Humanitarian Groups Explore Blockchain:
Overcoming Common Obstacles of Providing Aid during Humanitarian Crises

Part I

PROBLEMS AND A SOLUTION

When individual donors around the world learn of a new humanitarian crisis, they want to know that their donations make it through the pipeline to the intended place, and this short-term interest usually completes their involvement.

However, major aid-giving organizations see the larger picture of such a crisis. These organizations understand that the problems of humanitarian crises include short-term and long-term consequences, the latter of which can extend for many years. Like the individuals, these organizations take immediate action, but they also continue giving long-term aid and support to the victims in the aftermath of the inciting event. Devastating mismanagement of aid and resources—intentional and incidental—can intensify the crisis victims’ suffering for decades after the crisis event. Even worse, this mismanagement can discourage individual and organizational donors from continuing their support, since they are rightly wary that the aid they contribute may never reach the people who need it.

This series of articles surveys three areas in which organizations are testing blockchain technology to increase the efficiency of getting aid to the people who need it; to bring accountability to processes which have typically been opaque and corruptible; and to provide tools to crisis victims so they may take greater agency on their own behalf as they reconstruct their lives in the crisis aftermath.

THE PROBLEMS OF INDIRECT AID
To increase the efficiency of getting aid to the people who need it

In a traditional donation model, a contribution travels through an organization, through one or more banks or other financial service providers (FSP), through a currency exchange, to a government or organization in the crisis region, through multiple layers of local infrastructure, to the crisis victims. The process is agonizingly time-intensive, preventing crisis victims from getting the aid when they need it. Also, even if all parties involved move the aid along without misplacing or grafting any—an unrealistic hope—the shipping or transaction fees inevitably reduce the contribution from what the donor intended. Delays, corruption, and other risks make this whole process grossly inefficient.

The delays between giving and receiving aid, which are inherent to the traditional donation model, exaggerate the problems of natural and man-made humanitarian crises. In both of these types of crisis, organizations are exploring how blockchain-based solutions can create a streamlined donation model that reduces the number of times aid changes hands and can more closely resemble a peer-to-peer system. It could go without saying that blockchain-supported cryptocurrencies deliver funds around the world faster that any traditional FSP. Financial aid given though a blockchain-supported network avoids the process of currency exchange and can bypass layers of governmental infrastructure by connecting directly to a crisis victim’s individual account.

As of October 2018, the Building Blocks program in Azraq, Jordan delivers rapid financial aid to 100,000 inhabitants of Syrian refugee camps, by allowing refugees to “pay” for essential goods with a simple biometric authentication (specifically, an eyescan). The WFP then pays the bill for the goods through a quick cryptocurrency exchange. This means that the refugees do not need to wait to get the products they need, and the WFP can see in real time how much aid is needed and for what. A new phase of the program, in partnership with UN Women, will allow women in the Cash For Work program to receive both goods and wages through the same biometric identification system at their local grocery store.

Notably, the Jordanian camp is the second phase of the Building Blocks program; the first phase, deployed through the public blockchain Ethereum in Pakistan, was slower than the second application in Jordan. Direct and rapid access to aid are vital to refugees who have no other means of obtaining food, medicine, and other essentials. Therefore, the second phase of Building Blocks transferred to a private “commissioned” blockchain which the WFP controls internally. The Jordanian model is considered such a success that the WFP plans to expand it to reach all 500,000 Syrian refugees in Jordan.

Some organizations are taking the concept of rapid aid even further, theoretically delivering aid before the crisis even occurs. This might be compared to the concept of preventative medicine: by helping future humanitarian crisis victims to prepare for a crisis event, donor organizations can reduce the overall suffering of the victims and even reduce costs in the long term. At the first Humanitarian Blockchain Summit, a representative from the Red Cross spoke about attempts to proactively identify future victims of imminent natural disasters. Typically, the process has been to respond reactively after such disasters are already turning into humanitarian crises.
On the same panel, a consultant to the insurance industry explained how, by taking proactive measures, “natural disasters don’t have to result in humanitarian crises.” Using contemporary and available technology, imminent disasters might trigger blockchain-enabled “smart contracts” which are digital contracts coded with the ability to self-execute. For example, insurance holders off the Florida panhandle might hold smart contracts so the holders would receive an influx of funds to support their evacuation ahead of a major storm. The blockchain-supported smart contracts would provide direct and rapid aid, so that those affected by a disaster would have the means to avoid the worst effects. Donor organizations could create similar policies supported by blockchain, so that “smart” aid might be triggered for international areas about to be hit with major storms or other natural disasters, helping those in the region to evacuate safely ahead of time. This kind of pre-emptive support is an inevitable evolution of reactive work already being done by major aid-giving organizations.

