Can crypto solve all the problems with fiat? Will consumer products soon have traceable histories and fair trade certificates on a blockchain? Can we use distributed ledger technology to bank the unbanked, democratize elections, take ownership of our personal data, and reverse the tide of climate change?
In the past few years, Ive seen dozens of blockchain use cases, some promising high ROIs and some painting beautiful pictures of Blockchain Utopia. My favorites are always the ones that harness the technology for social good; however, I often experience an internal struggle between the humanitarian Berkeleian who loves social impact projects and the skeptical blockchain academic who is aware of the technologys limitations that render most use cases infeasible.
Here, I present five social impact blockchain use cases and the obstacles we?-?and not just blockchain developers and researchers?-?must overcome in our quest to build Blockchain Utopia.
Financial Inclusion and DonationTracking
Finance is the most intuitive use case for blockchains. Bitcoin was introduced as a digital currency offering the extra features of anonymity which allows for greater privacy, fewer transaction fees which allows for high volume and microtransactions, and removal of barriers which allows for cross-border payments. Typical financial use cases include IoT micropayments, remittances, claims management, and securities trading. But while most of us who are able to access Medium live in a country with a reliable currency system and access to financial services, there are billions of people whose financial opportunities can be dramatically improved with cryptocurrency technology.
Lets say a woman in India discovers she can apply her skills to start a small business. However, she does not have the initial capital to get started, and she is one of 2 billion people in the world with no access to banking/financial services so loan options in her community are scarce; debt bondage is also unfortunately prevalent in India. We can envision cryptocurrencies?-?frictionless digital money that transcends large financial institutions and international borders?-?helping those that banks have failed to reach.
Perhaps, in the future, everybody will transact with digital currencies. You and I, sitting across the world from the woman in India, will be able to easily loan money via smart contract and track exactly where the money goes; she will be able to build her credit through a reputation tracker built into the application. Retailers and CPG companies who participate in charities can set up 5% of all sales donations as smart contracts such that consumers purchasing those products will be able to verify and see the impact of their donations. Note that this particular vision excludes the anonymity capabilities of cryptocurrencies, and perhaps even requires centralized identity services.
Because finance is the simplest blockchain use case, it also reveals the technologys most fundamental problems. Cryptocurrency will only become mainstream if it exceeds what consumers expect from traditional applications: it needs to be faster, cheaper, and more accessible?-?none of which are really true today.
Ill talk about accessibility first: assuming we can get financial services to everyone with smartphone access, weve helped a laughably small portion of the unbanked.
But say some benevolent donor generously paid for everyone to have some kind of electronic wallet and everyone can transact with cryptocurrencies. To maintain the system, we also have to pay for people to host nodes and validate transactions?-?a nontrivial cost increase if you want true decentralization.
Further, we have the problem that Bitcoin can barely handle a dozen transactions per second, and most other cryptocurrencies dont do much better (for context, Visa is expected to handle tens of thousands). The main bottleneck is the demand for trustless consensus (observe the Scalability Trilemma) and redundant data storage. Fortunately, blockchainsScalabilityproblem is its most heavily researched topic: short-term solutions include setting up permissioned ledgers with faster consensus or Not Using Blockchain; long-term solutions include Proof of Stake implementations, sharding, side chains, and state channels.
Supply Chain for Fair Trade, Sustainability, and Ethical Consumerism
The first use case that came to mind when I initially read about blockchain was supply chain; at the time I thought it was an original idea (ha). Its also quite intuitive: we have a ledger containing the ownership history pertaining to a particular asset. If bitcoins are trackable, why cant everything else be?
Perhaps one day well be able to scan the barcode of any product bought at the supermarket and see its entire history from the machine it was manufactured in to the temperature of the grocery store cooler it was stored in. Enabled by the data integrity of a blockchain, supply chain transparency becomes the norm. With pressure from their customers who will make educated buying decisions based on provenance, companies are held accountable for their production and labor practices. All chocolate bars and lattes will be fair trade, fishing and aquaculture will be sustainable, counterfeit drugs will be eliminated, and workers producing textiles and electronics will be fairly compensated. Those of us who have sworn off meat but still yearn for the taste of a medium rare steak will be able to purchase a pound of tenderloin from a cow that was sustainably and humanely raised, painlessly killed, and whose methane emissions were offset. What a beautiful vision.
