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Pd

Operational Condition: Problem

Is there a clear problem definition?

Blockchain is frequently accused of being a solution in search of a problem.¹⁰⁹ As is the case with most innovations, Blockchange implementations are most likely to find success when they are targeted at a clear, well-defined problem, and when progress toward addressing that problem can be measured.

For example: The World Food Programme’s Building Blocks authentication project is an efficiency-led initiative focused on addressing high transaction costs in the distribution of aid at the Azraq refugee camp in Jordan. While only addressing a tiny portion of the broader refugee challenge (in Jordan and beyond), the tight focus has yielded clear financial benefits, including cost-reduction and disintermediation, translating into additional resources for programming.

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Operational Condition: Problem

Do information asymmetries and high transaction costs incentivize change?

As demonstrated in the seminal economics paper, “The Market for Lemons,” by Nobel Prize-winner George Akerlof,¹¹⁰ information asymmetries can create significant transaction costs for disadvantaged parties in both commercial or social engagements. When such asymmetries exist, there is significant incentive for implementing a system—such as blockchain—that levels the information playing field and establishes transparency and trust between disparate parties.

For example: In Kenya, BanQu was launched to address information asymmetries that disadvantage the extremely poor, many of whom currently lack access to credit and banking. For the so-called ‘unbanked,’ building up the credit and identity profile necessary to access financial opportunities is a difficult process with high levels of transaction costs and stumbling blocks. The BanQu blockchain aims to enable the unbanked to “develop a tractable, vetted financial and personal history,” while simultaneously providing financial institutions with anti-money laundering and know-your-customer tools. The result is lowered transaction costs on both sides of the equation.

Dr

Operational Condition: Data and Technology

Are accurate and high-quality digital records available?

In cases where high quality digital records are already available, the move toward a blockchain-enabled system is likely to be smoother and more rapid than an attempt to move from an analog identification system to one leveraging DLTs.

For example: The canton of Zug, Switzerland is experimenting with a self-sovereign identity initiative aimed at providing blockchain-based IDs for citizens to access public services. The process for participating in the initiative makes clear both the importance of engagement with legacy systems for some Blockchange use cases, as well as the related benefits of accessing existing digital records. Upon signing up for the Zug SSI project, citizens must register in person at the Zug records office, where civil servants can cross-check existing government documentation on the individual with their new blockchain-enabled identity. Officials can also associate existing records with individuals’ new digital credentials, thus avoiding the time- and resource-intensive process of recreating those records for new IDs.

Dt

Operational Condition: Data and Technology

Is there no availability of credible and alternative disclosure technologies?

Much of the skepticism surrounding blockchain uses for social change is based on the belief that in many cases, technologies already exist to achieve the same objectives, and often with better user interfaces and lower ecological and financial costs.¹¹¹ Although all problems look like nails to true believers¹¹² wielding the blockchain hammer, the most successful Blockchange efforts will fill a true gap rather than trying to address problems already being addressed effectively with other tools.

For example: The Lantmäteriet, the Swedish Land Registry, developed a prototype in which real estate transactions would be put on the blockchain from the point an agreement to sell is reached until the land title is transferred, allowing all parties — banks, land registry, brokers, buyers, and sellers — to monitor the progress of the transaction. The impetus behind the pilot project is the belief that there exists no other trustworthy solution for creating, enacting, verifying, storing, and securing digital contracts. The project seeks to test the idea that blockchain has unprecedented capacity to rapidly and effectively create new digital entities that cannot be fraudulently copied or tampered with, and secure processes that cannot be manipulated.

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Operational Condition: Ecosystem

Are there trusted intermediaries active in the space and does their efficiency or lack thereof incentivize change?

The presence or absence of intermediaries, and their effectiveness or ineffectiveness, can act as a key enabler for Blockchange. As a fully self-sovereign system of identity management is unlikely to reach critical mass for some time, effective intermediaries can enable engagement with both intended users and any legacy systems relevant to the Blockchange implementation. On the other hand, the absence of trusted intermediaries, or the presence of ineffective ones, could help to incentivize the creation and use of a more decentralized approach.

Moreover, intermediaries can play complex and varied roles, meaning that certain functions could be disintermediated without entirely removing the need for or value of a particular type of intermediary.

Indeed, it is likely going forward that new intermediaries will be established – for example, to address unforeseen circumstances or adjudicate contingencies that cannot be handled effectively through an automated and distributed system.¹¹³ In addition, it is likely that existing intermediaries may take on new roles and responsibilities as they transition to blockchain enabled-platforms.

For example: MIT’s Digital Diploma initiative is the result of a collaboration between the MIT Registrar’s Office and the Learning Machine startup. While still limited, use to date is largely the result of using the existing registrar office as a distribution channel, and would not be likely if the Blockcerts application was developed and implemented in isolation toward providing a fully decentralized credentialing system.

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Operational Condition: Ecosystem

Is there a level of cooperation (or ‘co-opetition’) among players? Is there an ecosystem of potential users?

The successful implementation of any new technology, especially one as complex as blockchain, requires a level of cooperation, if not full-scale collaboration, among a diversity of stakeholders. Just as an overreliance on and an outsized empowerment of vendors can lead to lock in, so a fragmented rather than cooperative approach among stakeholders can lead to the creation of unnecessary silos and a minimization of interoperability. Similarly, if there is no ecosystem of potential users, the initiative may have limited uptake.

For example: Voatz is one of the first movers in blockchain-enabled voting (not just vote tallying and auditing). To date, pilot projects for a university student union election and a state party convention election represent its major implementations, with remote voting for one state’s midterm congressional election launched just after this writing. Going forward, as more actors are likely to enter the blockchain-enabled voting space, some level of cooperation and interoperability will be key in order to ensure that voting processes across regions and levels of government are compatible.

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Operational Condition: Capacity

Are public officials technology aware and data literate?

Like any technology being considered for governance use cases, blockchain can only be effective if it is implemented in an enabling environment by stakeholders with a firm grasp of the technology, its strengths, its weaknesses, and how it fits into the broader governance landscape. Given blockchain’s nascence and complex nature, achieving this level of understanding is likely to pose an ongoing challenge to public officials. The issue of public sector technical literacy is especially important as private sector vendors continue to dominate the space.

For example: In Sierra Leone, controversy erupted after the global media publicized the so-called “Blockchain Election” in the country enabled by Agora, a Swiss blockchain startup. While it remains unclear how the misunderstanding originated, it is evident that Agora and the National Electoral Commission were not aligned on the use and objectives of blockchain in the election, and the media’s somewhat distorted coverage exacerbated that disconnect.