Blockchain technology gaining ground in Pacific island economies
By Louella Losinio
Vanuatu lacks access to traditional brick-and-mortar financial institutions, ATMs and other banking services. Many people do not even have bank accounts, which could potentially delay access to financial assistance during disasters and other critical times.
But last year, this South Pacific nation with a population of nearly 300,000, pioneered Unblocked Cash, a mobile-based development project using blockchain technology, along with tap-and-pay cards, to provide direct assistance to families recovering from disasters or acute financial distress. The system has since been used widely in Vanuatu to assist communities during the Covid-19 pandemic financially and after tropical cyclone Harold battered the island last year.
Small island developing nations are exploring the potential of blockchain technology in providing much-needed assistance to underserved communities and improving transparency and regulation of non-government and government services and programs.
Blockchain technology, which enables digital or cryptocurrency, is now being explored for its practical applications across different scenarios. The technology is defined as a decentralized digital ledger of assets shared among a certain number of people who are permitted within a network. Information or data placed in the chain is recorded once as a “block of data.” This first block starts a chain of data that records transactions that cannot easily be altered without the other party’s knowledge.
Blockchain technology has various uses such as providing a transparent and efficient way of transferring humanitarian aid, enabling financing programs to widely dispersed islands, and protecting the supply and delivery chain of essential supplies such as Covid-19 vaccines.
The use of cryptocurrency is also gaining traction and support from some small island developing nations, such as the Marshall Islands, which recently announced its digital currency, the SOV (sovereign), that will circulate alongside the U.S. dollar. More than just a means to raise revenues, some island governments see the potential of digital currency to break into the global financial system.
The Marshall Islands' parliament passed the Sovereign Currency Act of 2018 to officially adopt the SOV as its national currency and as legal tender for all debts, public charges, taxes and dues.
According to a white paper, the currency’s key features are its fair use and long-term sustainability.
Earlier this year, Beran Island Resort, an exclusive luxury destination for surfers, announced that it had begun accepting bitcoin as a form of payment for the rent of the facility. CoinDesk, a publication dedicated to cryptocurrency, reported that the resort was renting the facility for 1btc, roughly $53,000 at press time
In April, Island Innovation organized an online session on case studies focusing on islands that have embraced blockchain technology and cryptocurrency.
The session, called "Practical Applications of Blockchain & Cryptocurrencies for Sustainable Development on Islands," featured representatives from several nonprofits and technology companies who spoke about ways island nations have been using blockchain technology.
At the virtual session, Sandra Uwantege Hart, the blockchain innovations and cash transfer lead at Oxfam, said the UK charitable organization presented an initiative in Vanuatu to expedite humanitarian aid payments to underserved communities.
Hart said Oxfam's UnBlocked Cash project has two parts. First, at its core, it is a blockchain-powered platform that functions through token or collateralized card-based payments. These payments are then redeemable at local small, medium and large-scale vendors across the islands who hold smartphones. The phones are used as a mobile point-of-sale system.
She said developers had adopted the program for people who are not financially or digitally literate. Like a debit card, "It is a tap-and-pay system," Hart said. "They just need to tap the card and pay for what they need."
In terms of transparency, Hart said payments are fully traceable by category of spending, age, gender and location, as well as categories of vulnerability and timeframe.
Hart described the second component of the project as a model and a method.
"The technology is housed in this method, a programmatic approach that leverages the power and structure of something common across islands and regions.”
Island nations are characterized by solidarity and connectedness of community networks, and their businesses are decentralized, small and informal.
Hart said those social connections facilitated the creation and adoption of the technology. Such island qualities have allowed the blockchain program to develop from the bottom up instead of building the application first and then air-dropping it to the community.
From its pilot run in Vanuatu, Oxfam's UnBlocked Cash project is now being used in Papua New Guinea, Venezuela, and soon, in the Solomon Islands.
Tuvalu is also going through a digital transformation process. George Siosi Samuels, managing director of Faiabrand Pte Ltd., works on the Tuvalu National Digital Ledger project.
"Tuvalu is looking at leapfrogging itself, from having little or no online payment capabilities to blockchain-based payment solutions and having no digital citizenship application processes to one managed using a national public ledger,” Samuels said. “Through this, we will also be able to set up a ledger to manage things like fishing rights, property and land rights, police records, treasury accounts, and more."
Phase one of the project has been completed. The entire project is expected to be completed in five years.
While blockchain technology has broad applications, Samuels said it should not be viewed as the ultimate solution to island problems. Nevertheless, he added, the technology is appealing from a data security and safety standpoint.
"Blockchain is just a type of digital database. It is often a glorified version of a database, but it is what most people hear about in terms of buzzwords and what people are familiar with,” Samuels said. “It is not the savior for everyone. It is not the end-all solution but essentially helps record information in the form of data blocks that are chained after one another. It is usually difficult to change, hack or cheat."
Small nations have the advantage of being able to move quickly. For example, Tuvalu is finding innovative solutions to its problems rather than solely waiting for other countries to help, according to Samuels.
Blockchain technology is also being explored to achieve and monitor the 17 UN Sustainable Development Goals.
Sharmyn Powell, chief risk officer of the Eastern Caribbean Central Bank, said the technology facilitated financial inclusion in the DCash digital currency of the Organization of Eastern Caribbean (OEC) states.
DCash, the blockchain-based digital version of the OEC currency, was launched on March 31. Powell said DCash debuted in four out of eight Caribbean territories— Antigua and Barbuda, Grenada, St. Lucia and St. Kitts, and Nevis.
“So what we recognize is that there are some people who are financially excluded. They don’t have banking accounts. They can’t get the services that they want,” Powell said. “To ensure that we provided an opportunity whereby all our citizens across the OEC can have access to banking services, not necessarily in a traditional sense but in a digitized way so that we can have digital enablement.”
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During the April session hosted by Island Innovation, participants raised concerns over the energy demand, or environmental footprint, of mining cryptocurrencies.
“Right now, that’s what we’re seeing from bitcoin miners in terms of trying to use sustainable energy whenever possible,” said Simon Chantry, Bitt co-founder and chief information officer. “That includes things like locating mining operations next to hydro dams and using excess loads from nuclear plants or using methane flare gas or natural gas flares where that energy would go to waste if it wasn’t used for this purpose.”
Samuels noted that any significant human innovation takes time to perfect. Using a volcanic eruption as an analogy, he said, “Right at the beginning, when a volcano erupts, it is very wasteful. There’s all this energy that’s being forced out of the earth. And what’s the value in this? From mother nature itself, these volcanoes are actually creating new land.”
He added: “I see that happening in this blockchain space right now, where there are all these new experiments in blockchain and mining that are just all over the place, and nothing’s consolidated.”
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