FOR GLOBAL DEVELOPMENT

JOSEPH LUBIN, MALLY ANDERSON, AND BOBBI THOMASON

In the last year, global interest in blockchain technologies and their possible impact has permeated the public consciousness. Although much of this early attention has focused on the financial applications, many are eager to speculate about the ways blockchain will transform societies, institutions, and the very world as we know it. Many of these predictions inspire and galvanize observers and participants alike. However, these tools are very new and still developing, therefore few are addressing the potential and possibilities of blockchain tech- nologies in the near future.

So what can we do with blockchain contracts, self-sovereign identity, and technology right now? Most of the consumer utility tokens. builders of the blockchain The Ethereum blockchain is a public, ecosystem at ConsenSys share a vision of open-source, distributed computing plat- a decentralized future that creates oppor- form that supports the development and tunity and abundance for all people. utilization of decentralized applications. Ethereum has the unique potential, and Whereas the Bitcoin blockchain was some may believe even an obligation, to designed primarily as a payment system, create a more accessible, equitable, and Ethereum allows for more diverse capa- inclusive ecosystem from the outset by bilities, including its associated cryptofuel investing in social impact initiatives now. (similar to a currency), Ether, as well as The developing world stands to benefit smart contracts (see below). “Smart con- most dramatically from creative applica- tracts” are not actually smart, nor are they tions of decentralizing tools and necessarily contracts in a legal sense. They economies. This essay explores possible are just executable program objects on ways Ethereum-facilitated technologies certain that support them, can shape global development. We focus like Ethereum. A blockchain is a distrib- on three core applications of blockchain- uted ledger that enables tamper-proof, enabled solutions: peer-to-peer smart secure recording of transactions, collected

10 innovations / Blockchain for Global Development

Downloaded from http://direct.mit.edu/itgg/article-pdf/12/1-2/10/705255/inov_a_00263.pdf by guest on 30 September 2021 into “blocks” of data, between partici- could facilitate widespread decentraliza- pants on a decentralized, peer-to-peer tion, and thereby help us to address sys- network. Transactions and blocks are val- temic imbalances and bring about a more idated by the parties involved and do not equitable distribution of information and require a centralized authority to attest to resources. Proponents of blockchain the data or approve the value transfer, technology aspire to enable distributed which can reduce cost and frictional cooperation between strangers on a glob- delays in every interaction. al scale by way of mechanisms that auto- In the context of the Ethereum mate trust; the question is, how might blockchain, decentralization is both a that become a reality? goal and a process, as well as an architec- ture. The word “decentralization” refers SOCIAL CONSTRUCTION OF broadly to the dispersal of component BLOCKCHAIN TECHNOLOGY network nodes, data, computational activities, and developers across an open- As with all new technologies, blockchain source, peer-to-peer network; block- is not a panacea, nor should it be imple- chains are not controlled by any central mented without careful consideration of infrastructure, and no one party controls the context and an evaluation of previous the data or the network. In fact, it is near- interventions within that context. We ly impossible for a minority set of actors examine Ethereum’s possible impact on the network to improperly manipulate from the perspective of the social con- the data or the programs on a decentral- struction of technology, drawing from ized platform like Ethereum. These the work of sociologists and organiza- twinned capabilities—automation and tional theorists. When we discuss the adaptability, security and configurable social construction of technology, we transparency, peer-to-peer openness and refer to an iterative social process in greater individual control—all arguably which individuals and collectives use a make Ethereum the first technology that technology, observe its intended and

ABOUT THE AUTHORS Joseph Lubin is a Co-founder of the blockchain computing platform Ethereum and the Founder of Consensus Systems (ConsenSys), a blockchain venture studio. ConsenSys is one of the largest and fastest-growing companies in the blockchain technology space, building develop- er tools, decentralized applications, and solutions for enterprises and governments that har- ness the power of Ethereum. Lubin graduated from Princeton University with a degree in elec- trical engineering and computer science. Mally Anderson is Wordsmith and Editor-in-Chief of Cellarius, a blockchain-based transmedia storytelling project at ConsenSys. She is also a cofounder of ConsenSys Research. She previ- ously worked as an editor at Penguin Press and is a graduate of Vassar College. Bobbi Thomason is the Head of Research at ConsenSys. She is on the faculty of the Wharton School of the University of Pennsylvania and has worked as a researcher at Harvard Business School and Harvard Kennedy School. 2018 © Joseph Lubin, Mally Anderson, Bobbi Thomason innovations / volume 12, number 1/2 11

