Blockchain

Imagine stacking blocks. With increasing effort, one can continue adding more blocks to the tower, but once a block is in the stack, it cannot be removed without fundamentally and very visibly altering—and in some cases destroying—the tower of blocks. A blockchain is similar in that each “block” contains some amount of information—information that may be used, for example, to track currency transactions and store actual data. (You can explore the bitcoin Blockchain, which itself has already been used to transmit messages and more, to learn about a real life example.).

This is a core aspect of the blockchain technology, generally called immutability, meaning data, once sored, cannot be altered. In rare cases, a 100% consensus among users can permit changes although it is incredibly tedious.

Blockchain is at its simplest, a valuable digital tool that replicates online the value of a paper-and-ink logbook. While this can be valuable to track a variety of sequential transactions or events (ownership of a specific item / parcel of land / supply chain) and could even be theoretically applied to concepts like voting or community ownership and management of resources, it comes with an important caveat. Mistakes can never be truly unmade, and changes to data tracked in a blockchain can never be updated.

Many of the potential applications of blockchain would naturally want one of the pieces of data tracked to be the identity of a person or legal organization. If that entity changes, their previous identity will be forever, immutably tracked and linked to the new identity. On top of being damaging to a person fleeing persecution or legally changing their identity, in case of transgender individuals, for example, this is also a violation of the right to privacy established under international human rights law.

The second core tenet of blockchain technology is the absence of a central authority or oracle of “truth.” By nature of the unchangeable transaction records, every stakeholder contributing to a blockchain tracks and verifies the data it contains. At scale, this provides powerful protection against problems common not only to NGOs but to the private sector and other fields that are reliant on one service to maintain a consistent data store. This feature can protect a central system from collapsing or being censored, corrupted, lost, or hacked — but at the risk of placing significant hurdles in the development of the protocol and requirements for those interacting with the data.

A common misconception is that blockchain is completely open and transparent. Blockchains may be private, with various forms of permissions applied. In such cases, some users have more control over the data and transactions than others. Privacy settings for blockchain can make for easier management, but also replicate some of the specific challenges that blockchains, in theory, are solving.

Smart contracts are agreements that provide automatic payments on the completion of a specific task or event. For example, in civic space, smart contracts could be used to execute agreements between NGOs and local governments to expedite transactions, lower costs, and reduce mutual suspicions. However, since these contracts are “defined” in code, any software bugs become potential loopholes in which the contract could be exploited. Once case of this happened when an attacker exploited a software bug in a smart contract-based firm called The DAO for approximately $50M.

Many new cryptocurrencies are considering ways to leverage blockchain for transactions without the volatility of bitcoin, and with other properties, such as speed, cost, stability and anonymity, at the forefront. Cryptocurrencies are also occasionally combined with smart contracts, to establish shared ownership through funding of projects.

In addition, the digital currency subset of blockchain is being used to establish shared ownership (not dissimilar to stocks / shares of large companies) of projects.

The decentralized, immutable nature of blockchain provides clear benefits to protecting speech, but not without significant risks. There have been high-visibility uses of blockchain to publish censored speech in China, Turkey, and Catalonia. Article 19 has written an in-depth report specifically on the interplay between freedom of expression and blockchain technologies, which provides a balanced view of the potential benefits and risks, and guidance for stakeholders considering engaging in this facet.

Ethereum is a cryptocurrency focused on using the blockchain system to help manage decentralized computation and storage through smart contracts and digital payments. Ethereum encourages the development of “distributed apps” which are tied to transactions on the Ethereum Blockchain. Examples include automated auctions, voting, a Twitter-like tool, and apps that pay for content creation/sharing. See case studies in the cryptocurrencies primer for more detail.

Data stored or tracked using blockchain technologies have a clear, sequential, and unalterable chain of verifications. Once data is added to the blockchain, there is ongoing mathematical proof that it has not been altered. This does not provide any assurance that the original data is valid or true, and it means that any data added cannot be deleted or changed – only appended to. Working in civil society, this benefit has been applied to concepts such as creating records for land titles/ownership; to improve voting, to ensure one person matches with one unchangeable vote; or to prevent fraud and corruption and enhance transparency in international philanthropy. It has been used for digital identities to help people retain ownership over their identity and documents, and in humanitarian contexts to make voucher-based cash transfers more efficient. As an enabler for digital currency, blockchain increases the sources of philanthropic wealth and, in some circumstances, facilitates cross-border funding of civil society.