However, all the traceability hinges on the supposed data integrity of the blockchain, which we consider immutable, transparent, and trustless. But its really just a data structure with hash pointers. Still remains is the integrity of the data input process: if the warehouse worker decides to swap a bottle of oral chemotherapy drugs with sugar pills and nobody records that on the blockchain (and who would?), we have immutable, transparent, trustless… garbage.
Secure data entry?-?without introducing a trusted third party?-?is a nontrivial task: most theoretical implementations boil down to reliance on a tamper-evident device for data collection. Examples include hardware oracles and encrypted, tamper-evident RFID tags. But even then, we have what I like to call the Grapes Problem: suppose you have a cost-effective RFID tag whose proximity to a hardware oracle will automatically trigger updates to the blockchain. Where would you put the tag to make sure it collects all the information? One per crate of grapes? One per bunch of grapes? One for each individual grape? Until we solve these problems, blockchain adds little value to supply chain transparency.
Identity and Ownership of Personal Information
Private and public key cryptography introduced the ability to authenticate messages consistently without having to reveal any information about your identity. With the addition of blockchains and consensus, we can trustlessly come to agreement on transactions and state data without having to reveal that information either. These technologies enable privacy as the Cypherpunks envisioned it: the ability to selectively reveal personal information to others.
What should identity be tied to, and what information are we talking about? While I know exactly where my birth certificate, passport, and diploma are?-?or at least my mother knows?-?not everyone has their identity instruments and certifications on hand. It poses real complications in trying to get financial assistance, housing and property ownership, employment, and medical services. We have also heard much about problems with data management in healthcare and other services such as social media platforms: inaccessibility due to data silos, misuse of personal data, and security failures. There is increasing interest in regaining control of our own personal data.
The concept of a self-sovereign ID and personal privacy mesh well together: the vision is for everyone to possess a digital identity verifiable anywhere, and all the data associated with that identity belong solely to the owner. Granting permission to access specific bits of data is also within the persons control. There are blockchain companies offering digital wallets and lending platforms that use biometric information to tie digital identities to the real world?-?something that cannot be lost or destroyed. Other companies offer services which securely handle personal data and act as a third-party authenticator.
We will all benefit from a system in which we hold the keys to our personal data and selectively transfer access rights to various entities. For example, when you see a medical specialist, you grant her access to the relevant health records and she can access them instantaneously. You may also decide to provide non-identifying information to researchers investigating genetic predispositions to a condition you were diagnosed with and pharmacy companies developing drugs to treat said condition. You may be compensated for providing data, and the vast availability of data greatly accelerates medical advancements and healthcare providers ability to provide specialized treatment.
Note that there are debates as to whether this issue would be solved with blockchain or mere coordination and cryptography; Id argue that blockchain can play a role in access management and incentive structure.
Heres a spooky acronym: HIPAA. Any application handling sensitive data that cannot guaranteeprivacy and securityis unacceptable. Many of us like to tout blockchains absence of a central point of failure due to its decentralized structure. However, blockchain is a highly adversarial environment and, if we uphold the Code is Law ideology, any hacker who successfully finds a vulnerability has a right to any and all prizes she can extract from it. Bitcoin, of course, is vulnerable to a 51% attack that could be happening under our noses due to Bitcoins pseudonymity.
Developers must obviously be vigilant and rigorously test applications; at this stage where security is still a predominant concern, keeping projects open source is important for productivity.
Voting, Freedom of Speech, and Censorship Resistance
Given cryptocurrencies anonymous nature, it has been widely lauded as a censorship-resistant tool. Various journalism services are looking to use blockchain to support and compensate and incentivize newsmakers in local communities and politically unstable areas. Through an anonymous cryptocurrency, we have freedom of expression with not just our words but our dollars as well.
Id like to focus on the blockchain for voting use case: a decentralized voting platform that is incorruptible by the government and preserves democracy while enabling voter anonymity. A voter could register using some kind of identity verification like what I described above, cast a vote anonymously, and later verify that their vote was included in the computation of election results. Ideally the whole process is decentralized (if possible) and unable to be influenced by the voters government?-?or a foreign one. These benefits are in addition to the accessibility, ease of absentee ballots, and minimization of human error and fraud offered by the simple digitization of the voting process.
