Blockchains and International Development: A Good Bet

August 7, 2017

The applications for blockchain technology are expanding at breakneck pace. Most famously known as the underlying architecture for Bitcoin and valued for the way it transparently, accessibly, and securely records information, blockchains are rapidly being adopted beyond the bounds of finance and digital currency. In the realm of international development, blockchains are already improving livelihoods, facilitating good governance, and helping establish rights among poor communities. Understanding the technology itself is less important than understanding its enormous potential for public and global good.

Avoiding an in-depth explanation, a blockchain is essentially a digital ledger administered by a diffuse computing network. It exists in the cloud, accessible by all, but editable only collectively. It promises record keeping that is secure, transparent, diffuse, and low cost. Already widespread in the financial industry, blockchains are now being explored for uses across a broad spectrum of industries. Some of the technology’s most profound implications very well may arise from applications in international development.

One of the foremost examples comes from the realm of property rights and land registry. The ability to acquire and expand one’s own economic opportunities is closely tied to the ability to establish personal property. In developing states, property rights are often poorly understood, and the rule of law is often weak. This enables corrupt officials, influential businesses, or even mischievous neighbors to appropriate private land dishonestly. Even with a legitimate land title, the advent of a conflicting title in an environment with weak property rights can allow malicious actors to influence a system to their advantage.

In a blockchain-based land registry system, the end goal is for all property titles and transactions to be recorded within a blockchain. Such a system deters misappropriation by securely documenting the complete history of the entire community’s properties, and it eases the burden on central authorities by reducing the time and cost involved with record keeping and transactions. To be sure, the exactness and transparency of the record will mean less where courts are willing to overlook hard evidence, but the immutability of such a record makes the technology potent nonetheless. Countries like Georgia and Honduras already have such projects underway; if successful, they will leapfrog the world’s most developed countries in land registry efficiency and cost.

Elsewhere, blockchains are displaying encouraging signs of multipurpose functionality. In Kenya, the firm Rex Mercury is using the technology simultaneously to facilitate education and establish identities. Paying for children’s education is a common and costly issue in developing regions. Under Kenya’s conventional system, parents in rural areas are often expected to travel long distances, first to a bank to make a payment and then to the school to provide proof of payment, all at the expense of day-to-day productivity. For hard-pressed populations, this time expenditure can be prohibitively costly. To complicate matters further, schools tend to be underfunded and transactions often happen in cash—a recipe for lost and misappropriated payments.

When these payments occur in a blockchain-based network, parents can make payments via a mobile device into a blockchain ledger. The blockchain can then seamlessly provide proof of payment to the school. The result is a less costly, more reliable interaction for parents and, more importantly, a higher number of children with consistent education.

The second contribution blockchains make comes from the encoding of relevant information like names, locations, relationships, and payment histories, all with potential benefits for the community. For example, governments can provide improved services based on new demographic insights, and resulting payment histories enable future borrowing for previously unbanked individuals. These multiple dimensions of data offer valuable context for development, governance, health care, and more.

These are all positive glimpses of the potential for blockchains. But experts in the field also always provide a healthy dose of caution with every promising application. There are many obstacles that can prevent the proper implementation of this technology or mitigate the intended benefits. Some of the greatest issues revolve around keeping the technology accessible to the populations who need access to it at low or no cost.

Concerns are already rising that the technology will merely be subsumed into established industries and not become the open, transparent resource it could be. If companies adopt the technology without passing on efficiencies to consumers, the ability for blockchains to do good will be severely undercut. Furthermore, as a nascent technology, the security challenges are still being explored. Truly robust safeguards must begin today with educated implementation and mindfulness about future vulnerabilities.

Blockchains are not meant to be a development panacea. A verifiable source of information does little against an authoritarian government that is willing to overlook it. Increased access to education cannot ensure the quality of the education received. But blockchains deserve further investment, research, and responsible stewardship. They exhibit great potential to make development obstacles more surmountable and indeed have already begun to do so.

Phillip Meylan is a content strategist at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Daniel F. Runde holds the CSIS Schreyer Chair in Global Analysis and directs the CSIS Project on Prosperity and Development.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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