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Blockchain & DLTs�for Impact Investing

2018

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Our approach - PositiveBlockchain.io

The first non-profit and open-source database, media platform and community exploring the potential of blockchain technologies for social and environmental impact.

The database currently lists more than 600 projects and startups using blockchain techs for good.

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Positiveblockchain.io Use Cases

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Way to use blockchain for social impact data

Recording existing social impact data:

like we do today but in a decentralized way (facilitates reconciliation, provides shared infrastructure, immutable, secure)

Human recording of future social data:

Distributed Autonomous Organisations (DAOs) enable networks of individuals to coordinate and act together to address social and environmental problems without the need for a centralized structure
responsibility for measuring and recording impact would also have to be distributed in some way among the nodes that make up the network
Need some nodes with higher degree of trustworthiness, “oracles”

Automated reporting of human data

IoT, world of data, sensors
Health, energy, environmental data, temperature
automating the collection of large volumes of relevant data
Rather for outputs data, not outcomes

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Sources CAF

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Way to use blockchain for social impact data

Incentive mechanisms

incentivising accurate social impact reporting by rewarding truthful reporting of facts
Organizing second layer of reward-driven verification nodes
All done through tokenization
Same against fake news (snip, userfeeds, ..)

Predicting Social impact

Apply predictive markets to future social impacts
Blockchain in predictive markets (Augur, Gnosis,)

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Sources CAF

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Cryptorun project – Brussels

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What about data verification?

Blockchains cannot access data outside their network. An oracle is a data feeds – provided by third party service – that verify real-world occurrences

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Data Oracles = agent that finds and verifies real-world occurrences and submits this information to a blockchain to be used by smart contracts
trusted third party that can provide or certify the data

Today, many organizations function as trusted third parties in carbon exchange markets. They offer carbon auditing services for sequestration projects, using a variety of standards, such as the American Carbon Registry Standard, the Climate, Community and Biodiversity Standard, Gold Standard, Plan Vivo Standards, and Verified Carbon Standard. Like the organizations that issue various fair trade labels, these services provide the credibility of third-party certification. But whether we’re talking about fair trade or certifiable carbon, the standards come with built-in measurement biases, and the third-party auditors themselves are subject to possible corruption.

This is where so-called oracles might offer a solution for a blockchain-based system. Oracles are software entities that store data or perform calculations to verify data and then pass it to a smart contract. In effect, an oracle is a trusted third party that can provide or certify the data.

In the case of carbon emissions, the solution to trustworthy data may be a consensus of oracles—third-party evaluators of emission and sequestration claims—using multiple data sources and approaches to measuring carbon. These sources might include self-reporting, audits, government analyses, and even sensor-based direct measurements as the Internet of Things comes online. They could even include self-reporting by products that have a positive or negative carbon footprint over their lifetimes. Such a network of oracles would still need a way to resolve differences and disputes about emissions reporting, of course.

The question is whether these oracles can be automated to provide qualified consensus data to a carbon coin blockchain at the right moment—that is, could they reduce the friction in the measurement system enough to make it the foundation for a viable exchange?

This is perhaps an example of where the blockchain will meet artificial intelligence. The blockchain by itself is probably not going to be sufficient to manage a carbon trading system. But combine it with machine learning and a robust IoT linked to a network of oracles and it may well be not only feasible but essential to the future of the planet.

Oracles

Smart contracts contain value and only unlock that value if certain pre-defined conditions are met. When a particular value is reached, the smart contract changes its state and executes the programmatically predefined algorithms, automatically triggering an event on the blockchain. The primary task of oracles is to provide these values to the smart contract in a secure and trusted manner.

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Types of blockchain oracles

Software Oracles

the data originates from online sources, like company websites
Temperature, prices of commodities and goods, flight or train delays, etc.