Financial service provider fees and currency volatility cause additional problems in the traditional donation model, beyond creating delay. FSP fees eat into donated aid, reducing the impact of each donated euro or dollar. Blockchain-supported cryptocurrencies also have transaction fees, but they are unburdened by the massive overhead of traditional FSPs. Additionally, donor organizations can use private blockchain networks to avoid external fees altogether, becoming, in effect, the “bank” themselves. In Building Blocks, early program results reported a 98% decrease in financial fees, thanks to circumventing banks and other traditional FSPs. The money saved from avoiding fees translates to approximately $4,000 each month. This, happily, translates to more aid money for the refugees.

Currency volatility is another obstacle in the traditional model of giving aid. By the time a donated dollar, euro, or other strong financial unit makes its way to the local currency of an area in crisis, the volatility of the local currency might render the original donation worthless. Blockchain-supported cryptocurrencies can have volatility of their own; however, the stability or volatility of a cryptocurrency is relatively invulnerable to the volatility in any one national currency. Additionally, Venezuelans do not have the option to keep their funds in a different, more stable national currency, because of strict controls on the exchange of foreign monies. Opening a bitcoin wallet, by contrast, is possible anywhere that a person has network access and a smartphone.For example, Bitcoin’s value is not affected by the many humanitarian crises in Venezuela or by the Venezuelan hyperinflation. In this example, aid funds delivered in Bitcoin would likely retain more value than the same funds exchanged and delivered in the bolivar.

Bitcoin usage in Venezuela
Venezuelans turn to Bitcoin - source: https://coin.dance

Most aid-giving organizations have stayed away from blockchain-supported cryptocurrencies. For example, in Venezuela where currency is inflated and volatile, and where citizens are experiencing a myriad of humanitarian crises, the people have demonstrated intense interest in converting to blockchain-based cryptocurrencies, which are more stable than the weakened national currencies. The Venezuelan government is attempting to improve on its weakened bolivar by experimenting in its own “petro” cryptocurrency. However, the success of the petro depends on international investment in its initial coin offering, and potential investors have stayed away because they recognize that the petro is an attempt by the Venezuelan government to circumvent international financial regulations. The most important point here for aid-giving organizations is to note that the petro offers no promise of immediate help for the Venezuelan people, even if the ICO is ultimately successful. The petro is a national currency, even if it is blockchain-supported cryptocurrency. Therefore, it is susceptible to the same problems of other national currencies.

On the other hand, while the bolivar and the petro struggle, Venezuelans themselves and their businesses have noted that cryptocurrencies can help them avoid the volatility of their national currency (bolivar) and the petro if they use a cryptocurrency which is already funded and stabilizing. Bitcoin and Dash are growing in popularity in Venezuela, and Dash in particular is being adopted by new users and merchants at levels that outpace China and Russia. Dash’s CEO and founder penned an article in The Hill, emphasizing that profit-driven cryptocurrency companies like his own are “start[ing] to lend their platforms to charity organizations in an attempt to pioneer a new medium for donation processes.” Humanitarian aid organizations which hope to make a difference in Venezuela would find a population ready to adapt to blockchain-supported aid, and this aid could be sent with minimal fees or delay.

The last significant obstacle in efficiently delivering aid to victims of humanitarian crises is, unfortunately, corruption. The many steps of the traditional donation model create an equal number of opportunities for graft. During his tenure as Secretary General of the United Nations, Ban Ki-moon made the infamous announcement that “corruption prevented thirty per cent of all development assistance from reaching its final destination,” which means that billions of dollars in aid are lost to corruption each year.
The solution to this problem is perhaps clearer than that of any problem listed above: simply reduce the steps between the donation and its recipient. If a donated dollar is deposited directly in a crisis victim’s digital wallet, there is zero opportunity for a middleman to steal a portion for himself or for “gifts” to supporters, a common practice that greases the wheels of institutionally corrupt governments. By transferring aid through blockchain-supported systems to crisis victims, donor organizations can be confident that no extraneous person or organization has any opportunity to intercept the donated funds. Additionally, blockchain’s famously decentralized system is resistant to tampering or other modifications; it is secure even from attempts to hack it. If humanitarian organizations are serious about exploring all options for optimizing aid-delivery, they must include blockchain technology in that exploration, since it can make delivery faster, cheaper, and more secure than the traditional donation model.

Part II to follow: The challenges of blind distribution, or how to bring accountability to proccesses which have typically been opaque and corruptible.