Downloaded from http://direct.mit.edu/itgg/article-pdf/12/1-2/10/705255/inov_a_00263.pdf by guest on 30 September 2021 Joseph Lubin, Mally Anderson, and Bobbi Thomason

unintended consequences, and then build gathering critical resources early on, new technologies. which has proven true in the first few Scholars have concluded from such years of Ethereum’s development. studies that technologies cannot guaran- However, it also means that the assump- tee a definitive impact, even when they tions guiding these initial projects can are built with specific intentions. This solidify into assumptions about the entire matters because it offers space to inquire ecosystem. This can be a drawback, as the into how individuals, organizations, and problems an enterprise is trying to solve societies interact with technologies, and are very different from those faced by vul- with each other. In the context of global nerable populations, where access and development, this means that, in order for inclusion usually are far from guaranteed, new technologies to empower all citizens information asymmetry is rampant, and instead of perpetuating global hierarchies power dynamics are uneven, although and historical concentrations of power, there may be some common elements in we must be vigilant about how and where the solutions. they are implemented. The challenge of the digital divide— We are in a particularly critical the differential access and ability of indi- moment for considering these questions. viduals, communities, and countries to Blockchain technology is less than a use information and communications decade old: Satoshi Nakamoto released technologies and the socioeconomic and the Bitcoin white paper in 2008, and political inequalities that result—is partic- Vitalik Buterin published the Ethereum ularly urgent during the selection period white paper in 2013. The development of of a new technology. Failing to address blockchain software protocols and appli- these imbalances early on can exacerbate cations that enable their decentralization an already wide gap. The success of the is still very much in progress. Blockchain blockchain ecosystem and being able to in 2018 is entering a critical selection deliver on the promise of decentralization phase, in which it may evolve from a is as much a question of inclusion as one fringe technology used by a small group of effective protocol development and of enthusiasts trading usability. into a truly public and global platform. Social dynamics shape the adoption, THE POTENTIAL OF SMART implementation, use, and meaning of a CONTRACTS technology during the so-called selection phase, which is the early period of ecosys- Many great minds and high-impact tem development in which ever greater organizations around the globe already numbers of users adopt a new technolo- recognize the potential of the Ethereum gy.1. The conventions, habits, and struc- blockchain and decentralization to tures that emerge during this selection increase access, streamline processes, and period for blockchain are likely to deter- enfranchise global citizens. Much of the mine its future success as a social tool for attention in the ecosystem’s early days has facilitating decentralization. focused on financial inclusion, or “bank- The social construction of a new tech- ing the unbanked,” which refers to the at nology often begins with enterprise proj- least two billion of the world’s population ects developing and testing a tool. who do not have access to the traditional Gaining traction around innovation financial system. The thinking is that, requires funding, and this dynamic can be with accessible, secure digital identities, useful in accelerating development and lower transaction costs, and cheaper

12 innovations / Blockchain for Global Development

Downloaded from http://direct.mit.edu/itgg/article-pdf/12/1-2/10/705255/inov_a_00263.pdf by guest on 30 September 2021 Blockchain for Global Development

remittances, the barrier to entry around community.3. global financial networks will be lower Whereas the Bitcoin blockchain and more people will be able to partici- emphasizes value exchange, the Ethereum pate. blockchain introduced the mechanism of While this could prove true in the a smart contract, which enables trusted longer term, we argue that this is the transactions, automated trust and agree- wrong emphasis in the early stages of the ments, and software objects to be shared ecosystem. Building so-called solutions in and used on the decentralized World traditional financial centers and expecting Wide Web. Smart contracts are essential- marginalized populations to embrace ly code that can process information and them wholesale oversimplifies the social self-execute actions based on established process of technological adoption. rules and conditions, thereby carrying out Moreover, it would require significant agreements automatically. In many cases, disruption of a vast, old, and entrenched this tremendously versatile mechanism system. There are other blockchain-based removes or reduces the need for interme- solutions that can address a broader range diaries or third-party actions or attesta- of pressing international development tions, reduces transaction time and cost, issues in a local context. and enables the automation of a broad These solutions must strive to avoid range of tasks on a global scale. repeating what William Easterly has Blockchain technology has the poten- called the problem of “authoritarian tial to increase productivity, efficiency, paternalism,” wherein the donor commu- transparency, and disintermediation in nity—usually composed of wealthy peo- peer-to-peer value or information ple from so-called developed nations— exchange. All of these characteristics also decides what is best for poor or disenfran- create challenges for legacy organizations chised citizens in the “developing” that are carrying out global humanitarian world.2. These efforts often are based on efforts and economic development, thus distorted assumptions of what those vul- the potential benefits are manifold. In nerable populations really need, or they order for international development to be focus on increasing access to institutions more than merely a top-down process— important in the developed world, such as which inevitably creates opportunities for banks or deeded property records, in the abuse of centralized power—it is cru- regions that are operating outside of cial to involve beneficiaries in the devel- Western economies. opment of the technologies designed to From a financial inclusion perspec- empower and enfranchise them. tive, the buy-in nature of most cryptocur- In the current value chain of interna- rency-backed blockchain applications tional development, funds travel across assumes that under-resourced localities borders from a global network of donors define “value” in the same way western- or lenders to a system of implementation ized communities do—via fiat currency— partners and local organizations. This rather than by other quality-of-life meas- economic circuit is opaque, inefficient, ures like access to resources, social capital, and slow, and much potential value is or the direct exchange of goods. Easier consumed before it reaches the intended access to credit or lower cross-border beneficiaries. Blockchain technology is transaction fees are often degrees potentially a high-precision tool for removed from the daily concerns of understanding and instrumenting social someone living on less than $10 per day— economics. It can help the donor commu- which is true of 80 percent of the world nity track and monitor funds through the

