Blockchain is uniquely suited to be used for positive social impact, with more near-term potential than originally thought. Here is a look at how blockchain is being applied to transform the world for the better and its potential to solve major world problems in the future.

Blockchain is expected to offer many benefits to enterprises and business consortiums in the coming years, but increasingly, people are pointing to blockchain as a potential force for social impact. Its unique combination of transparency, reduced transaction costs, and capacity to guarantee people’s digital identities could forge a revolution. Outcomes include reducing fraud and graft, helping the poverty-stricken reap the benefits of being tied to the global economy, and building a safer, more reliable food chain.

Here’s a look at why blockchain is uniquely suited to be used to improve major world problems and how it’s being applied.

Big progress toward social good

The best place to get a global understanding of how blockchain can be used for social impact is a study sponsored by the Center for Social Innovation at the Stanford Graduate School of Business in collaboration with Rippleworks. The study, finished in mid-2018, examined 193 organizations and projects that use blockchain to help the public in some way.

The results are eye-opening: Some 86 percent of the organizations “were making material progress toward solving a genuine problem, while only 14 percent belonged in the ‘hype’ category,” according to a Stanford Business School blog post about the survey. Fifty-five percent of the programs are expected to have an impact within a year.

“It’s still early days,” says Doug Galen, head of the survey and a lecturer at Stanford. Galen also is co-founder and CEO of Rippleworks, which connects startup and technology experts with social ventures. “But I was pleasantly surprised by the status of the initiatives and the range of applications. Blockchain has more near-term potential for social impact than originally thought.”

The study identifies four primary benefits that blockchain offers to organizations looking to do social good: its transparency, immutability, low cost of operations, and ability to guarantee a person's or object’s digital identity. So, for example, blockchain's transparency could help deliver more help to victims of disasters by reducing fraud, considering 30 percent of all disaster relief money is lost along the way, the study says. Its immutability could be used to stop election fraud or store medical records and monitor supply chains to ensure safe medications and goods.

[ Also read: 4 companies using blockchain for social change ]

Ideal for financial inclusion and eliminating the middlemen

The low cost of operations makes blockchain ideal for financial inclusion—bringing the benefits of financial institutions and financial systems to those who have been locked out of them. As such, it is being used today to eliminate middlemen in money transfers, allowing workers who move from developing countries to developed nations to send more of their money back home. That's a big issue, because foreign workers across the world send $500 million of remittances to their home countries, according to the study. Blockchain is already being used by the United Nations World Food Programme to make cash transfers easier for 10,000 Syrian refugees in Jordan.

Galen says, “The fact that you could put money directly into people’s hands, bypassing intermediaries and avoiding large-scale graft, is a huge opportunity for hundreds of millions of people around the world. Bringing these costs down—and in the case of farmers, increasing their share [of profits]—could mean the difference between living below and living above the poverty line.”

Verifiable identity is key to any kind of banking

Vital to financial inclusion is having a digital identity, something that more than a billion people in the developing world lack. Without a valid form of identification, people are shut out of the global economy. IDC's report “IDC FutureScape: Worldwide IT Industry 2019 Predictions” notes, “More than 1.5 billion people are virtually excluded from being able to participate in the 21st century economy and lack access to financial services, healthcare services, government services, and more because they lack any documentation that would establish their identity.”

Blockchain can be used to give people an all-important digital identity. James Cohen, chief architect for blockchain for Hewlett Packard Enterprise Pointnext, notes, “Many undeveloped countries don’t have national identity cards, and so it’s hard for people to establish their identities. Having a verifiable identity is key before you can do any kind of banking—and blockchain can do that.”

Stanford’s research is echoed by a white paper written by Accenture Labs, “Blockchain for Good: Guidelines for Transforming Social Innovation Organizations.” The paper is based on in-depth examinations of 30 use cases in which blockchain was used by NGOs and other organizations to solve social challenges, from monitoring human trafficking to restoring land use records and feeding the hungry. It found that one important way blockchain helps these groups is by increasing transparency—for example, reducing corruption and nepotism when registering land. A blockchain-based land registration system is open to everyone to see, so corruption can be more easily discovered. A blockchain-based pilot program in Ghana, called Bitland, is being used to register land in this way.

Beyond startups and NGOs

Blockchain is being used for social impact not just by NGOs and startups focused on social innovation but by enterprises in the mainstream economy as well—and often large ones. According to FBI statistics, Cohen says, health insurance fraud stands at $40 billion each year, which the insurance industry is expected to combat with blockchain. Doing so will “reduce everyone’s medical premiums significantly,” he says. Blockchain will also be used to improve the safety of the pharmaceutical supply chain, ensuring people don’t take fraudulent medications that can do them harm, he says.

“There’s an awful lot of counterfeit drugs out there,” Cohen says. “And the sad fact is that if pharmacists unknowingly dispense counterfeit drugs, ultimately people will die unnecessarily.”

Cecile Baird, a founder of think tank Blockchain for Good, agrees with Cohen that supply chains will be made more transparent by blockchain. She says that “will force companies to be more accountable for their actions and the way they operate.” She points to the fashion industry as an example. If the fashion supply chain were made transparent to consumers, those buying clothing could check whether the goods are being manufactured in an ethical way and not by using child labor, paying extremely low wages, and subjecting workers to unsafe conditions.

Baird also believes blockchain “could transform social media,” particularly the way in which private information that social media gathers about people is sold to advertisers. With a blockchain-based system, she says, people could control which of their data could be gathered and sold—and be paid for its use as well.

There are countless ways in which blockchain is being used for good by smaller organizations as well. Alison McCauley, CEO of Unblocked Future, a consulting group specializing in blockchain, cites many examples, including Plastic Bank, which targets the problem of oceanic plastic pollution by paying people via a blockchain platform to collect plastic—not only reducing pollution but also giving revenue to low-income people.

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When will the benefits appear?

Cynics might point out that aside from its use for cryptocurrencies, blockchain adoption by enterprises has been relative slow—and if it’s not being widely adopted by big, for-profit corporations, its use for social good will come even more slowly.

But Cohen disagrees. He says blockchain’s use for social good will likely leapfrog its widespread use in enterprises. “The use of blockchain is taking longer than I expected, but I think the social good aspect of it will be probably one of the early areas of use because it's low-hanging fruit,” he says. “Pharmaceutical companies are desperate to take out the counterfeit drugs in their supply chain, for example. Not only is it costing them money, but the reputational damage of that for the pharmaceutical company is enormous. And I see the use of blockchain for good happening in many other ways as well.”

Blockchain for good: Lessons for leaders

Some 86 percent of companies using blockchain to increase social good are making progress toward solving genuine problems.

A key blockchain benefit is establishing people’s digital identities so they can better participate in the global economy.

Consumers may gain more transparency into supply chains for pharmaceuticals, food, and more using blockchain-based solutions.

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