The United Nations (UN) is in the final stages of what could be one of the most epic blockchain projects of all time.
Michael del Castillo
April 24, 2017
After successfully using the ethereum blockchain to transmit Pakistani rupees to 100 people earlier this year, the UN’s World Food Program (WFP) is arranging extra security to ensure it safely executes the next stage of its work.
A pilot test, scheduled to begin in Jordan on 1st May, will see the WFP sending an unspecified number of dinars to more than 10,000 recipients in need of financial support and extra food, with the goal of expanding the number of recipients to 500,000 people by 2018.
To protect the privacy of the recipients, the exact amount to be dispersed is not being revealed. But the technology being developed is part of an even bigger push to make the UN’s services so resilient that they could survive even the destruction of the UN itself.
The secret to such a design, according to WFP financial officer Houman Haddad, could be to remove the rupee altogether as a means of distributing funds – along with any other state-issued currency.
“At the moment we’re paying out in normal currencies, so-called fiat currencies,” said Haddad, who also works with both the WFP’s treasury and financial risk management divisions. “That is mainly because a lot of the places in which we work don’t accept either bitcoin or ether.”
He told CoinDesk:
“However, the ideal would be that if they do, then we could just transfer the cryptocurrencies. It gets rid of the post-payment altogether.”
Called ‘Building Blocks’, the first successful test of the ethereum-based solution was conducted in January in the Sindh province of Pakistan. There, 100 people received 3,000 rupees and the equivalent value in food via transactions authenticated on the ethereum testnet.
Created over a 40-day period, the proof-of-concept is the latest effort designed to show that a blockchain could be used to distribute humanitarian aid to those in need.
Beneficiaries of the project were assigned random one-time passwords that displayed on their mobile devices, which were then shown to supermarket proprietors who helped disperse both the funds and food.
At the end of the test, the transaction records on the public ethereum testnet were reconciled with the actual funds distributed.
The procedure flips on its head the idea of cutting out the middleman.
Instead of paying the funds directly to the recipients, the UN sends the money to the shops, cutting out both banks and even the actual recipients.
In one example cited by Haddad, money meant for 100,000 beneficiaries could instead be paid directly to the 400 merchants that might be available in that area.
“The cost will be lower because there will be fewer transactions, no admin fees and all of that,” said Haddad. “The risk will be lower because we don’t have to advance money to anyone because we would only pay for actual purchases.”
A second pilot planned for August will see the test expand beyond the borders of Jordan to other nations, with the possibility of reaching tens of millions of recipients served by the WFP in the future.
Yet, both the proof-of-concept and upcoming pilot are part of a larger push within the UN to rethink what the organization calls cash-based transfers (CBT).
Instead of turning over perishable resources such as food and medicine, the UN directly injects money into the local economy in the form of vouchers, prepaid cards, mobile money and more.
In 2015, the program transferred $680m in aid to recipients, a number Haddad said the WFP hopes to increase to $2bn per year. In the first six years of the program, 9.6 million people were given assistance through cash-based transfers.
Though the advantages of CBT include increased efficiency and stimulated trade, there’s still plenty room to improve, according to Haddad.
Specifically, he believes the current system still suffers from fees, a lack of privacy for the recipient, risks associated with relying on startup mobile money companies and lengthy contracting processes to ensure payment is still completed in the case these startups fail.
All of these issues, Haddad said, could be reduced by moving the transactions to a blockchain.
As such, the pilot is set to continue over the course of May, and will be conducted on a private version of the ethereum blockchain, with the goal of eventually conducting 1 million transactions per month.
“If we reach the $2bn mark that we are set to achieve in terms of total spending on cash-based transfer,” he said, “we estimate conservatively we could save $20m a year.”
Stronger than the UN
While consortia models have become increasingly popular for financial institutions looking to leverage the network effect of blockchain, the WFP went in a decidedly different direction.
Developed in partnership with the Field Innovation Exchange offered by exponential technology think tank, Singularity University, the pilot is designed as the next step towards increasing internal cooperation between agencies at the UN.
Initially, the project, developed at WFP’s Innovation Accelerator, is being built to give store keepers a reliable way to know how much money and food each of their customers can afford.
But project manager Alexandra Alden said she’d eventually like to see applications open up in divisions across the UN, with efforts aimed at cryptographically securing identity, tracking supply chain logistics and leveraging Internet of Things-enabled devices.
Importantly, Alden and Haddad hope that future incarnations of the technology could be built on the public ethereum blockchain, should it grow to be able to handle the necessary transaction volumes.
“The ideal world would be where beneficiaries have smartphones,” said Alden. “They can store their own private key so they can see the transaction history, their entitlements, where the shops are that are selling the goods they want, price analysis of where rice is cheaper.”
To help ensure that the WFP is working closely with government agencies, she added:
“Our goal is to ideally deal with this in a way that even if the WFP did not exist in 10 years time the beneficiaries could still benefit from the system.”
The future of donations
Haddad breaks down the benefits of blockchain into three categories: empowering beneficiaries, lowering costs and reducing redundancy in the system of UN services.
Unlike previous attempts to collaborate that he said were stunted by internal competitive interests, he believes the blockchain solutions being developed across the UN will someday be able to interoperate because of the common source of data.
Already, UN Women has partnered with Innovation Norway to make it easier for women and girls to explore blockchain, and it is currently hiring a blockchain consultant. In October, the UN publicized its interest in using blockchain for sustainability projects, and in November, the United Nations Children’s Fund invested in its first startup working in the sector.
Should the United Nations ever integrate these blockchain efforts and more, Haddad said the potential benefits of reducing a number of redundancies will be limited unless the organization also starts accepting ethereum and other cryptocurrencies as a form of payment from donors.
“A lot of our people have offered to donate ether,” he said. “We can’t accept it at the moment, but being in finance and treasury I’m actually looking at how we can start accepting it.”
“Then, if we can pay out as well we can offer end-to-end tracking of the money coming in and going out, where it was spent, what it was spent on in a manner that does not intrude on the privacy of the beneficiary.”
Image via the United Nations