A function such as this can provide a solution to the legal invisibility most often borne by refugees and migrants. Rohingya refugees in Bangladesh, for example, are often at risk of discrimination and exploitation, because they are stateless. Proponents of blockchain argue that its distributed system can grant individuals with “self-sovereign identity,” a process through which they create and register their identity themselves and can therefore control and share that information.  However, if blockchain architects do not secure transaction permissions and public/private state variables, governments could use machine-learning algorithms to monitor public blockchain activity and gain insight into whatever daily, lower- level activity of their citizens are linkable to their blockchain identities. This might include interpersonal and business payments, timing, and any other locations or businesses where citizens need to “show their ID” for services, be they health, financial, or other. Furthermore, such a use of blockchain assumes that individuals would be prepared and able to adopt that technology, an unlikely possibility due to the financial insecurity many vulnerable groups, such as refugees, face.

Blockchain is resistant to traditional problems of one central authority or data store being attacked or experiencing outages. In a blockchain, data are constantly being shared and verified across all members—although a blockchain requires large amounts of energy, storage and bandwidth to maintain a shared data store. This decentralization is most valued in digital currencies, which rely on the scale of their blockchain to balance not having a country or region “owning” and regulating the printing of the currency. Blockchain has also been explored to distribute data and coordinate resources without a reliance on a central authority and simultaneously being resistant to censorship.

Blockchain presents multiple barriers to engaging with it. Connectivity, reliable and robust bandwidth and local storage are all needed. Therefore, mobile phones are often an insufficient device to host or download blockchains. The infrastructure it requires can serve as a barrier to access in areas where Internet connectivity primarily occurs via mobile devices. Because every full node (host of a blockchain) stores a copy of the entire transaction log, blockchains only grow longer and larger with time, and thus can be extremely resource-intensive to download on a mobile device. For instance, over the span of a few years, the blockchains underlying Bitcoin grew from several gigabytes to several hundred. While the use of blockchain offline is possible, offline components are among the most vulnerable to cyberattacks, and this could put the entire system at risk.

Blockchains — whether they are fully independent are part of existing blockchains — require some percentage of actors to lend processing power to the blockchain, which — especially as they scale — itself becomes either exclusionary or creates classes of privileged users.

Another problem that can undermine the intended benefits of the system is the unequal access to possibilities to convert blockchain-based currencies to traditional currency, for example in relation to philanthropy or to support civil society organizations in restrictive regulatory environments, as for cryptocurrencies to have actual value, someone has to be willing to pay money for it.

Beyond these technical challenges, blockchain technology requires a strong baseline understanding of technology and its use in situations where digital literacy itself is a challenge.

There are paths around some of these problems, but any blockchain use needs to reflect on what potential inequalities could be exacerbated by or with this technology.

Storing sensitive information on a blockchain – such a biometrics or gender – combined with the immutable aspects of the system, can lead to considerable risks for individuals when this information is accessed by others with the intention to harm. Even when specific personally identifiable information is not stored on a blockchain, pseudonymous accounts are difficult to protect from being mapped to real-world identities, especially if they are connected with financial transactions, services, and/or actual identities. This can erode rights to privacy and protection of personal data, as well as exacerbate the vulnerability of already marginalized populations and persons who change fundamental aspects of their person (gender, name). Explicit consent, modification and deletion of one’s own data are often protected through data protection and privacy legislation, such as the General Data Protection Regulation in the EU that serves as example for many other laws around the world. An overview of legislation in this area around the world is kept up to date by the United Nations Conference on Trade and Development.

For example, in September 2017, concerns surfaced about the Bangladeshi government’s plans to create a ‘merged ID’ that would combine citizens’ biometric, financial and communications data (Rahman, 2017). At that time, some local organizations had started exploring a DLT solution to identify and serve the needs of local Rohingya asylum-seekers and refugees. Because aid agencies are required to comply with national laws, any data recorded on a DLT platform could be subject to automatic data-sharing with government authorities. If these sets of records were to be combined, they would create an indelible, uneditable, untamperable set of records of highly vulnerable Rohingya asylum-seekers, ready for cross-referencing with other datasets. “As development and humanitarian donors and agencies rush to adopt new technologies that facilitate surveillance, they may be creating and supporting systems that pose serious threats to individuals’ human rights.”

As blockchains scale, they require increasing amounts of computational power to stay in sync. In most digital currency blockchains, this scale problem is balanced by rewarding people who contribute to the processing power required with currency. The University of Cambridge estimated in fall 2019 that Bitcoin alone currently uses .28% of global electricity consumption, which, if Bitcoin were a country, would place it as the 41st most energy-consuming country, just ahead of Switzerland. Further, the negative impact is demonstrated by research showing that each Bitcoin transaction takes as much energy as needed to run a well-appointed house and all the appliances in it for an entire week.