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Hardware Oracles

information directly from the physical world
A car crossing a barrier where movement sensors must detect the vehicle and send the data to a smart contract
Another use case is RFID sensors in the supply chain industry

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Going forward

Same for any data!
Payment events
Pictures of things, geo-tagged and time-stamped
Unique QR codes
Spatial/ weather data.

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Case: Fizzy (Axa)

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ProofofImpact – South Africa

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Results are written in the blockchain

Community members collect evidence by taking photo though the app wallet

Pictures have a GPS location & a time-stamp

Pictures are shared in a distributed network (blockchain) could be millions of ppl

Verification

Smart contract & token emission

reward

Community

Using blockchain to capture impact value and reinvent how we finance social impact

Lulian Circo

Co-Founder

& CEO

https://proofofimpact.com/

let’s say an investor/ donor is funding a program aimed at educating girls. This program involves building schools, hiring & training teachers and ensuring that girls actually attend school.

Donor X Wants to fund a girl school education program

Therefore hires a middle-man organization to manage the work: construction, education, capacity building, job creation

These funds are usually referred as « Cost of Delivery »

BETTER ALTERNATIVE

See it as « Valuation of Impact » Education = weath

Transfer this value 100% directly to the community
Conditional on of verifying pre-agreed impact events
e.g. X girls attending school during the next 5 years

Members of that community with smartphones act as verification nodes. This includes girls in the community, parents, teachers. They are prompted inside an app to take pictures of their environment at random intervals. Teachers take picture of their class. Students take pictures of their colleagues & teachers. Every picture taken will have GPS location & a time-stamp. The app used is nothing more than a token wallet with a verification feature. People n the community value the token (which is essentially cash).

Pictures are uploaded on a global distributed network that could include millions of people globally — essentially nodes on the network. All these people have a token wallet on their phone where they store & trade value, make payments etc. They have opted in to act as verification nodes. Users answer simple questions about the pictures (“do these students look engage?” “how many girls do you see in this picture”?). The more powerful nodes can run AI/ ML scripts that evaluate patterns on these pictures. Eventually, a consensus of impact is achieved, which unlocks payment for the community & a small verification fee for the verifiers (who act as miners on this network). It all gets written on a block. This process can be optimized along proof of stakes principles and/ or adding machine-generated data as available.

�Verification:�Looks familiar? The logic of distributed verification is widely used already. Now replace “bicycles” in the reCAPTCHA above with “Mosquito nets” and we are getting somewhere.�

Going forward:

Same for any data!

Payment events

Pictures of things, geo-tagged and time-stamped

Unique QR codes

Spatial/ weather data.

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Case: Amply

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Ixo – South Africa

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Protocol and platform for claiming impact via the blockchain�

Shaun Conway

Founder & President

https://ixo.world

The generic process for evaluating an impact claim

The ixo protocol is the rails to optimize the creation of Impact Projects and then to streamline the collection and evaluation of the impact claims. The verified impact claims are then added to a global ledger of impact data which makes it available for analysis to optimize future projects.

«déclarations d’impact vérifiables»��It is developing a “proof of impact” protocol allowing data about projects–for example, that a child has been vaccinated or that a tree has been planted–to be recorded on a distributed ledger (a blockchain). This enables the claim of impact to be verified as legitimate and for funders thousands of miles of away to see that their money has been well spent. It also creates a new asset class, a cryptographic token that’s issued as the claim is authenticated, that could become the basis for a more organized, regulated form of investing.

