Three bits of advice for blockchain advocates who think they understand aid

Despite claims to the contrary, new technologies like blockchain are unlikely to disrupt the aid industry quickly. Here is why.

Tobias Hagmann Adam M. Fejerskov
7 March 2018

Zaatari refugee camp is currently home to some 80,000 Syrian refugees - in the Jordanian city of Mafraq, near the border with Syria, on March 5, 2017. Xinhua/Press Association. All rights reserved.Before Christmas, the Danish development agency Danida launched ‘Hack the Future of Development Aid’, a report exploring the potential of blockchain technology to disrupt foreign aid. The Danida report paints a bright picture of what blockchain, the digital ledger that records encrypted peer-to-peer transactions, can contribute to the UN Sustainable Development Goals.

In line with blockchain’s foremost advocates, the report suggests that crypto aid money, the corollary of Bitcoin for aid transfers, can speed up aid delivery by circumventing intermediaries between donors and beneficiaries. Land titles, insurance policies, and proof of identity can all be turned into code in the blockchain, rendering paper archives and corrupt governments obsolete. Land titles, insurance policies, and proof of identity can all be turned into code in the blockchain, rendering paper archives and corrupt governments obsolete.

Danida is not alone in betting on digital technology to innovate aid delivery. Last year the World Food Programme piloted Building Blocks, a cash transfer programme for Syrian refugees in Jordan that made use of an Ethereum blockchain and biometric authentication. In Bermuda, Brazil, Georgia, and Sweden national and municipal land registries are currently experimenting with blockchains to make property transfers and land titles more secure and efficient. Peruvian economist Hernando de Soto recently advocated for the introduction of a global land registry using blockchain. ID2020, a public-private consortium that includes Microsoft, will soon implement its first digital identity projects in a bid to provide undocumented persons with a legally recognized identity.

Blockchain proponents see the end of conventional development aid on the horizon. Yet the endeavour to ‘hack’ development with cryptocurrency and decentralized ledgers is neither simple nor straightforward. Aid disrupters need to bear in mind three bits of advice to avoid repeating old mistakes and to improve their chances of success.

Know what you want to disrupt.

The tech world has powerful technology and creativity that it can bring to ‘development’. But at times it ignores the intricacies of international aid. Danida’s report, for example, works from the precept that development agencies’ main challenge is ‘to speed up aid transfers’. Development is no longer, if it ever was, a matter of distributing resources from rich countries to poor. Development is no longer, if it ever was, a matter of distributing resources from rich countries to poor.

Bringing about social, economic and institutional change is extremely complex. The existing aid architecture with its many bilateral and multilateral actors, multiple rules and requirements and its evolving intervention modalities reflects that complexity. Quick cash transfers are imperative during humanitarian crises, but they are of little concern for long-term development interventions. Determining when to give, whom to give to and with what particular objective to give has always been more challenging for aid workers than the actual resource transfer.

Disrupt all the way down.

Hacking development should be about disrupting the very way we think and do development rather than reproducing the old problems of development.

Blockchain and cryptocurrency may be new technologies, but if they only aim to change the conditions or costs of aid transactions they miss an opportunity to transform development as we know it, including donor-driven agendas, duplication of projects and activities and persistent coordination problems. There is a difference between doing the same things differently and then doing different things altogether. There is a difference between doing the same things differently and then doing different things altogether.

There is a real risk that new tech interventions ignore the bigger picture of economic inequalities, power relations and social marginalization by pushing for a well meant, but ultimately problematic individualization. Disintermediation is good for lowering transaction costs, but bypassing the state in developing countries to target individuals directly underestimates the importance of strong public institutions, both for accountability and democratic oversight, and for economic and social progress. The state may be an enemy of blockchain advocates, but it is crucially important for poverty reduction.

Code needs context.

Great code can only change that much. It might come as a surprise to some, but development is just as cryptic and complex as a Bitcoin. The history of aid is full of good intentions that failed on accounts of a limited understanding of local contexts.

This has been the case with the adoption of new technologies, whether it is improved fertilizer, mobile phones or blockchain technology. People around the world tend to make different uses of the same technology. A narrow approach to innovation, such as the Rockefeller Foundation’s Social Innovation Labs, which downplays expertise and prior experiences in favor of data-driven and radical innovation approaches, is unlikely to succeed.

Solutions that presuppose the superiority of technical knowledge, that neglect local realities and ignore indigenous knowledge are doomed to fail. Property rights as blockchain are a case in point: what good does it do if a farmer can access a land title deal with her smartphone if there is no police or local authority to enforce that claim?

Disrupting development aid is a worthy cause. But it requires a realistic strategy that builds on long-term learning and exchange between tech innovators and programmers on the one side, and development planners, policy-makers and aid experts on the other side.

Development folks need to familiarize themselves with new technology while blockchain proponents need to acknowledge that aid is complex and contextual. Only then can we achieve genuine disruption, including a redefinition of the way we think and do development, not just the pursuit of old goals with new methods.

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