As a result of ongoing experimentation, development and investment in blockchain and distributed ledger technologies for a variety of purposes and by a variety of stakeholders, there is no single blockchain technology, but rather a variety of approaches (and hybrids of those approaches). Decisions from implementers regarding which flavor of blockchain to leverage can have important business and governance implications.
Broadly, the following matrix of blockchain implementation options has emerged:
Public vs. Private: Public blockchains (e.g., Bitcoin, Ethereum) are designed so that anyone can view, browse or audit transactions. On the other hand, on private blockchains (e.g., Hyperledger and various business applications), the data is not publicly accessible.
Permissionless vs. Permissioned: The permissionless vs. permissioned dichotomy hinges on who has the rights to add or validate43 block transactions on the chain.44 For permissionless ledgers (e.g., the Bitcoin blockchain) anyone has the ability to write to the blockchain, whereas permissioned ledgers provide for a restricted set of users to write and authenticate transactions. In the latter case, the application is not truly decentralized, and might not be well-suited for addressing certain types of information asymmetry.
Figure. Matrix of blockchain implementation options.
Although we often hear references to blockchain as a monolithic entity, it has become increasingly clear, especially as the field has evolved, that there is in fact no single blockchain technology. Rather, there are several variations of attributes that provide for different technological scenarios – for example, restrictions on the ability to view and/or contribute to the blockchain. So while blockchain technologies, and DLTs more broadly, are often treated as a single, homogenous innovation, in fact, the attributes of different blockchain implementations can vary widely, just as the resulting outcomes of those implementations will necessarily vary.
Despite these variations, some core attributes do remain foundational and (more or less) consistent across blockchain applications. In the following sections, we distinguish between those core attributes and those optional attributes that could exist in some, but not all, implementations.
Blockchain ledgers exhibit a level of immutability not present in other similar management systems.45 While questions are increasingly arising on how immutable blockchains truly are,46 in general terms, “it is nearly impossible to alter or falsify information on the blockchain.”47 Of course, this immutability helps to ensure that nearly all entries of information (including information that is corrected later in the chain) remain as “permanent legacies.”48
The distributed validation mechanisms that confirm additions to the blockchain cannot easily be manipulated to intentionally add low quality or inaccurate information to the blockchain. This integrity of user information and activity is also the result of automated capturing of transaction metadata for all activity undertaken on the chain.49
The information security offered by blockchain arises from the distribution of information and agency across nodes in the blockchain. Data breaches can strike centralized databases, such as the infamous Equifax breach of 2017, but given the distributed nature of blockchain, a similarly effective attack would require “an attack on every copy of the ledger simultaneously."50
While essentially all blockchain implementations exhibit some level of immutability, integrity, and resilience, many of the benefits most commonly cited by blockchain optimists and vendors are in fact largely optional—they depend on deliberate technical and design choices. Questions about what types of implementation yield what types of benefits will likely be central going forward for those seeking to use blockchain, whether in a business or social good setting. Here, we outline three of the most important – and potentially transformative – attributes of certain blockchain varieties.
Bitcoin, the original blockchain use case, was developed in order to create a disintermediated monetary system, allowing users to transact peer-to-peer without involving central banks. Blockchains, especially public ones, can enable such disintermediation, but not every implementation will necessarily cut out the middlemen – nor is the destruction of intermediaries always straightforward or desirable, as discussed in more detail below. A private, permissioned blockchain, for example, implemented with hand-selected nodes would exhibit vastly different levels of disintermediation compared to something like the Bitcoin blockchain. Blockchains can also generate a new set of intermediaries such as miners, exchanges and programmers specializing in smart contracts, for example.
In public blockchains, the entirety of information and metadata held on-chain is/are? available to all users.51 Only cryptographic hashes containing user information are publicly visible and information on all transactions is time stamped and available to all.52 While all blockchain implementations make visible such information, different implementations can restrict access to a small set of pre-approved users to such an extent that transparency cannot be reasonably attributed.
Just as blockchain is often framed as a technology for disintermediation, narratives commonly describe how blockchain can create new levels of service accessibility, allowing previously disconnected individuals (e.g., the so-called “unbanked”) to transact and access services without relying on traditional gatekeepers and third parties.53 Again, while such accessibility improvements can be enabled through some blockchain implementations, others place limits on who can view or contribute to the chain. Some blockchain implementations are entirely on the “backend,” meaning that individuals whose activity is represented on the blockchain do not necessarily need to be aware that they are contributing to the blockchain. This is the case, for instance, with the World Food Programme’s Building Blocks project discussed more below and in Appendix 1.
Blockchain is increasingly viewed as a transformative technology for creating social change. The meteoric rise of Bitcoin in many ways acted as a proof of concept for disrupting centralized legacy systems, particularly those that require high levels of trust between parties that otherwise lack clear incentives to trust one another. Blockchain is now seen as providing a potential solution to everything from homelessness in New York City54 to the Rohingya crisis in Myanmar55 to government corruption around the world.56 Demonstrating the breadth of current experimentation, Stanford’s Center for Social Innovation recently analyzed and mapped nearly 200 organizations and projects aimed at creating positive social change with blockchain.57 Complementing this work, the GovLab is developing a mapping of Blockchange implementations58 across regions and topic areas.
