Blockchain & Social Impact Rhodri Davies Head of Policy & Programme Director, Giving Thought

What are blockchain & cryptocurrency? Distributed public ledger: record of transactions and ownership within a system, without the need for traditional trusted 3rd party NB: ≠ Cryptocurrency is the best-known use case of blockchain so far, but there are potentially far wider applications

What does blockchain enable? Decentralisation & Disintermediation 1 Radical transparency 2 Smart contracts 3 Assets and value of all kinds can be recorded 4 Transforming governance 5

How could it be relevant to charities? Cryptocurrency Blockchain Financial Radical donation transparency New Digital Assets Charity crypto-tokens & ICOs Disintermediation Non-Financial Asset tracking & provenance Digital Identity Social Purpose DAOs Crypto-mining for charity Crypto-philanthropy Social Impact

Civil Society Blockchain so far

Blockchains & Social Impact Measuring Creating Recording Incentivising Transacting Predicting?

2) Radical Transparency Creating Social Impact: Civil Society Blockchain Possibilities (part 1) 1) Disintermediation Reduced transaction costs Direct cash transfers at scale Increased trust? 3) All Kinds of Assets Any existing asset can be recorded on blockchain- tangible or intangible Entirely new digital assets can be created- e.g. tokens 2) Radical Transparency Ability to track donations at all points Increased trust? Challenges in terms of core costs etc. What about justified donor/beneficiary anonymity?

5) New governance models 6) Real-time financial info Creating Social Impact: Civil Society Blockchain Possibilities (part 2) 4) Smart Contracts Self-executing computer protocols that perform defined functions when set criteria are met Wide range of applications e.g. automated Payment by Results, algorithmic regulation 5) New governance models Distributed Autonomous Organisations (DAOs)- networks of individuals able to coordinate at scale without centralisation by using smart contracts etc. Challenge to traditional charitable organisations? 6) Real-time financial info Immutable shared ledger of transactions No need for separate reporting regime No need for audit?

Measuring Social Impact Blockchains are not themselves measurement tools, so they won’t automatically solve existing challenges with measuring social impact In the short term, we will still need: Agreed frameworks (goals &metrics). ‘Oracles’ Authoritative individuals/organisations who verify info on a blockchain But there may be other possibilities in the future…

Recording Impact NB: Assuming we have a way to measure impact, what is the benefit of using a blockchain to record it? Highly secure: immutable, distributed ledger so no central point of attack Shared record: can be updated by multiple parties without central oversight or separate reconciliation process ‘Social Impact Data Commons’: break data siloes to drive innovation Universality: social impact data recorded on same ledger as financial data etc., opens up wide range of possibilities in terms of transactions/incentives

Direct Social Impact Recording: Internet of Things Gartner predicts there will be 20bn IoT devices by 2020 Many experts believe blockchain tech will provide infrastructure for data collection and transaction Some data could provide proxies for social impact and outcomes (e.g. health data, environmental data, data on from smart homes).

Digression: IoT, The M2M economy & Philgorithms One upshot of IoT development will be emergence of a Machine-to-Machine (M2M) economy made up of vast numbers of very small transactions. Can we harness some for social good? Impossible to do through direct human oversight, so will need to be automated. Hence AI philanthropy and philgorithms (algorithmic process of matching need with interventions based on analysis of social data and impact data) Will put a much stronger emphasis on impact measurement

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Transacting in social value Once impact data is recorded on a blockchain, it can be used as the basis for transactions Cryptographic tokens can be created to represent value of any kind (financial, non-financial, physical, intangible) – including social impact Tokens could combine different elements of value recorded on same underlying ledger to create blended assets or currencies Already efforts to do this for e.g. charitable giving, SDGs, environment etc. But this isn’t all you can do with tokens…

Token Incentives & Social Impact Crypto tokens can be used as the basis for reward systems designed to incentivise many different things when it comes to social impact, e.g: Production Users rewarded directly for producing measurable impact Token likely to function as currency (closed or exchangeable) Measurement & Reporting Users rewarded for accurate measurement and trustworthy reporting of impact (similar to projects aimed at combatting fake news etc.) Token may have financial value, or function merely as marker of reputation Prediction Users rewarded for success in predicting which interventions will deliver best outcomes/highest impact Already a number of blockchain-based prediction market platforms (Augur, Gnosis etc.) NB: Theory of creating incentives is called “Mechanism Design” – essentially the inverse of Game Theory, and won its creators the Nobel Prize for Economics…

Prediction markets for social impact Basic idea: create a marketplace around a token which rewards those who successfully identify the best interventions and approaches to deliver impact i.e. “Bet on your theory of change” Benefits of using a blockchain: decentralised (i.e. you don’t need a “bookie”) and payments can be automated using smart contracts Potentially democratising: would be open to organisations from all sectors, as well as individuals Over time, participants would develop track records. Those who prove to be good at predicting social impact will attract more funding.

Where to find more CAF Giving Thought think tank and Future:Good project Giving Thought Podcast: http://givingthought.libsyn.com/ @Rhodri_H_Davies

Charities Aid Foundation Rhodri Davies Head of Policy & Programme Director, Giving Thought Charities Aid Foundation rdavies@cafonline.org