Today I read this article by Andrej Verity, a disaster responder for UN-OCHA, about using a digital currency like Bitcoin in humanitarian aid.
It reminded me of a Tweet I made last May: "Bitcoin is transparent and self-accounting currency. What if foreign aid were delivered by Bitcoin? Or campaign funds?" I had no Bitcoin at the time, but it sounded plausible.
I've changed my mind about the idea, so I replied to Andrej over e-mail:
I've worked with a couple of NGOs and use a few different digital currencies, including Bitcoin, so I'm interested in this idea. There are two major components to your post: (1) that humanitarian organizations should adopt a digital currency, and (2) that they could a new digital currency for their purposes.
These currencies do lower the fees for transferring and exchanging money. As you say in the post, Bitcoin has a blockchain which records every transaction as an exchange between addresses. If each organization had a known address for themselves and a known address for every place they make a purchase, you could see how the money was spent.
The main issue with this system is that creating a new, unidentified address would take only a second. For audit-ability you would need to lock the currency into an online wallet where users need to identify the recipient to make a payment. Or you might want to verify identity before letting someone register an address on your site and receive a payment. Before you know it, you are remaking the bank system and it's a lot of paperwork.
In a crisis, you know that internet access is scarce. In Bitcoin, payments cannot be made and balances cannot be verified while offline. There is such a thing as a 'paper wallet', but you could give 10 people copies of the same wallet and only the first to go online would receive payment. Any steps to guarantee funds for an offline user would take significant rewriting of Bitcoin, especially if you still want people to identify themselves to receive the money.
If you do create a new currency, I don't know that it helps to limit it to humanitarian aid. Bitcoin can be volatile, but its many users and exchanges and organizers provide inertia. A 51% attack on Bitcoin mining or manipulating an exchange takes a great deal of collusion or a huge investment. When you start a new system, the risks are much greater that someone can manipulate the market. I was wondering if your idea would support rewarding online crisis mapping volunteers with micropayments? This could be an interesting experiment to introduce these currencies to the humanitarian aid community.
Hi there - I was one of the contributors to the report, and I'm currently developing a blockchain-based platform for decision-making by humanitarian NGOs. Our work is based on a paper I wrote last year which might interest you: https://medium.com/@paulcurrion/introduction-513f86ed92df#.wk3ixqdnw. You raise some good points above, it's given me something to think about over the weekend!