innovations / volume 12, number 1/2 13

Downloaded from http://direct.mit.edu/itgg/article-pdf/12/1-2/10/705255/inov_a_00263.pdf by guest on 30 September 2021 Joseph Lubin, Mally Anderson, and Bobbi Thomason

complex aid distribution system and cut form of reporting on funds and assis- out cross-border costs and intermediary tance; recipients of aid are accountable to fees in the process. the groups that provide it. For example, if A notable recent example is the a local NGO receives funding from World Food Programme’s (WFP) USAID, it is required to report on how Ethereum experiment in the Azraq the funds are used and to demonstrate refugee camp in Jordan. By incorporating their impact. Blockchain technology can biometric registration data from the UN benefit both parties by enabling more High Commissioner for Refugees, more transparent tracking of funds and their than 100,000 people in the camp have effective deployment on the ground. bought groceries with a retina scan that Downward accountability, or fun- verifies their entitlement voucher.4. The ders’ and NGOs’ accountability to the WFP records and accounts the associated populations they are working to serve, has payment on the blockchain, which slashes been more difficult to implement. It is not the cost of cross-border and intermediary easy to gauge reliably how effectively a fees to just 2 percent of their previous group’s efforts are meeting the needs of amounts. This streamlined system can local populations and integrating them free more funds to go straight to benefici- into new iterations of their solutions. aries, which could eventually include all With simplereporting or surveying on a 500,000 Syrian refugees currently living in decentralized application, perhaps on a Jordanian camps. readily available mobile phone, the work Creative application of immutable of collecting trustworthy feedback could ledgers and smart contract mechanisms happen on the ground without requiring has the potential to solve such issues as field staff to facilitate it, thereby avoiding local corruption—for example, in the potential corrupted or fabricated report- Niger River Delta, where funds intended ing. for cleaning up severe oil spills are rerout- A recent example is the distribution ed by militants and local government offi- of funds to educate Syrian children, 1.6 cials—or to create networks of multiparty million of whom have been displaced transparency in nonfinancial peer-to-peer since 2011.5. The countries hosting the value exchanges. Constructing largest number of school-aged Syrians— blockchain architectures that build a Turkey, Lebanon, and Jordan—have micro-economy of services that is mutu- received more than $1.4 billion in aid ally tethered to incentives (and disincen- funds to support their education, yet at tives) is a more effective and sustainable least half a million children have not means of empowering impoverished received any education, due in part to communities. local policies that exacerbate poverty and A common claim about the potential increase social pressure to choose work or of blockchain to facilitate decentralization marriage over education. Better reporting is that influence can potentially move on the distribution of funds, more sup- from the center—governments, large portive policies for refugee families, and hierarchical organizations and compa- better coordination between aid organiza- nies—to the edges. In international devel- tions would vastly improve the situation opment, this could manifest as two-way for Syrian children. Incorporating accountability in aid distribution and the blockchain technology could begin to genuine empowerment of vulnerable make this possible. communities. Upward accountability exists in the

14 innovations / Blockchain for Global Development

Downloaded from http://direct.mit.edu/itgg/article-pdf/12/1-2/10/705255/inov_a_00263.pdf by guest on 30 September 2021 Blockchain for Global Development

