Blocked Aid

Callum Macfarlane, 21 February 2022


INTRODUCTION

The advent of blockchain technology and its wide range of use cases, most notably Bitcoin (BTC), has excited many to the possibilities of disruption to traditional organisations in banking. Blockchain has quickly become relevant to every facet of society, and its introduction to development and humanitarian aid is innovative. Where current aid systems are opaque, slow, and convoluted, blockchain can provide clarity on who is donating and how money and supplies flow through organisations (Lee 2018). Overall, the numerous opportunities that blockchain provides are staggering. For this reason, it is essential that underlying assumptions about the technology are examined and rationalised. With an in-depth analysis of blockchain and its applications in the aid sector, we can develop better strategies to harness this new technology in the greater global development field.


WHAT IS BLOCKCHAIN

To understand how blockchain can improve the delivery of aid to society’s most vulnerable, it is necessary to first grasp its core concepts. Blockchain is an umbrella term used to describe a range of technologies that have combined to create a decentralised digital ledger (Rodeck & Schmidt 2022). The blocks, which can contain a wide array of different information, are transmitted across a network of computers across the world, validating the information between the system without the need for a central authority and is viewable by everyone (But how does bitcoin actually work? 2021). This allows money to be transferred directly between two people without needing a central bank. Blockchain can also contain smart contracts, which automatically execute actions according to the pre-set terms of the agreement (IBM 2022). This technology would provide an efficient way for agencies to share their supply chain and donations securely and in a fully transparent way. It would also allow donors to have confidence in the organisation, as smart contracts would ensure that funds were used correctly – as per the initial donation – with minimal middle-man interference (IBM 2022).


Figure 1: Bitcoin Foreign Aid (Pepper 2019)


The benefits provided have seen blockchain become implemented in a range of development projects across the world. The World Food Programme (WFP) has implemented the Building Blocks initiative on the Ethereum network (the largest decentralised smart contract system), providing funds to 100,000 Syrians in a Jordan refugee camp (WFP 2021). This initiative has allowed the WFP to bypass local monetary organisations that have often struggled to deal with the scale and logistics of supplying debit cards to such a large number of people in affected states (Ainsworth 2022). It has also allowed women to take direct control of their own finances as cryptocurrencies are placed directly in their unique digital wallets, allowing greater autonomy and decision-making capabilities (WFP 2020). Further projects, alongside Building Blocks, are fostering the potential that blockchain has to positively impact how aid is delivered.


THE ASSUMPTIONS AND OVERSIGHTS

Blockchain technology is often quoted as a panacea to the issues present in the traditional aid sector. However, the underlying assumptions and oversights of blockchain itself are problematic and need to be highlighted to improve its aid implementation. Primarily, many blockchain projects work on the assumption that there are no issues defining cryptocurrency as a tangible asset or an intangible medium of exchange – a belief built on western systems (Al Jazeera 2018). However, this is not necessarily the case in other parts of the world. For example, within the international Islamic banking system the definition of these currencies will change whether the profit of cryptocurrencies is a form of riba, meaning unjust gains (Phillips 2022). Because of this, the definition of cryptocurrencies becomes debated, especially as different groups regard it as either halal (lawful) or haram (unlawful). This has led to cryptocurrencies becoming banned in Egypt (Orji 2021), and other nations considering following suit, including the Central Bank of Syria which has warned its citizens against using these ‘virtual currencies’ (Al Mashhour, Abd Aziz & Noor 2020, p. 2762). In regard to the WFP Building Blocks Programme, which provides aid to numerous Muslim refugees (WFP 2021), official statements such as these could undermine the effectiveness of implementation and other similar programmes.


By recognising these issues, ex-ante aid can be delivered to such groups by using shariah-compliant (religiously acceptable) implementations of blockchain technology. Organisations are starting to come into existence and directly respond to these issues. Marhaba (MRHB), for example, is an Islamic decentralised finance company that is creating a shariah-compliant system using blockchain to provide options for Islamic communities (MRHB 2021). By engaging with these organisations, aid can be delivered in a way that is more appropriate for the groups they are aiming to help.


