Blockchain for Impact Suggests New Pathway for Urban Innovation: An Interview with a Trailblazer

As part of SmartAustin’s efforts to build our city’s global network, to support urban tech innovation, we connected with an intriguing blockchain innovator, focused on the “blockchain for impact” (discussed in detail below). The social impact blockchain, and the work of the ixo Foundation, address much broader opportunities than just urban tech innovation, but the intersection of civic life, business and tech innovation, and ixo’s (and blockchain’s!) ‘startup’ nature made the topic too compelling for us to ignore. Read below to learn (and perhaps be stretched) by Founder and President Shaun Conway’s insights and his foundation’s wide range of activities.

 

 Shaun Conway - Founder | President at ixo foundation

Shaun Conway - Founder | President at ixo foundation

Shaun Conway: Hello from South Africa! Before you begin, let me just say that I’ve heard amazing things about Austin and would love to visit. In fact, I may be coming through there soon.

SmartAustin: Of course, we love to hear that about our city. We have some ongoing blockchain exploration, at the municipal level, that may be of interest to you. Perhaps we can make a connection.

SC: Yes, I had a chance to look over the use case, around identification systems to support social services, and it is of interest. Specifically, we’ve worked with a large bank to develop a blockchain-based identification system and I would be happy to see how we can support.

 

SA: Great. Let’s take a step back and talk a bit about the “blockchain for impact”, and the ixo protocol and approach.

SC: ixo is, at its core, about verification of impacts - by this we mean all the measurable changes that can contribute to a more sustainable world. The protocol is about ‘verifiable claims’, and all information about an identified person or entity can really be considered a “claim.” The impact economy is about using the blockchain to identify claims, in the form of data points linked to individuals, events, and/or outcomes, related to desired social impacts. Smart contracts can then be developed that executive automatically when claims are fulfilled. Or, at the very least, highly distributed project funding becomes possible, due to the great reduction in infrastructure costs, since the financial middleman is taken out. Sometimes, the outcomes claims themselves. are, in fact, passed through trusted parties, but this depends on the use case.

From a technical point of view, ixo protocol allows for extensibility, and in that sense, is analogous to ethereum: they both provide for app development, and therefore further innovation, on top of the network. Our team’s focus is to try to keep the core infrastructure very solid, and to thereby allow for many use cases. However, to get there, will work with selected partners for lighthouse implementations, and learning how these technologies can be applied. In the process, our core team will interested in developing open source reference implementation.

Where projects get proposed to us that fit the puzzle, we implement reference projects. The focus is not just on having good examples, but also being able to scale to a broad range of social uses. The whole platform is meant to scale.

 

SA: Got it. Can you give us some examples of some of those lighthouse projects?

SC: We have fairly big and growing and big pipeline of projects. In the US, we are working with a public zoo that is supporting the deployment of a mass spectrometer that measures the density of insect life in forests. This is part of a conservation effort in Africa and the device was developed by the Rochester Institute of Technology.  We are just starting to scope out project and plan to use the measurement device as an oracle [“claim verifier”]. We might, in the future, link satellite imagery, to provide  richer evidence.

We are also working with a conservation effort in Africa, to raise an impact bond. The raise is for a billion dollars, to fund the reclamation and proper management of tracts of lands, across Africa. The rapid decline and loss of wildlife in just the past few years is incredibly frightening. The rhino and other species have faced great decimation over the past 5-10 years. This is part of a desperate bid to slow down and/or reverse losses. We are still in the early stages to see how ixo could provide verification of impact to accelerate funding.

Next, we are working with UBS Optimus Foundation in India. There, we are almost all contracted. The “development impact bond” there would support educating young girls. We find that girls who should be at a grade 4 reading level are only at a grade 2 level. The impact bond was arranged to provide a range of supportive interventions, and proved to be very effective. It’s being scaled to about 160 schools, across three states in india. The ambition is to support the performance of two hundred thousand students over the next four years.  The encoded logic of smart impact bonds only pays out if outcomes are achieved. A range of interventions will be provided in the meantime. We are further partnering with UBS Optimus to tokenize the data, and move towards impact bond-type mechanisms that are smaller and easier-to-set up. We are planning to set up a technical design workshop in Zurich in early June, together with UBS.