As is often the case for emerging technology, the regulations surrounding blockchain are either ambiguous or nonexistent. In some cases, such as when it can publish censored speech, regulators overcorrect and block access to the entire system or remove pseudonymous protections of the system in country. In Western democracies, there are evolving financial regulations as well as concerns around the immutable nature of the records stored in a blockchain. Personally-Identifiable Information (see Privacy, above) in a blockchain cannot be removed or changed as required by the European Union’s General Data Protection Regulation (GDPR) and widely illegal content has already been inserted into the bitcoin blockchain.

While a blockchain has no “central database” which could be hacked, it also has no central authority to adjudicate or resolve problems. A lost or compromised password is almost guaranteed to result in the loss of ability to access funds or worse, digital identities. Compromised passwords or illegitimate use of the blockchain can harm individuals involved, especially when personal information is accessed or when child sexual abuse images are stored forever. Building mechanisms to address this problem undermines other key features of the blockchain.

That said, an enormous amount of trust is inherently placed in the software-development process around blockchain technologies, especially those using smart contracts. Any flaw in the software, and any intentional “back door”, could enable an attack that undermines or subverts the entire goal of the project.

The 2019 report “Blockchain and distributed ledger technologies in the humanitarian sector” provides multiple examples of humanitarian use of DLTs, including for financial inclusion, land titling, donation transparency, fraud reduction, cross-border transfers, cash programming, grant management and organizational governance, among others.

• The World Food Programme’s Building Blocks project uses blockchain technology (Ethereum, four nodes and one controlling entity) to make its voucher-based cash transfers more efficient, transparent and secure, and to improve collaboration across the humanitarian system.
• The Start Network and its member organisations Dorcas Aid International and Trócaire partnered with Disberse, a for-profit financial institution for the aid sector, on pilot programmes using DLT (Ethereum-based, two and three nodes and one controlling entity) to increase the humanitarian community’s comfort with the technology.
• Helperbit uses the Bitcoin public network to create a decentralised, parametric peer-to-peer insurance service and donation system (multi-signature e-wallet) to change practices of humanitarian assistance both before and after an emergency.
• Sikka, a digital-assets transfer platform (Ethereum, one node and one controlling entity), was created by World Vision International Nepal Innovation Lab to address the challenge of financial access during times of crises for financially marginalised and in-need communities.
• The IFRC and Kenya Red Cross implemented the Blockchain Open Loop Payments Pilot Project (Multichain, four nodes with three controlling entities), through Red Rose, to explore how blockchain could increase the transparency and accountability of cash transfer programmes, including in relation to self-sovereign digital identities.”

Civil.co is a journalism-supporting organization that has harnessed the blockchain to permanently keep news articles online in the face of censorship. Civil’s blockchain aims to encourage community trust of the news in different ways. First, the blockchain itself is used to publish articles, meaning a user with sufficient technical skills can theoretically verify that the articles came from where they say they did. Civil also supports this with two non-blockchain “technologies”: a “constitution” which their newsrooms must adopt, and a ranking system through which their community of readers and journalists can vote up news and newsrooms they find trustworthy. By publishing on a peer-to-peer blockchain, their publishing has additional resistance to censorship. Readers can also pay journalists for articles using Civil’s tokens. It is worth noting that Civil’s initial fundraising fell flat and its model is still struggling to prove itself.

In “Blockchain: Can We Talk About Impact Yet?”, Shailee Adinolfi, John Burg and Tara Vassefi respond to a MERLTech blog post that not only failed to find successful applications of bockchain in international development, but was unable to identify companies willing to talk about the process. This article highlights three case studies of in-progress projects with discussion and links to project information and/or case studies.

“Digital Currencies and Blockchain in the Social Sector,” David Lehr and Paul Lamb summarize work in international development leveraging blockchain for philanthropy, international development funding, remittances, identity, land rights, democracy and governance, and environmental protection.

In “Alas, the Blockchain Won’t Save Journalism After All,” Jonah Engel Bromwich describes Civil.co’s initial attempts adapting blockchain to a media funding strategy.

Consensys, a company building and investing in blockchain solutions, including some in the civil sector, summarizes (successful) use cases in “Real-World Blockchain Case Studies.”

UN Blockchain4Humanity Global Challenge considers the use of blockchain to help prevent child trafficking in Moldova. This use is also discussed in the Reuters article, “Scan on exit: can blockchain save Moldova’s children from traffickers?”

The MIT Technology Review presents a case study of the use of biometrics and blockchain in a refugee camp in Jordan, that presents challenges to the right to data protection of the vulnerable individuals involved “Inside the Jordan refugee camp that runs on Blockchain.”