Climate Change vs. Crypto - How blockchain can help vulnerable populations adapt to climate change
A couple of weeks back, I wrote a post titled “Crypto, blockchain, and the environment: the other side”, which is the first in a new series looking at the positive use cases of blockchain and cryptocurrency in combatting climate change. In this post, I highlighted three categories of use cases: 1) transparency and accountability, 2) efficient provision of financial services, and 3) supporting vulnerable populations. Today I’m going to dive a bit deeper in to category number three, supporting vulnerable populations.
Although there is still much that can be done to prevent the climate crisis from worsening, unfortunately there has already been irreversible damage to the climate. A recent report from the UN’s Intergovernmental Panel on Climate Change highlights how greenhouse gases in the atmosphere have already reached levels high enough to all but guarantee climate disruptions for the foreseeable future. That being said, it will be essential to put in place structures to help the world, especially vulnerable populations that are most likely to be adversely impacted, prepare for and adapt to an increase in extreme weather events due to climate change.
Provision of Aid
The first, and perhaps most obvious way that blockchain and cryptocurrency can help vulnerable populations adapt to climate change, is by building efficient systems for the disbursement of aid to those that have been impacted by climate catastrophes. There are already multiple blockchain start-ups that are testing novel ways to provide aid directly to beneficiaries. One of these projects, Rahat, which was launched in Nepal, uses mobile-based blockchain tokens to rapidly provide aid to victims of natural disasters, which can then be spent at vendors for essential supplies.
A similar project, developed by the World Food Programme, was rolled out to 100,000 people in refugee camps in Jordan to simplify the process of purchasing groceries. For this program, the funds provided to beneficiaries are stored on an account maintained on a blockchain, and they need only scan their iris to spend their funds at the local grocery store. This cuts out the need for financial middlemen, and beneficiaries do not have to worry about securing cash or a food voucher. In the event of disasters due to climate change, similar applications could allow for the rapid disbursement of aid to beneficiaries.
The beauty of blockchain-based platforms for disbursing aid, is that you don’t necessarily need to have a smartphone, computer, or access to the internet to receive aid and access financial services. In fact, there are already multiple projects in the works, such as Kotani Pay and Leaf Global FinTech, which make use of USSD technology, which has been in existence for decades.
In short, “USSD (Unstructured Supplementary Service Data) is a session-based text communication protocol available on every GSM-enabled mobile device”. Most telecom services make use of USSD today, which allows for the exchange of messages between the mobile phone and an application that lives on the network, meaning that users don’t have to install an app to make use of this service. An example of a time when you may have used USSD is when you “top up” your mobile balance or send a message to check the balance of your phone. Due to the accessibility of the USSD technology, no special equipment or mobile apps are required, nor is an internet connection or smartphone. USSD technology can be utilized on any basic mobile phone, which is huge considering that 2.4 billion people around the world still use basic phones.
The benefits of a blockchain-based system for providing aid are many, as it not only provides an efficient, cost-effective way of distributing aid that cuts out costly and slow intermediaries, but it is also highly transparent and auditable, which is essential given the massive amount of aid that will need to be distributed. This transparency in conjunction with the immutability of blockchains also reduces the risk of fraud, as all transactions can be accounted for with ease.
Climate Displacement
One of the unfortunate realities of climate change, is that it will likely result in massive displacement of vulnerable populations, resulting in a new wave of refugees. The World Bank has estimated that there will be 143 million more climate migrants by 2050 from Latin America, Sub-Saharan Africa, and Southeast Asia. This could be due to a number of reasons including resource scarcity, an increase in extreme weather events, increased inter-state competition for food, and an increased frequency of disease outbreaks, among others.
The most prudent strategy would be to attempt to mitigate this crisis by putting in place proactive measures to protect those at risk of becoming climate migrants, such as food security initiatives, projects to increase economic opportunity, agricultural innovations, etc. That being said, despite the best efforts of many great organizations that are trying to help communities become more climate resilient, the fact that there will be climate migrants is an unfortunate reality, and as such, systems need to be put in place to support this new wave of migrants.