THE POSSIBILITY OF SELF- However, no technology has inherent SOVEREIGN IDENTITY social power, only potential social utility. A new technology acquires meaning from the Although financial solutions are a readily ways people use and adopt it; thus, to available advantage of Ethereum block- become a solution, an adopted technology chain applications, the nature of a decen- needs to be coupled with informed and tralized database and immutable ledger proactive policy. For example, introducing offers still greater benefits in enfranchising self-sovereign identity on the blockchain to individual citizens. Another application a vulnerable population living under a cor- central to the vision of blockchain technol- rupt government does not suddenly solve ogy and the possibility of a decentralized the problem of human trafficking. In fact, in world is the proliferation of self-sovereign such cases technology can become a identity. The term “self-sovereign” has weapon to use against the very people it is recently entered the lexicon to describe intended to help. some identity systems, usually blockchain- A current example is the problem of based. It does not connote a personal bub- sex trafficking in Moldova, a country known ble of idiosyncratic laws, though perhaps in for a high level of kidnappings and forced time the world may move to more granular labor, particularly in the breakaway region sovereignty. Rather it represents what many of Transnistria.7. Depressed economic con- believe is the right that all individuals on the ditions and a lack of local opportunity—the planet should have to own and control their average monthly salary is just $230—force own personally identifying data. A self-sov- many Moldovans, including many women ereign identity is a persistent, portable digi- and children as young as 13, to migrate else- tal identity that is under the control of the where, often in response to fake online job owner, with various aspects encrypted and postings. People from rural areas are at a selectively disclosable by the owner in situa- particularly high risk for kidnapping tions she designates. “Official” identities because they often do not have state-issued currently are managed by the state; relevant identification, which makes it easier for data is stored, and in effect controlled by, a traffickers to move them across borders government body. Individuals in unstable using fake documents, rendering them all or hostile states thus risk losing their identi- but invisible to border authorities when ty if they cross borders, flee their homeland, they go missing. or lose their ability to access funds or set up While a self-sovereign, immutable dig- new accounts. (Less formal, but equally ital identity for Moldovans might seem like important, aspects of many of our identities a workable fix, well-established criminal are controlled by corporations that store networks that cooperate with corrupt offi- and monetize this personal information, cials will likely find a way around enforce- often without adequately securing its stor- ment steps, like checkpoint verification. In age.) an already unstable political environment, The International Labor Organization workarounds, bribes, and further abuses of estimates that at least 21 million people are power could easily undermine a more affected by human trafficking, most com- secure identity system and place vulnerable monly in the form of sex slavery or forced 6. Moldovan citizens in greater danger. labor. More than 26 percent of those peo- Technology alone is not a life raft; to uphold ple are children. Having a self-sovereign solutions it requires buy-in and participa- identity could make it possible for individu- tion from government and non-govern- als caught in human trafficking to flee with- ment organizations alike, as well as the out depending on a passport or other form implementation of supportive policy. Self- of identification that otherwise could be sovereign identity is a potentially powerful withheld or stolen from them. tool for vulnerable populations across the

innovations / volume 12, number 1/2 15

Downloaded from http://direct.mit.edu/itgg/article-pdf/12/1-2/10/705255/inov_a_00263.pdf by guest on 30 September 2021 Joseph Lubin, Mally Anderson, and Bobbi Thomason

