Thousands of Syrian refugees in Jordan’s Azraq camp do not pay for their food with cash, but with a scan of their eyes.
Purchases are then recorded on a computing platform based on blockchain — the technology behind bitcoin.
Iris recognition devices at the checkouts of the camp’s supermarket authenticate customers’ identities and deduct what they spend from sums they receive as aid from the World Food Programme (WFP).
The UN agency last month launched the futuristic system as a one-month pilot involving 10,000 of Azraq’s more than 50,000 inhabitants in a bid to explore blockchain’s potential to cut costs and bottlenecks. It is now looking to scale up the project to reach more than 100,000 refugees in several camps across Jordan by the end of the year.
“We feel this is a starting point,” WFP director of innovation Robert Opp said. “There are a number of potential uses of blockchain that could dramatically change the way we reach people in terms of our efficiency, effectiveness and security.”
Blockchain, which first emerged as the system underpinning the virtual currency bitcoin, is a digital shared record of transactions maintained by a network of computers on the Internet, without the need of a centralized authority.
It has become a key technology in both the public and private sectors, given its ability to record and keep track of assets or transactions with no need for middlemen.
Such features have drawn investments from big business and banks around the world, as well as the attention of a number of humanitarian agencies, including the WFP.
In recent years, the WFP has increasingly shifted its aid-giving toward cash-based assistance, which now accounts for about 25 percent of all aid it delivers.
Handing out money rather than food allows recipients to choose what they buy and eat, while helping to keep afloat local markets and economies in crisis-hit areas, it said.
Last year, the WFP’s cash transfers totaled US$880 million.
To move the money across the about 80 countries in which it operates, the agency relies on the services of a large number of banks and financial intermediaries that traditionally apply transaction fees of up to 3.5 percent, Opp said.
Blockchain promises to cut those costs, an alluring feature for an agency facing a chronic shortfall in funding, and there are also other benefits.
As blockchain automatically records transactions on a secure ledger, WFP accountants can easily follow the flow of money without spending time and energy triangulating reports from stores and banks, WFP finance officer Houman Haddad said.
There is no need for advance payments, financial risk is lower and so is the possibility of fraud — such as a bank and a store colluding to inflate bills, he added.
“Before, the WFP had to exclusively rely on external sources of data,” he said. “Now we have our own immutable record of everything that happens.”
Misappropriation of funds is an issue across the whole humanitarian sector, so it is little wonder that other agencies are also studying blockchain, UN Office for Project Services special adviser for blockchain Yoshiyuki Yamamoto said.
In 2012, then-UN secretary-general Ban Ki-moon said that 30 percent of all UN development assistance was lost to corruption.
“If we don’t know where 30 percent of the money is, that’s a big concern for everyone,” Yamamoto said.
In January, innovation units at UNOPS, the UN Development Programme and UN Women started an informal grouping to exchange information about their blockchain work, he said.
The club has since grown to about 10 members, including the UN Children’s Fund and the UN High Commissioner for Refugees.
“It’s a waste of time and resources if 16-plus UN organizations are doing the same thing separately in a silo,” Yamamoto said.
In April, the group asked private companies for ideas for possible applications of blockchain to the UN system. The response was overwhelming, underscoring the growing hype about the nascent technology, Yamamoto said.
“In a word, it’s crazy!” he said, adding that they received more than 70 responses, while other requests usually draw only a handful.
Finance is just one use of blockchain, and many more are yet to be explored, Opp said.
For example, it could help track deliveries of food aid or securely register land titles in developing countries, he said.
That would help small farmers — who struggle to prove ownership of their plots in the absence of paper documentation — to secure loans and increase food production.
“Another potential is to help build identity for refugees,” said Caroline Rusten, head of UN Women’s humanitarian unit.
Blockchain could be used to create a secure, paperless record of skills and education that refugees can carry with them, to which information can be added as they are on the move, she said.
“[This would allow] people to be appreciated for who they are and the qualifications they have, and not just seen as refugees,” Rusten said.
A blockchain database with information on refugees’ identity and the type of support they receive would also help avoid duplications of work between different UN agencies.
However, creating a centralized UN out of a “gigantic bureaucratic system” is still some way off, Yamamoto said.
“It can’t be done overnight,” he said. “We are at a very early stage.”
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