Informed by our analysis of the current field of practice, we identified three key types of Blockchange applications or use cases: Track and Trace, Identity, and Smart Contracts. In the following table, we desribe each of these use cases, provide examples of projects implemented across them, and identify the commonly cited social change objectives for such projects.
Description
Improving the traceability of tangible and intangible objects as they, for example, are shared between parties or travel across supply chains.
Capacity for Addressing Information Asymmetries
The impact of blockchain is already starting to be felt in global supply chains, including in the pharmaceuticals and food industries. By immutably recording various steps in supply chains and other logistics chains, blockchain has the potential to reduce waste and fraud, crack down on duplicates and illicit products, and increase consumer safety. Blockchain in effect allows transparency watchdogs, as well as average consumers, to track the provenance of goods they purchase and consume, in the process leveraging the power of information so that consumers and citizens can make better choices.
Illustrative Examples
Verisart59 creates verifiable, digital certificates for art and collectibles, which helps buyers ensure each piece’s provenance.
Grass Roots Cooperative60 along with Heifer USA created a blockchain-powered app that allows every package of chicken marketed and sold by Grassroots to be traced on the Ethereum blockchain.
Everledger61 works with stakeholders across the diamond supply chain to track diamonds from mine to store.
Ripe62 is working with Sweetgreen63 to use blockchain and Internet of Things (IoT) sensors to track crop growth, yielding higher-quality produce and providing better information for farmers, food distributors, restaurants, and consumers.
Description
A distributed system of trusted identifiers with some level of immutability that can allow for the confirmed and authenticated identification of people and objects.
Capacity for Addressing Information Asymmetries
The lack of verifiable, self-sovereign identities is emerging as one of the major problems of the information age, enabling everything from identity theft to privacy violations, new and existing forms of surveillance, and other forms of fraud. Today, citizens do not control their online presences, and this not only leads to immediate problems but erodes long-term trust in the entire data ecosystem. Several projects are underway to use blockchain to remedy this situation.
Illustrative Examples
The State of Illinois is working with Evernym64 to pilot digitization for birth certificates, to test the feasibility of giving individuals a digital identity from birth.
BanQu65 creates an economic passport for previously unbanked populations by using blockchain to record economic and financial transactions, purchase goods, and prove their existence in global supply chains.
In 2015, AID:Tech66 piloted a project working with Syrian refugees in Lebanon to distribute over 500 donor aid cards that were tied to non-forgeable identities.
uPort67 provides digital identities for residents of Zug, Switzerland to use for accessing governmental services.
Identity Foundation68 is a community-driven group of developers and organizations working toward an interoperable, decentralized identity ecosystem.69
Bitnation70 is the world’s first Decentralised Borderless Voluntary Nation (DBVN). The website proof-of-concept, including the blockchain ID and Public Notary, is used by tens of thousands of Bitnation Citizens and Embassies around the world.
Description
Automated processes that take a particular, predefined action, triggered when another predefined action is executed and confirmed by blockchain nodes.
Capacity for Addressing Information Asymmetries
Much has been made of blockchain’s potential for automated contracting. Smart contracting has the potential to reduce fraud and transaction costs for businesses, governments and citizens.71 More generally, it has the potential to drastically simplify processes (by, for example, automating compliance and enforcement), thus opening up new business models and permitting average citizens to enter into complex and hitherto expensive arrangements with businesses, governments and each other. Smart contracting is an example of how existing information asymmetries can potentially be leveled and flattened, putting more power into the hands of citizens and consumers.72 At the same time, security concerns related to smart contract technologies (following several high profile hacks) suggests the need for a more cautious use.73
Illustrative Examples
In Indonesia, Carbon Conservation74 and Dappbase have created smart contracts that will distribute rewards to villages that can prove the successful reduction of incidences of forest fires.
Alice75 has built Ethereum-based smart contracts for a pilot donation project that supports 15 homeless people in London. The smart contracts ensure donations are released only when pre-determined project goals are met and aims to test a new and more transparent approach for donation platforms.
Bext36076 uses smart contracts to pay coffee farmers fairly and immediately based on a price determined through weighing and analyzing beans by the Bext360 machine at the source.
BitLumens77 uses smart contracts and solar panels to provide energy to areas lacking an operational power grid where costs would otherwise be prohibitive.