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Ixo – South Africa

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Protocol and platform for claiming impact via the blockchain�

https://ixo.world

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Case: carbon offseting on the blockchain

Theory is great
Political process
Lobbying keepin caps high
Low transparency
Not uniformly applied to all fossil fuel emissions
imprecise definitions of carbon emissions
Potential frauds in tradeable permits generations

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Emission Trading Systems

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Case: carbon offseting on the blockchain

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A carbon deposit and redemption system

Deposit paid for every ton of CO2 created

Recorded in a blockchain digital asset « carboncoin »

Held in escrow

Until redeemed by a party that sequesters a ton of CO2 (reforest. or industrial CSS)

Source: http://www.edwardtdodge.com/2015/09/22/a-new-model-for-carbon-pricing-using-blockchain-technology/

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Case: carbon offseting on the blockchain

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A carbon deposit and redemption system

Blockchain = integrated auditing in the system
Transparent = reduces capacity of fraud
Easier easier international flow of funds
depoliticized system = better international cooperation
No ad-hoc accounting methods and carbon offset definitions, 1 ton of CO2 = 1 ton of CO2
monetizes “good” behavior and competition for the escrowed resources
It is a fair system, as those producing CO2 have to bear the financial burden and those caring for the environment would benefit
money raised used strictly to solve carbon emissions problems (not political agenda)
Could apply to any deposit-refund system

Source: http://www.edwardtdodge.com/2015/09/22/a-new-model-for-carbon-pricing-using-blockchain-technology/

Blockchain benefits?

Advanced financial accounting technology, the blockchain, offers the capacity to integrate auditing into the system in a manner that is transparent to all parties and dramatically reduces the capacity for fraud

Easier international flow of funds

The financial instrument deemphasizes the need for political negotiations

one ton of CO2 is equal to one ton of CO2 anywhere in the world: bypass the existing ad-hoc carbon accounting methods and carbon offset definitions

monetizes “good” behavior and competition for the escrowed resources would result in concentrated actions to save the environment

It is a fair system, as those producing CO2 have to bear the financial burden and those caring for the environment would benefit

the use of blockchain is cost-effective, transparent and auditing measures can be implemented into the protocol, making monitoring and enforcement easier (ibid.).

Of course, practical issues of fraud, geopolitics, and the implications of large amounts of frozen assets on the escrow need further assessment.

Going further with any deposit-refund system:

PET bottles�Plastic waste tokenization�consumer electronics �

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Nori

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New Era Energy - Singapore

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a framework designed to greatly enhance carbon market data authenticity and provenance

Carbon Grid Protocol

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World Bank Blockchain bonds

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bond-i (blockchain operated new debt instrument) that raised $110 million

The World Bank is a global development cooperative owned by 189 member countries. Its purpose is to help its members achieve equitable and sustainable economic growth in their national economies

The World Bank issues between US$50-US$60 billion annually in bonds for sustainable development. It has a 70-year track record of innovation in the capital markets.

The global bond markets have about $100 trillion worth of securities outstanding and about $250 trillion worth of bonds are traded in a year.

bonds: use the debt capital markets to raise funds for investment in developments. Purchasing a government bond is a form of investing. When you buy a bond from an issuer (in this case, the Austrian government), you are loaning that money with an agreement that the issuer repay the debt over a certain period of time (settlement period), with some form of interest added to make it worthwhile.

Bond issuance process involves multiple mutually-untrusting stakeholdersplaying specialized roles. These entities, which include the issuer (company), merchant bankers, legal counsel, rating agencies, trustees, collection bankers, registrars form a consortium or a ‘working group’. The group works on several documents including engagement letters, consent letters, disclosure documents, due diligence certificates, issuer undertakings, escrow agreements, regulatory submissions etc. The working group members discuss, exchange emails, negotiate, create these documents, review them, approve them by wet-ink signing & sealing and finally submit them to the regulators for permission to issue.

The bond-i blockchain platform was built and developed by the CBA Blockchain Centre of Excellence, housed in the Sydney Innovation Lab.

Service providers to the bond’s platform include TD Securities as market maker, IHS Markit as independent valuation provider, Microsoft as independent code reviewer, and King & Wood Mallesons as deal counsel.

Investors in the bond include CBA, First State Super, NSW Treasury Corporation, Northern Trust, QBE, SAFA, and Treasury Corporation of Victoria.