CONCLUSION

Clearly, the potential benefits that blockchain provides are worth the time and effort to incorporate into existing aid delivery, or into entirely new modes of delivery. However, the utopic claims of its proponents seem to overlook and downplay the inherent issues within the system. Thus, if blockchain is to be implemented effectively into the development sector, the inherent political power structures that underpin blockchain must be reflected upon, as technology can never be truly neutral. Ultimately, by reflecting upon these topics, we can become better equipped to deliver the best possible aid into the future.


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References


Ainsworth, D 2022, ‘Sanctions and banks make it a struggle to get money into Afghanistan’, Devex, 17 January, accessed 17 February 2022, <https://www.devex.com/news/sanctions-and-banks-make-it-a-struggle-to-get-money-into-afghanistan-102448>.


Al Mashhour, O F, Abd Aziz, A S and Noor, N A M 2020, ‘An investigation for a legal framework governing cryptocurrencies under the Syrian legislation: An analytical study’, Journal of Critical Reviews, vol. 7, no. 13, pp. 2761-2767.


But how does bitcoin actually work? 2021, online video, accessed 11 February 2022, <https://www.youtube.com/watch?v=bBC-nXj3Ng4&t=991s>.


IBM 2022, What are smart contracts on blockchain?, accessed 11 February 2022, <https://www.ibm.com/topics/smart-contracts>.


‘Islam and Cryptocurrency, halal or not halal?’, Al Jazeera, 8 April 2018, accessed 17 February 2022, <https://www.aljazeera.com/economy/2018/4/8/islam-and-cryptocurrency-halal-or-not-halal>.


Lee, W 2018, ‘Blockchain and Foreign Aid Governance’, Medium, 21 July, accessed 9 November, <https://medium.com/hashreader/blockchain-and-foreign-aid-governance-d081fb09efd9>.


Marhaba DeFi (MRHB) 2021, accessed 10 November 2021, <https://marhabadefi.com>.

Orji, C 2021, ‘The countries where Bitcoin and crypto are banned or restricted’, Euronews, 30 August, accessed 10 November 2021, <https://www.euronews.com/next/2021/09/24/bitcoin-ban-these-are-the-countries-where-crypto-is-restricted-or-illegal2>.


Pepper, M 2019, Bitcoin Foreign Aid, digital image, accessed 10 November 2021, <https://edition.cnn.com/2019/05/23/perspectives/bitcoin-foreign-aid/index.html>.


Phillips, D 2021, ‘Is Bitcoin halal?’, Decrypt, 23 January, accessed 11 February 2022, <https://decrypt.co/37286/is-bitcoin-halal>.


Rodeck, D and Schmidt, J 2022, ‘What is Blockchain?’, Forbes, 10 February, accessed 17 February 2022, <https://www.forbes.com/advisor/investing/what-is-blockchain/>.


World Food Programme (WFP) 2021, Building Blocks, The United Nations, accessed 10 November 2021, <https://innovation.wfp.org/project/building-blocks>.


World Food Programme (WFP) 2020, ‘How blockchain is helping WFP’s fight against coronavirus in Bangladesh’, Medium, 11 February 2022, <https://medium.com/world-food-programme-insight/how-blockchain-is-helping-wfps-fight-against-covid-19-in-bangladesh-d2b466a8becf>.


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The views expressed in this article are the author's own and do not necessarily reflect Politik's editorial stance or the views of UNSW.


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Get to know the author

Callum Macfarlane is a fourth year student, studying a Bachelor or International Studies. Callum has always been keenly interested in how states interact with each other. He is hoping to study how we can deliver aid to better provide the help that is needed to impoverished people and how new technology advances can pave the way. This is Callum's first contribution to Politik Insights.


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