Explainer: How are humanitarian aid organizations using blockchain and Web3?

(Photo courtesy of CARE)

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In Ecuador, international aid organization CARE launched a one-of-a-kind pilot project in 2021: using crypto-vouchers to connect people with reproductive and sexual health services. 

In collaboration with Umoja Labs, a crypto payments platform working with underbanked populations in the Global South, CARE also trained up eight healthcare service providers to accept these crypto-vouchers, who were able to “digitally cash-out their crypto into dollars.” 

The pre-loaded cards formed a “micro-economy”, essentially replacing the exchange of cash that would normally take place. As a result, 250 people, including pregnant women, sex workers and survivors of gender-based violence, were able to access these health services. For service providers, accepting the crypto-vouchers reduced their payment time from 30 days to less than one week. 

This is just one example of ways that the humanitarian aid sector is using blockchain technology to distribute cash and resources to communities in disaster and conflict zones. In another pilot, CARE partnered with the Binance Charity Foundation to bring crypto vouchers to informal savings and loan association groups in Kenya. Oxfam’s UnBlocked project – led by the organization’s Pacific arm – helped distribute US$2 million worth of cash and voucher assistance in Vanuatu following Tropical Cyclone Harold. 

The United Nations World Food Programme claims to have the “world’s largest implementation of blockchain technology for humanitarian assistance” with Building Blocks, a blockchain-based program that distributes multiple types of assistance, including cash, food and medication. 

And just at the end of 2022, UNHCR – the United Nations’ agency for refugees – partnered with the Stellar blockchain network to distribute digital currency to those impacted by the ongoing war in Ukraine. It’s a solution delivered in collaboration with the United Nations International Computing Centre (UNICC), the UN’s digital tools arm, whereby internally-displaced people can withdraw funds from MoneyGram locations in Ukraine. 

Why are blockchain applications so appealing to the aid sector?

A blockchain is made up of a series of blocks, each of which stores a piece of data. Each block is linked to the block before and after it through a unique passcode, which changes if the data within the block is edited or tampered with. That, in turn, ‘breaks’ the chain. The result is an unchangeable record of data, stored almost as a series of chronological events. 

Blockchain is a compelling humanitarian technology for the aid sector in particular. Firstly, it claims to be decentralized, allowing aid organizations to distribute cash and supplies outside central banking systems and fiat (government-issued) currencies. Secondly, the fact that a blockchain record is permanent, visible to anybody and cannot be changed, means that it offers an opportunity to build a totally transparent historical record, be that of transactions, donations or distributions. 

In the context of the aid sector, blockchain can have a number of use cases. Payments to people outside of fiat currency, in the form of stablecoins – which are usually pegged to a form of government-issued currency, hence making them less volatile – or other cryptocurrencies, is the most likely application of blockchain. A January 2023 article by the cryptocurrency publication CoinDesk suggests that stablecoins have many more real-world applications – including humanitarian aid – because of their relative stability. 

Take Mercy Corps, who partnered with Binance Charity to launch a token – a form of digital currency, often for a specific use – that supported refugees fleeing from South Sudan to Uganda. The token, pegged to the Ugandan Shilling, helped financially support refugees on the move. “We know that a more financially secure individual is better equipped to withstand climate disruption [as well],” says Scott Onder, chief investment officer at Mercy Corps. 

“Through blockchain transactions, smart contracts can automatically trigger insurance payouts when a hurricane occurs. Through digital assets and crypto, people are able to quickly and easily store, save and transfer value when climate shocks hit,” he adds.

Why is it important for the aid sector to be cautious of blockchain and Web3 technologies?

The growing prevalence of blockchain and Web3 technologies in humanitarian aid have also attracted skepticism. 

In November 2022, the Minderoo Centre for Technology and Democracy, based out of the University of Cambridge, published a report highlighting the risks and ethics of experimenting with blockchain-based technologies in and around humanitarian crises. 

Aid organizations themselves are also increasingly vulnerable, given their relative lack of knowledge, in comparison to the technology vendors behind blockchain-based solutions. 

“Whenever there are new technologies, these are the challenges CARE and other organizations face: we’re not technology developers, but consumers, largely,” says Christian Pennotti, the senior director of market based approaches at CARE. “But how can we make smart and informed decisions, and how can we get enough expertise around us to guide that?” 

In the development of the crypto-voucher solutions in both Ecuador and Kenya, CARE called on a network of formal and informal advisors, who had experience within and outside the social sector, throughout its decision-making process, Pennotti adds. 

“We worked extensively with Binance and Umoja Labs to define the capabilities, the user interface, which wallets and cards would be used. All those decisions were made jointly – we didn’t build the tech, but we did try to optimize it for our use cases,” Pennotti adds.

“But we speak very different languages. Social was genuinely new for people on the technology side, and they had lots of expertise in another domain where we did not.” That, he says, led to some lengthy decision-making processes as well. 

In other words, humanitarian aid organizations and technology companies work in distinctively different ways, often with goals that don’t align neatly. The former looks to expand impact, while the latter is often focused on profit-making. However, the aid sector needs money to achieve that expansion, and the tech start-up sector can be a huge pool of wealth, Pennotti adds. 

“Philanthropy [from the tech sector] is often tied to using a technology company’s products,” he says. “‘If you’re willing to use our blockchain, our platform, then we’ll give you money.’” And even though a tech vendor is likely to make less money from a non-profit client than a for-profit one, an aid organization using their products can function as good marketing for the technology solution, positioning it as a reliable one. 