Blockchain is well situated to provide innovative solutions to some of the most common challenges that refugees face, whether it’s the need to move money across borders, to have a system for storing credentials and identification, or the provision of aid including one-off support or an Unconditional Basic Income (UBI).
There are already many great projects in place that provide solutions to the challenges highlighted above. Leaf Global FinTech, for example, has developed an accessible solution for refugees and vulnerable populations which enables them to store and access their funds regardless of where they are, making it much easier to move money across borders. The Refugee Integration Organization (RIO), on the other hand, is using the innovations of blockchain and cryptocurrency to provide UBI in the Celo cryptocurrency to individuals residing in three refugee camps.
The potential for creating reliable, secure, and efficient systems of identification and the storing of credentials for refugees is also huge, and there are many projects that are working on solutions for this as we speak. One of these projects, which is a partnership between Cardano and the Ethiopian government, is looking to make use of the Atala PRISM technology to “create a national attainment recording system; to verify grades, monitor school performance, and boost nationwide education.” While this project isn’t for refugees, it could certainly act as a proof of concept and could be applied to other contexts, such as developing identification systems for refugees.
Smart Contacts and Climate Insurance
With an increase in extreme weather events due to climate change, there will be an increased need for reliable and efficient insurance to protect individuals, especially in vulnerable communities, by providing them with financial security in the event of extreme weather events that impact their livelihood.
Unfortunately, insurance is highly inequitable depending on where you live in the world and your financial situation. Insurance for those in developing countries can be prohibitively expensive, and thus, those from low-income backgrounds may not have protections on their homes or livelihoods in the event of extreme weather events.
Blockchain-based insurance platforms can help address this by providing decentralized insurance that cuts out the need for an intermediary, thus greatly reducing costs. One project that is doing this today, is Etherisc, an innovative, blockchain-based platform for crop insurance.
Crop insurance, or agricultural insurance, is an essential tool for farmers looking to mitigate the impacts of unpredictable weather events and helps insure them against losses in crop yield due to environmental causes. Despite the value of agricultural insurance as a risk management tool, only 3% of smallholder farmers in Sub-Saharan Africa use it.
There are many reasons why this number is as low as it is including expensive premiums, issues with trust, and a lack of transparency among insurance providers. It is clear that traditional insurance isn’t working for this population, and that an alternative is needed. This is where Etherisc comes in.
Etherisc is an “innovative parametric crop insurance built on top of our “Generic Insurance Framework” (GIF) on Ethereum and indexed to local weather parameters.” Etherisc makes use of Chainlink’s oracle network which provides a reliable connection to external weather data sources. In the event of an extreme weather event, insurance policies are triggered automatically and payout the insurance to the policy holder.
Simply put, the blockchain, which is built on the Ethereum network, uses smart contracts to automatically make insurance payouts during extreme weather events that are tied in to the blockchain via Chainlink’s oracle network. The end result is a fair, transparent, and tamper proof process, where payouts are made in a timely manner.
In addition to the obvious benefits that come with an objective, tamper-proof payout system, this project could also save farmers a substantial amount of money in insurance premiums. In fact, one study found that the use of this technology will reduce the costs required to issue a policy by a massive 41%, bringing down premium costs for the farmers. The end result is insurance premiums in small installments as low as 50 cents, ensuring access to those who previously couldn’t afford insurance.
This project could act as a pilot for similar initiatives in vulnerable communities that look to provide a number of different types of insurance including crop insurance, home insurance, and property and business insurance.
Conclusion
Looking forward to the future, it is clear that climate change will have an enormous impact on humanity, and especially society’s most vulnerable. As such, we must work collectively to ensure adequate systems and supports are in place to help vulnerable populations adapt to this new reality, and to support them in the event of climate catastrophes. The open, transparent, efficient, and accessible nature of blockchain technology provides a great case for its use in many of the solutions highlighted above, and it must be a part of the discussion when considering how to best prepare for the new reality of climate change.
What are some other ways that blockchain and cryptocurrency can help vulnerable populations adapt to climate change? Tweet us at @Crypto_Altruism, we’d love to hear from you!
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