There are many problems with the voting use case. Part of the issue with voting systems specifically is also security: the decentralized voting platform (data entrypoints included) must be strictly more trustworthy than existing voting process for it to be acceptable to voters. But theres another, simpler problem with consumer adoption. Ive heard many times that a voting system built on a blockchain will be more accessible to voters and increase voter turnout. Its a good thought, but I always respectfully ask them to show me a blockchain-based application that is strictly more user-friendly than its traditional counterpart. It isnt easy.
When blockchain startups ask me for advice, I say: hiredesigners. The UIUX of many blockchain applications is typically subpar for no good reason, and Im dont just mean a pretty website with animated buttons. The blockchain space needs more individuals who understand how to create a user experience in which the blockchain becomes irrelevant. What do I mean by that? Right now, there seems to be a collection of magic words you can tack on to things to make their value double: distributed ledger, byzantine fault-tolerant consensus, and advanced cryptographic protocol. Nobody uses the names of communication protocols and data structures to sell their web products. When the buzzwords are abstracted away and all we see is a better user experience, well know we have transitioned from hype to meaningful technological advancement.
Energy and Environment
Im not going to talk about how Bitcoin uses more electricity than Chile. And Im not going to talk about how many mining pools in China are powered by coal. But I am aware of those issues. Perhaps blockchain can redeem itself by contributing to energy concerns relevant today: incentivizing the production and usage of renewable energy and disincentivizing carbon emissions.
A small scale application that is feasible today is installation of microgrids such as independent rooftop solar panels that are available to supply energy locally, which are especially beneficial during natural disasters. Such power generators can directly transact with consumers using cryptocurrencies (one of many sensible IoT blockchain use cases).
A larger scale application includes a large network of power suppliers supplying data on the amount and type of energy they provide and power consumers supplying data on their energy demands throughout the day, week, month, and year. This data can be used to design an incentive structure for mediating the carbon intensity of energy usage at different times: charge your electric vehicle during the hours 1-4pm and receive rewards for utilizing more solar energy at a low-demand time of the day, or wait until 10pm (when demand is typically high and much of the power is generated with fossil fuels) and pay more.
Carbon credits already provide an incentive structure for reducing the emission of greenhouse gases, taking responsibility for negative environmental impact, and beginning to halt the progression of climate change. The tokenization of carbon credits and carbon offsets can increase transparency, ease of transfer, and integrity of the system. Since every purchase has some environmental impact or another, consumers may one day be able to track the footprint left by their actions and take actions to counteract them. Carbon offsets can be directly embedded into products so consumers can automatically participate in the efforts to pay back Mother Earth for the environmental cost of producing their products.
But heres a final problem of integration: most blockchain applications only work if everybody uses it.Interoperabilityis one part of it. Adoption is difficult with many incompatible platforms, and locked up ecosystems hinder productivity and innovation. There are also variousintegration barrierswhich include slow-moving industries due to a prioritization of safety over innovation, conservative law-makers and law-abiders bound by regulations that do or dont exist, and consumers hesitant to buy into a technology best known for Silk Road and Mt. Gox scandals. All very reasonable, Id say, but solvable. Possible solutions include education, peer pressure from consortia, more education, mandate by government, and even more education.
Conclusion
Theres a point in the blockchain learning curve in which we become hopelessly disheartened by the current limitations of the technology?-?are there ANY feasible use cases? Perhaps you felt that these peachy visions of a blockchain-enabled future are all impossible. Or perhaps you envisioned Blockchain Utopia as I did, but were unsure how to build it. Hopefully I have convinced you that it is indeed possible, but that there are obstacles to overcome before we get there.
Blockchains challenges generally fall into one of three categories: technical shortcomings resulting from the nascent nature of the technology, non-blockchain challenges that significantly influence the efficacy of a blockchain use case, and hurdles to integration.
What does this mean? You dont have to be a blockchainer or even a developer to help us tackle these challenges. Envision your own Blockchain Utopia and build it.