“Every computer in the network checks (validate) the transaction against some validation rules that are set by the creators of the specific blockchain network. Validated transactions are stored into a block and are sealt with a lock (hash). This block becomes part of the blockchain when other computers in the network validate if the lock on the block is correct”. https://medium.com/ignation/pulling-the-blockchain-apart-the-transaction-life-cycle-7a1465d75fa3 ↩
Further complicating matters is the concept of hybrid or sidechains: “An additional area is the emerging concept of sidechain, which allows for different blockchains (public or private) to communicate with each other, enabling transactions between participants across blockchain networks.” Blockchain: How this technology could impact the CFO role. Ernst & Young, 2017. https://www.ey.com/gl/en/industries/technology/ey-how-blockchain-technology-could-impact-the-cfo ↩
Some private permissioned blockchains and DLTs allow selected users and nodes to edit or delete records. ↩
Christina Comben. “Are Blockchains Actually Immutable?” The Merkle, April 7, 2018. https://themerkle.com/are-blockchains-actually-immutable/ ↩
Raúl Zambrano. “Blockchain.” International Development Research Centre, August 2017. https://idl-bnc-idrc.dspacedirect.org/bitstream/handle/10625/56662/IDL-56662.pdf ↩
Michael Mainelli. “Blockchain Will Help Us Prove Our Identities in a Digital World.” Harvard Business Review, March 16, 2017. https://hbr.org/2017/03/blockchain-will-help-us-prove-our-identities-in-a-digital-world ↩
Raúl Zambrano. “Blockchain.” International Development Research Centre, August 2017. https://idl-bnc-idrc.dspacedirect.org/bitstream/handle/10625/56662/IDL-56662.pdf ↩
Philip Boucher, Susana Nascimento, and Mihalis Kritikos. “How blockchain technology could change our lives.” European Parliamentary Research Service, February 2017. http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/581948/EPRS_IDA(2017)581948_EN.pdf. However, note that so-called 51% attacks on blockchains have recently increased thus challenging its resilience. See http://newsaltcoins.com/51-percent-attacks-increase. ↩
Raúl Zambrano. “Blockchain.” International Development Research Centre, August 2017. https://idl-bnc-idrc.dspacedirect.org/bitstream/handle/10625/56662/IDL-56662.pdf ↩
Garrick Hileman and Michael Rauchs. “2017 Global Blockchain Benchmarking Study.” September 22, 2017. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3040224 ↩
Philip Boucher, Susana Nascimento, and Mihalis Kritikos. “How blockchain technology could change our lives.” European Parliamentary Research Service, February 2017. http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/581948/EPRS_IDA(2017)581948_EN.pdf ↩
Ben Schiller. “This New Blockchain Project Gives Homeless New Yorkers A Digital Identity.” Fast Company, December 6, 2017. https://www.fastcompany.com/40500978/this-new-blockchain-project-gives-homeless-new-yorkers-a-digital-identity ↩
Beh Lih Yi. “Stateless Rohingya to get digital IDs with blockchain.” Reuters, December 20, 2017. https://www.reuters.com/article/us-myanmar-rohingya-tech/stateless-rohingya-to-get-digital-ids-with-blockchain-idUSKBN1EE1VA ↩
Laura Shin. “New Initiative Aims To Eliminate Corruption With Blockchain Technology.” Forbes, June 20, 2017. https://www.forbes.com/sites/laurashin/2016/06/20/new-initiative-aims-to-eliminate-corruption-with-blockchain-technology/#542415641309 ↩
Doug Galen, Nikki Brand, et. al. “Blockchain for Social Impact Moving Beyond the Hype.” Stanford Graduate School of Business Center for Social Innovation. https://www.gsb.stanford.edu/sites/gsb/files/publication-pdf/study-blockchain-impact-moving-beyond-hype_0.pdf ↩
Blockchange Repository. The Governance Lab, 2018. https://blockchan.ge/curatedexamples.html ↩
Verisart, 2018. https://www.verisart.com/ ↩
Grass Roots Farmers’ Cooperative, 2017. https://grassrootscoop.com/ ↩
Everledger, 2018. https://diamonds.everledger.io/ ↩
Annie Massa. “Someone Figured Out How to Put Tomatoes on a Blockchain.” Bloomberg, November 9, 2017. https://www.bloomberg.com/news/articles/2017-11-09/the-internet-of-tomatoes-is-coming-starting-with-boston-salads ↩
Sweetgreen, 2016. https://www.sweetgreen.com/ ↩
Evernym, 2013-2018. https://www.evernym.com/ ↩
BanQu, 2018. http://www.banquapp.com/ ↩
AID:Tec, 2017. https://aid.technology/ ↩
uPort, 2018. https://www.uport.me/ ↩
Identity Foundation. http://identity.foundation/ ↩
ID2020. https://id2020.org/ ↩
Bitnation, 2018. https://tse.bitnation.co/ ↩
Blockgeeks, 2018. https://blockgeeks.com/guides/smart-contracts/ ↩
Lin William Cong and Zhiguo He. “Blockchain Disruption and Smart Contracts.” May 22, 2018. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2985764 ↩
Sherman Lee, Blockchain Smart Contracts: More Trouble Than They Are Worth? July 10, 2018 Forbes
https://www.forbes.com/sites/shermanlee/2018/07/10/blockchain-smart-contracts-more-trouble-than-they-are-worth/#590c82e223a6 ↩
Carbon Conservation. http://www.carbonconservation.com/index.html ↩
Alice, 2017. https://alice.si/ ↩
Bext360, 2018. https://www.bext360.com/ ↩
Bitlumens, 2018. https://bitlumens.com/ ↩
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