Can Blockchain Be Used for Public Good?
A new Stanford study looks beyond the hype to examine how decentralized transactions can solve social ills.
Blockchain can help guard against election fraud, because the decentralized nature of its transactions means they cannot be altered after the fact. | istock/filo, Reuters/Chris Keane
In recent years, the buzz around blockchain — the distributed ledger technology behind cryptocurrencies like bitcoin — has inspired a wave of investment, entrepreneurship, and marketing schemes. Proponents say the platform could disrupt every industry and create a more secure, transparent, and just global economy, while skeptics tend to balk at such inflated expectations.
Missing from the discussion has been a rigorous study of blockchain’s current real-world applications. Is it actually a force for good, or is it mostly hype?
Blockchain for Social Impact
The study “Blockchain for Social Impact” was overseen by Stanford Graduate School of Business lecturer Doug Galen under the auspices of the school’s Center for Social Innovation. The researchers and coauthors were all current or former Stanford students:
- Nikki Brand, MA ’19, International Policy Studies, Stanford School of Humanities & Sciences
- Lyndsey Boucherle, MSx ’18, Stanford GSB
- Rose Davis, MA ’19, International Policy Studies, Stanford School of Humanities & Sciences
- Natalie Do, MBA ’18, Stanford GSB
- Ben El-Baz, MSx ’18, Stanford GSB
- Isadora Kimura, MBA/MA ’18 Stanford GSB and Graduate School of Education
- Kate Wharton, MBA ’19, Stanford GSB
- Jay Lee, Growth and Community, RippleWorks, MA ’15, Communication, Stanford School of Humanities & Sciences
That’s the question taken up in a new study sponsored by the Center for Social Innovation at Stanford Graduate School of Business and conducted by lecturer Doug Galen and a team of eight current and former Stanford students. The group analyzed 193 organizations, initiatives, and projects that are seeking to use blockchain to benefit the public. Their goal was to map the field and see which efforts were most promising.
Encouragingly, the study found that 86% of initiatives were making material progress toward solving a genuine problem, while only 14% belonged in the “hype” category. And things are moving fast: 55% of the programs expect to make an impact within one year.
“It’s still early days,” says Galen, cofounder and CEO of RippleWorks, a foundation connecting startup and technology experts with social ventures. “But I was pleasantly surprised by the status of the initiatives and the range of applications. Blockchain has more near-term potential for social impact than originally thought.”
Beneath the Iceberg’s Tip
That potential extends well beyond the world of digital currencies, which is where blockchain remains in the popular imagination — for now.
“People still think ‘bitcoin’ when they hear the word cryptocurrency,” Galen says, “but that’s just the tip of the iceberg. Beneath the surface is the much more robust blockchain platform that goes well beyond bitcoin and cryptocurrencies.”
A blockchain is essentially a shared digital ledger that records transactions and stores data in a transparent, decentralized way, making it a powerful tool for a range of social enterprises, from tracking coffee through a supply chain to building a credit system for the 2 billion “unbanked” people worldwide who still lack basic financial services. The study looked at applications in every major sector and found that healthcare, financial inclusion, aid, and democracy and governance were the areas with the most existing “blockchain for good” initiatives.
Galen points to four key potential benefits: transparency, immutability, lower costs, and digital identity. A transparent record of donations could help an aid industry in which 30% of all disaster relief money is lost. And the “immutable” feature of blockchain might help guard against election fraud, since every transaction is permanent and cannot be altered after the fact. In healthcare, which accounts for 25% of the study’s cataloged initiatives, the focus has been on using blockchain to store medical records and to monitor supply chains, including medicine temperatures during shipment.
In addition to making supply chains more trackable and secure, blockchain is likely to have a large, immediate impact on the way people transfer money. Foreign workers worldwide send an estimated $500 billion worth of remittances back to their home countries each year. By eliminating transactional middlemen, blockchain systems can help workers transfer a higher percentage of their savings directly to family members. This easy movement of funds applies to aid and development as well. The UN World Food Programme used a version of blockchain in Jordan to facilitate cash transfers to more than 10,000 Syrian refugees.
“The fact that you could put money directly into people’s hands, bypassing intermediaries and avoiding large-scale graft, is a huge opportunity for hundreds of millions of people around the world,” Galen says. “Bringing these costs down — and in the case of farmers, increasing their share — could mean the difference between living below and living above the poverty line.”
Challenges to Adoption
As with any new technology, there are challenges to adoption. Implementing blockchain requires extensive coordination and trust in the network, the authors of the report found. When it comes to supply chains, for example, everyone from the producer to the distributor to the packager has to be willing to employ the new system. That buy-in requirement could present a substantial obstacle for aid and philanthropy, since nonprofits and governments tend to be risk averse and slow to adopt innovative solutions.
Blockchain also doesn’t solve every privacy issue, of course. Some patients might be uncomfortable with a blockchain-based medical record, and anyone with a bank account might still have cause to worry about the theft of their digital information.
“The ultimate goal is to protect people’s identity while also allowing them to control and monitor how it’s used,” Galen says. “But people might have concerns if safeguards are not properly in place.”
Another potential damper on blockchain’s spread is that initiatives looking to deploy the technology will have to navigate a range of government regulations, depending on the countries and sectors in which they operate. Galen, however, sees this is a step toward helping the technology mature. “Regulation can bring trust and security so that blockchain can hopefully reach its fullest potential,” he says.
Some of the most pressing questions have to do with initiatives in democracy and government. Estonia uses blockchain to offer a range of public services, and there is a growing crop of programs worldwide to help with crowdfunding, legal support, press freedom, and voting.
During the 2016 U.S. elections, the Montana state government worked with Votem, a Cleveland-based mobile voting platform, to use distributed ledger technology for absentee voters. A post-election survey determined that 99% percent of voters who used the Montana system found it convenient and would use it again.
“The potential for positive social impact in the U.S. is great,” the Stanford researchers write, noting that more than 2.6 million U.S. citizens living overseas were eligible to vote back home in 2014, but only 93,000 of them did — a turnout of 4%.
Putting People First
The study also cautions against using blockchain arbitrarily.
“It’s important to understand blockchain’s place,” Galen says. While the technology has enormous potential to ensure transparency, reduce costs, and offer better security, there’s no value in using it just for the sake of being innovative.
“These initiatives should be people-first. They should focus on solving a real problem, then figure out how blockchain might be able to help achieve that goal. The human impact part comes first. The technology will follow.”
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