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Austria to to track up to $1.3B in government bonds

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Crypto Development Fund

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Alice.SI

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Mobilized Construction – Kenya/Uganda

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Kevin Lee

Co-Founder &

CEO

Collect road condition data

Deploy maintenance teams on marketplace (smart contracts)

Workers get paid through mobile

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User generate reports (crowd-sourced data)

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the Blockchain way of fixing Africa’s roads

https://www.mobilizedconstruction.com /

Mother getting to the hospital

Rain: taxi rate from 1 to $4

6,5 Mkm of unpaved road: Africa, India, South America, South-East Asia

3,7 trillion of $ of infrastructure. 2,7 funded or tbf. 1 trillion gap.

Impacts:

Infrastructure costs reduction
50% decrease in travel time
50% decrease in fares
400% increase in vehicle activity

Example:

Kiarutara, Kenya

Impact: 17 jobs, improved market access for 2,000kg of tea leaves and 1,000L of milk daily, decrease of taxi fares from US$0.50 to US$0.30.

Micro PPP to fill out the financing gap of road infrastructure

Labor based maintenance. No new (World Bank since 15-20y).

But Mbilized Construction does it through the tech

1. Measure International Roughness Index through acceleromete & imagery analysis. We translate vehicle movements to calculate International Roughness Index (IRI) and use our machine learning algorithms to identify the locations of road hazards like potholes.

Create a map where the repairs are needed

2. Creates micro contracts for local people to fix the roads

Document work they do.

3. Get paid when the repair has been validated (next cars driving, quality standards..)

Smart contracting: Assess contractor performance through real-time data collection and compensate vehicle operators for data collection.

User generated reports: Crowdsourced data and road hazard reporting from local citizens to identify hazards quickly and accurately.

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BitGive

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Case: BitGive

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Case: BitGive

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Case: Disberse

a fund management platform that drives the transparent, efficient & effective flow & delivery aid finance

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Case: Impak Finance

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Case: Impak finance

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Details on Impact assessment

How do we measure impact?

impak Finance has been inspired by the UN’s 17 sustainable development goals (SDGs), and is using them to build a framework for measuring impact. The validation and measurement of a company’s impact has 3 steps:

First: A declarative and automated questionnaire. Companies fill in a form covering: information about the company (activity sector, legal information, etc.) and information related to the impact. On the impact side they will provide their impact intention, the various SDGs they plan to address (minimum 2) with their business, the sustainability of their mission relative to their economic objectives, how they are integrated in the community and their business acumen.

As an output we create an “impak Profile”, which shows to the rest of the ecosystem the SDGs they are addressing and their respective KPIs to which they are committed.

Their answers determine which stage of impact they fit into: from a simple impact intention to a replicable and viable impact model. The stages of impact are designed to clarify objectives and to help new projects progress with the examples of others that have a solid impact model.

Second step: An in-depth impact assessment, requiring a much longer time investment, allows the company to showcase its status as “verified impact”. This assessment goes into more depth and intends to build a process to regularly check upon the company’s impact, using verified KPIs.

The last step is a due diligence process. Companies wishing to obtain a loan will be submitted to a rigourous process that will go beyond what is expected to “simply” check the KPIs. This due diligence process was inspired by various sources such as MSCI, B Lab, Chantier de l’économie sociale, and work from our own team.

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Case: Raiseimpact

“We’re building the future of responsible capital with an impact exchange for tradeable private investments on the Ethereum blockchain”

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Thank you!