world, but the social structures surrounding being exchanged, wherein a voting system identity must be in place for that potential lets users rate one another’s work. This to be realized. could be as simple as letting community members vote on which tasks or services THE PROMISE OF are most in demand in their local net- CONSUMER UTILITY work.8. TOKENS AND WORK-IN Other token-related tools, such as ECONOMIES token-curated registries (TCRs), can also facilitate peer-to-peer management of Another blockchain-enabled solution mechanisms for mutually improving could give local social networks greater quality of life and local economic condi- agency and incentive feedback loops, tions. A TCR is a system in which users thereby empowering marginalized com- apply to a list vetted by a group of token- munities to develop their own tools for holders that upholds a set of criteria. The change. A token is a digital asset that list is designed to incentivize its own either has its own inherent value or repre- maintenance by its curators so that it con- sents some other asset on the blockchain. tinues to evolve in a valuable way. A TCR Using a crypto-economic incentive mech- could include a list of services needed in a anism, tokens can promote the emer- particular social group or microeconomy, gence of new, distributed digital networks or a ranking of services performed or of mutually incentivized participants and exchanged. Management and implemen- help them coordinate their efforts to tation are in the hands of the participants, achieve a common goal. Consumer utility and the potentially quick feedback loops tokens are often services or units of serv- can boost a microeconomy or effect social ice that can be used to gain access to serv- change much more swiftly than any exist- ices provided via a decentralized applica- ing top-down methods. tion (i.e., a digital subscription or mem- Given the challenges of downward bership sold in exchange for access and accountability and transparency across reduced fees). Utility tokens can also global development efforts, tokens are a serve as claims on content, like a song, or potentially powerful way to include bene- scarce resources, like decentralized data ficiaries in aid programming efforts, or storage, for instance. Consumer utility even to empower them to control new tokens are distinguished from investor means of coordination among them- tokens, in that securities bodies around selves. the world would not consider them to be subject to the strictures of securities law. LOOKING AHEAD Consumer utility tokens on the blockchain can provide a mechanism for The tools described in brief in this essay— economically incentivizing social good. smart contracts, self-sovereign identifica- With the ability to create “programma- tion, utility tokens, and TCRs—are avail- ble” economic incentives, a development able now. While it may take years to target or milestone can be built into the understand the impact of the Ethereum feedback loop of the token as a functional blockchain across institutions, the possi- component of its design. A token can bility for broader social change begins reestablish economic incentives that with the solutions developed during the enhance quality of life for the members of selection phase. its user network. The token is a means of Whether we will succeed in building “keeping score” between the services a decentralized future together depends

16 innovations / Blockchain for Global Development

Downloaded from http://direct.mit.edu/itgg/article-pdf/12/1-2/10/705255/inov_a_00263.pdf by guest on 30 September 2021 Blockchain for Global Development

on early efforts to make Ethereum-sup- opment/2018/feb/06/unicef-recruits-gamers- ported technologies accessible, inclusive, mine-ethereum-aid-syrian-children. and tailored to local social contexts. 6. Observers and participants alike should “Global Estimates of Modern Slavery.” Available at http://www.alliance87.org/glob- hold one another accountable to these al_estimates_of_modern_slavery- goals in a spirit of productive coordina- forced_labour_and_forced_marriage-execu- tion and shared responsibility. In global tive_summary.pdf.

development, as in many other fields, the 7. potentially transformative power of these ConsenSys is currently working on a proj- ect with the World Identity Network to tools is great, but only if they are con- explore blockchain-enabled identity solutions structed to function in the world as it is in Moldova. For more information on this now, in all its entrenched and challenging engagement, visit complexity, as well as to facilitate the https://www.econotimes.com/World- transition to a more equitable world. Identity-Network-ConsenSys-partner-to- build-blockchain-solution-to-fight-child-traf- ficking-1203648. 1. Leonardi, Paul M., and Stephen R. Barley. “What’s under Construction Here? Social 8. Greenfield IV, Robert. “Developing Work- Action, Materiality, and Power in In, Not Buy-In Token Economies.” , Constructivist Studies of Technology and NY: ConsenSys Media, January 2018. Organizing.” The Academy of Management Available at Annals 4, no. 1, 1-51. https://media.consensys.net/developing- micro-economies-via-work-in-not-buy-in- 2. Easterly, William. The White Man’s Burden: 9f15b28f4126. Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. New York: Penguin Press, 2006. 3. Ravallion, Martin, Shaohua Chen, and Prem Sangraula. “Dollar a Day Revisited.” Washington, DC: World Bank, May 2018. 4. “Blockchain Against Hunger: Harnessing Technology in Support of Syrian Refugees.” Available at https://www.wfp.org/news/news- release/blockchain-against-hunger-harness- ing-technology-support-syrian-refugees; Tirone, Jonathan. “Banks Replaced with Blockchain at International Food Programme.” Bloomberg, 2018. Available at https://www.bloomberg.com/news/articles/20 18-02-16/banks-replaced-with-blockchain-at- international-food-program. 5. Human Rights Watch. “Following the Money: Lack of Transparency in Donor Funding for Syrian Refugee Education,” 2017. Available at https://www.hrw.org/report/2017/09/14/fol- lowing-money/lack-transparency-donor- funding-syrian-refugee-education. UNICEF has undertaken another new project as of February 2018. More information available at https://www.theguardian.com/global-devel-

innovations / volume 12, number 1/2 17

Downloaded from http://direct.mit.edu/itgg/article-pdf/12/1-2/10/705255/inov_a_00263.pdf by guest on 30 September 2021