The Minderoo Centre’s report also points out some of the risks of giving power to technology startups in the context of humanitarian aid. “Critics suggest Oxfam’s Unblocked Cash has beckoned blockchain companies like Consensys into an influential position from which they can develop their products in circumstances of limited accountability and tax,” it says. In addition, “IrisGuard holds iris [eye] scans of 2.7 million Syrian refugees across five countries and works with the Jordanian state. The company’s involvement in humanitarian payments threatens to extend both national security and corporate interests in refugee camps.”

“You’re potentially amplifying risk by making something immutable if the initial [data] entry was done through coercion, which is a big part of life when you’re living in a vulnerable situation,” Pennotti adds. 

Depending on the user experience and interface of a particular piece of blockchain technology, some might also require end-users to have technical awareness and digital literacy to be able to access basic necessities. “Not everyone can or should be self-reliant and entrepreneurial,” according to the Minderoo Centre’s report. “Not everyone possesses the know-how to safely manage cryptocurrency accounts, exchanges, and investments. Not everyone can afford and maintain access to mobile devices and the internet.”

And while decentralization and transparency are what draw the humanitarian aid sector towards blockchain technologies, it’s important not to conflate the two, according to a report by Careful Industries, a UK-based research organization that explores the social impacts of technology. As they state in their research, “decentralized is not the same as transparent.” 

They cite an example by Dr Margie Cheesman, in which workers depended on a blockchain-based system for payment: “Staff treated blockchain on a ‘need to know basis’, deeming the technical complexity inappropriate because of workers’ mixed literacy and numeracy skills and technical capacities… Refugee women workers made new data points whenever they completed a transaction, but the ledger was not made visible to them.”

How can aid organizations best position themselves to work with blockchain technology vendors?

While the aid sector should approach Web3 and blockchain with caution, it’s also important not to write the technology off altogether. Pennotti gives an example of a colleague in Lebanon, who draws attention to the impact that blockchain-based financial inclusion projects can have in volatile political situations: “From where he’s sitting, the idea that he can store value on his phone, in a way that nobody and no bank can touch, makes absolute sense. He said: ‘You guys don’t understand this because you don’t need it.’” 

“To him, this was obvious: he had no trust in the government or the banking system, and given a choice, he would trust Bitcoin.”

According to Careful Industries’ research, it’s vital for the aid sector – and the social impact sector more widely – to have a seat at the table when discussing how these technologies will be developed, applied and governed: “While it might seem too early for bodies engaged with international development and diplomacy to intervene in Web3 technologies, the imperative to do so is significant. […] The demands of the market are one of the strongest animating forces for technical innovation – but allowing investors and entrepreneurs to be the only ones that shape technologies does not represent the whole of humanities’ needs.” 

Careful Industries advocates for a “test and learn approach” to blockchain. Pennotti seconds this, addressing the tension between blockchain experiments and being too risk averse as a sector: “What can we do to demystify this technology in the sector? Reckless experimentation or doing it for the sake of doing it doesn’t make any sense. But at the same time, sitting on the sidelines also doesn’t make a ton of sense.”

In order to define a genuine use case for blockchain technologies, thoroughly vet technology vendors, and carry out ethically designed pilots, staff within aid organizations need to be upskilled and involved in decision-making. “The digital transformation is not about the tools you’re using, but about the people you’re employing and the processes that they’re running within the organization,” says Paul Currion, a former humanitarian aid worker and co-founder of Disberse, a now-closed blockchain startup that helped distribute funds to the aid sector. 

Currion emphasizes that upskilling doesn’t have to be a deep understanding of the technology itself – instead, people need to be trained to spot holes in specific technologies, and carry out due diligence of vendors.  

The first question an aid worker or organization should be asking of a technology vendor, Currion says, is whether blockchain is really needed to carry out a particular function, and whether it can be achieved another way. “If the answer is that we don’t need the technology, but we think it might be ‘cool’, then they’re asking [the sector] to take a punt on an unproven technology. There’s a place for that, but it’s not the lifesaving work of humanitarian aid.”

Then, he says, it’s vital to ask questions about the stage of software development the company is in, any testing they’ve carried out, any services they already carry out in the field, and meaningful metrics. Mercy Corps, for instance, performs an in-depth due diligence of multiple companies in the technology space to find an appropriate match. 

“With each company and/or technology, we ask questions to understand the revenue model, path to sustainability, user education component and regulatory standards, and to ensure that our users are not the end product,” says Onder. “We conduct an analysis of the technology, product features, business, team, theory of change and impact, and all of the aspects a venture capital fund or corporation would ask when considering an investment, merger or joint venture.”

However, larger organizations are much more likely to be able to invest in these due diligence processes, and the upskilling required to get staff up to speed, Currion adds. “Small [aid] organizations are just massively overstretched. They don’t have the redundancy to spare for these things.” There’s a risk that this will widen the financial and impact gap between larger and smaller organizations in the humanitarian aid sector in the long run. 

This is why he advocates for a collective approach to negotiating with technology vendors: in other words, he encourages aid organizations to form strategic alliances. “You have better bargaining power as a collective, and you can share capacity. If there is someone who knows the score, they can take the lead in negotiating.”

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