Another project is with the Gold Standard Foundation. The foundation was initiated by the World Wildilfe Fund about 15 years back. They are based in Switzerland and provide the highest quality certification for carbon trading.  We work to support Nexleaf, an IoT device, that supports a clean cookstoves program. Cookstoves have a huge impact on deforestation, can negatively impact quality of life and cause respiratory illness, and can cause carbon emissions. NexLeaf, specifically, senses the amount of use of stove, accumulates carbon credits, and measures air quality. We are looking to pilot it in India.

 

SA: Quite a list!

SC: There’s more, though!

We are involved in other early childhood development projects, and are looking to expand. We have a strong relationship with UNICEF, an early investor, and are expanding with them beyond South Africa, to countries such as Kazakhstan and, Indonesia.

We were also awarded 2nd price prize in a UN competition to develop identity solutions for refugee children and deter child trafficking in Moldova.

Finally we are working on a water initiative. The City of Cape Town is facing Day Zero, when we will have no water. We are in the worst water situation in living memory and population pressures are quite high. This initiative is more of a civil action project, in which participants gain recognition by being awarded tokens.

 

SA: I will have to review all of that compelling list in detail later on, but I wanted to ask you about a specific mechanism you mentioned: You’ve referenced “the impact bond” a couple of times. Can you give us a bit more background?

SC: So, the concept of the impact bond, is based on municipal bonds, which were developed in the US. In development sectors, however, issuing bonds is very particularly challenging. They are extremely costly, and experts and intermediaries are needed. To get scale, to be reasonably cost-effective, the issue needs to be large enough, but not too large--that is, not too big to fail--which increases moral hazard and introduces new risks. So, in the end, it’s quite hard to scale correctly.

The question we asked ourselves is, “How can you take principles of the impact bond and create an economic mechanism to incentivize folks to do the right thing, but then apply blockchain, so that transaction costs can be reduced?” We’ve had to think this through very carefully, for instance applying game-theory towards staking [requiring that all the parties participating in delivering, evaluating and financing an impact bonded project have value-at-stake or ‘skin in the game’] and penalties, being built into smart contract, so that desired behavior, incentives, and tools are aligned. We are bringing together some of the brightest minds from  the legal world, the impact space, and the blockchain world.

 

SA: We work closely with municipalities and other government authorities. How do you see blockchain intersecting with their work?

SC: Blockchain is about decentralizing technology and providing a platform for people to take their own action. It enables that kind of decentralized participation. The idea is that citizens can decide which projects to prioritize, and have a say in the governance mechanisms of a project. You don’t need to be the person who has lots of dollars if, for instance, you have accumulated tokens that provide governance. A token can be designed so the people who have the most to lose if the wrong decisions are made will have the most influence, but, yes, there are still technical and use case challenges there.

I do have to say that, with regards to the sensors and data propagating through smart cities initiatives, there’s a danger that that can be abused. Also, how do we know that we can trust the data? IXO is built on new core standards for the decentralized web (3.0), which acts as a safeguard against this.

Finally, there is a movement, in some places, for “liquid democracy.” Candidates are standing on this platform, including in Colorado, and blockchain protocols are being developed to support it. Someone could decide, through this process, “On this issue, I am not the best person to vote, so I will pass on qualification.” Liquid democracy enables a democratic process, which is not just a simple vote.

 

SA: The potential does seem great, but don’t governments need to be engaged, seduced even, in the short-term? What are the models for that?

SC: Those are relevant comments. In one of early childhood development projects, the key problem is getting government to accept the new systems. All of these practitioners are delivering services to kids, and we are finding new ways to fund them. But, yes, we still support having them print out or email their verification claim or email it, so that it can go through a traditional database. We do think that, as demand becomes greater for a more streamlined process, the completely blockchain-mediated approach will become much harder to ignore.

 

SA: Great, practical example. Finally, looking forward, how can folks get more involved in ixo and social impact blockchain?

SC: We would invite them to join our ambassadors program. The ixo foundation seeks to work with people who will collaborate with developers and/or evangelize our work. They might speak or organize meetups. Of course, we are also looking for partners who are going to build compatible, open source tools. There’s a great deal of opportunity here.

We are also exploring ideas around providing incentives to supporters, but we are allergic to ICO’s because we don’t believe that behaviors and incentives are aligning there. So, we are exploring several ideas around that. Stay tuned!