Let’s have an honest assessment of the possibilities of using blockchain technology as a tool to empower local communities to define and achieve their own impact, or what the development space often refers to as Locally Led Development (LLD). 

This blog unpacks a recent paper on decentralized opportunities for locally led development with the Decentralization Research Center.  It sees technology as a tool and like all tools, it should be fit for purpose, or it shouldn’t be used.  Given the hyped-up sales pitches and techno prophecies of blockchain, it is useful to step back and take a rigorous, if somewhat conceptual, assessment of this experimental tool by focusing on three questions:

• When could blockchain be used to enhance locally led development?

• How could it be used?

• How do we learn to use it better?

When and How Can Blockchain be used to Improve Locally Led Development?

While still in its infancy, blockchain technology, often associated with cryptocurrencies like Bitcoin, is much more than just digital money. It’s a decentralized digital ledger that records transactions across multiple computers in a network. This setup makes it much more secure, transparent, and tamper-proof. So, how does this help locally led development?

Transparency and Trust

One of the biggest hurdles in locally led development is ensuring transparency and trust among stakeholders. Whether it’s tracking the use of funds, ensuring fair labour practices, or verifying the authenticity of products, blockchain could provide a transparent and immutable record that helps build trust among all parties involved, from local communities to international donors.

Providing this level of transparency and trust could enable donors to directly contract local actors, a critical barrier to improved locally led development.  For example, blockchain can be used to create digital identities or track the distribution of aid, ensuring that resources reach the intended recipients without being siphoned off by corrupt intermediaries. It can also streamline supply chains, making it easier to verify the origin of products and ensure they meet sustainability standards in more cost -effective ways.

Empowering Local Communities

Blockchain could empower local communities where local actors set their own agendas and develop solutions tailored to their unique needs which addresses some of the critical power imbalances inherent to current development models.  One exciting example is the concept of Decentralized Autonomous Organizations (DAOs). DAOs are organizations governed by smart contracts—self-executing contracts with the terms directly written into code. These organizations can operate without centralized control, allowing communities to self-organize and manage their resources more effectively. Such an approach parallels many of the objectives of network humanitarianism with its focus on bottom up empowerment and impact versus mandated top down agendas and procurement targets as measures of success.

Any type of entity could become a DAO (local NGOs, LLCs, Cooperatives, etc.) and use the technology to alleviate much of the need for intermediaries that add cost and time, introduce opportunities for corruption, or impose agendas that are counter to the goals of the local actors and their community.  For example, FishCoin created a self-organized, self-governed seafood supply chain from fish farmers to restaurants who know that their seafood dishes were responsibly sourced and empowered the actors comprising the supply chain.

How do We Learn to Use it Better? 

While the potential of blockchain is immense, there are significant challenges to overcome. Scalability is a significant issue, as blockchain networks can struggle to handle large volumes of transactions efficiently. Regulatory uncertainties also pose a massive hurdle, as governments worldwide grapple with how to classify and regulate blockchain-based systems.

Likewise, to harness the full potential of blockchain, education for communities to understand how to use blockchain technology effectively and safely is crucial. Given the multi-purpose nature of blockchain, the education will need to be application specific with DAO’s being the most complex type of application. Ongoing research is essential to identify best practices and develop standardized protocols for blockchain applications. Collaboration among governments, NGOs, and the private sector can drive innovation and create an enabling environment for blockchain adoption.

There should be no rose-tinted views of these barriers to initial testing and possible scaled use of blockchain as a tool for locally led development. It will take an immense amount of work but the potential to enhance transparency, empower local communities, and create new models of collaboration provides ample possible return on the investment. As we move forward, let’s embrace the evidence-informed possibilities and work together to overcome the challenges, ensuring that blockchain technology serves as a force for good.

So, what do you think? Are the barriers too significant or are we posed for innovation in a seemingly stagnant field? Let’s keep the conversation going and explore how we can take advantage of the opportunities and learn to avoid their pitfalls!

The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.

Featured image credit: White Paper: Decentralized Possibilities for Locally-Led Development