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lucas.zaehringer@gmail.com

hello@positiveblockchain.io

Facebook

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Appendix

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Proof of Impact to fight deforestation

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Farmers can cut forests in Zambia
Sell charcoal
Plant crops instead
Feed their family

Source: https://proofofimpact.com/

What usually happens…

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Proof of Impact to fight deforestation

Donor X

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Wants to stop deforestation

Source: https://proofofimpact.com/

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Proof of Impact to fight deforestation

Donor X

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PROGRAMS

Therefore invests in

Planting trees

Education

Capacity building

Job creation

Wants to stop deforestation

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Proof of Impact to fight deforestation

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HIGH COSTS

HARD TO SUSTAIN

PROGRAMS

Planting trees

Education

Capacity building

Job creation

ECONOMIC MECHANISM UNCHANGED

COMMUNTY’S DEPENDENCY ON AID

= forest’s value higher when dead

All of this costs a lot of money. And while it will all probably have some impact, they will do nothing to change the fundamental economics there: to the typical local farmer, that forest remains more valuable dead than alive. By cutting the forest, this farmer can plant some crop and out of the wood he can make charcoal which he can sell right away. This will help feed his children. Sure, the odd jobs facilitated by our consortium (plus the involvement of the local law enforcement) will somehow mitigate this but the hard economic reality remains unchallenged. The moment this project slows down — and/ or the moment no-one is looking — that forest will be cut. This will force the donor to continuously renew that project (even while lamenting the lack of “sustainability”), and it will deepen the community’s dependency on aid.

�

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Proof of Impact to fight deforestation

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PROGRAMS

Planting trees

Education

Capacity building

Job creation

Needs busy organizations that need to survive by maintaining their man-in-the-middle usefulness

All of this costs a lot of money. And while it will all probably have some impact, they will do nothing to change the fundamental economics there: to the typical local farmer, that forest remains more valuable dead than alive. By cutting the forest, this farmer can plant some crop and out of the wood he can make charcoal which he can sell right away. This will help feed his children. Sure, the odd jobs facilitated by our consortium (plus the involvement of the local law enforcement) will somehow mitigate this but the hard economic reality remains unchallenged. The moment this project slows down — and/ or the moment no-one is looking — that forest will be cut. This will force the donor to continuously renew that project (even while lamenting the lack of “sustainability”), and it will deepen the community’s dependency on aid.

�

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Proof of Impact to fight deforestation

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€€

Source: https://proofofimpact.com/

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Proof of Impact to fight deforestation

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€€

€€€

Source: https://proofofimpact.com/

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Proof of Impact to fight deforestation

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€€€

Now gets paid if forest remains healthy

PROBLEM

Need to organize

Verification
Pricing
Payment releases

Source: https://proofofimpact.com/

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Proof of Impact to fight deforestation

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SOLUTION

Gets a wallet and uses him phone camera

Frequently takes a picture of the forest

Pictures are shared in a distributed network (blockchain)

machine intelligence and human intelligence verification

Results are written in the blockchain

Smart contract & token emission

reward

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Proof of Impact to fight deforestation

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SOLUTION

Gets a wallet and uses him phone camera

Frequently takes a picture of the forest

Pictures are shared in a distributed network (blockchain)

machine intelligence and human intelligence verification

Results are written in the blockchain

Smart contract & token emission

reward

FAIL

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Proof of Impact to fight deforestation

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SOLUTION

Gets a wallet and uses him phone camera

Frequently takes a picture of the forest

Pictures are shared in a distributed network (blockchain)

machine intelligence and human intelligence verification

Results are written in the blockchain

Smart contract & token emission

reward

FAIL

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Proof of Impact to fight deforestation

Blockchain / distributed network pay a key role
Impact data can become globally accessible
New services can emerge

Insurance without claims (crop insurance, farmer can submit picture of crops damaged to get compensated, verification unlocks smart contracts. Same for any insurance product

Downstream payments for commodity producer: cup of coffee in London drunk = direct small payment release to the grower’s wallet in Guatemala

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Source: https://proofofimpact.com/

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Proof of Impact for education programs

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Donor X

Wants to fund school education programs

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Proof of Impact for education programs

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Donor X

Wants to fund a girl school education program

PROGRAMS

Therefore hires a middle-man organization to manage the work

Construction

Education

Capacity building

Job creation

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Proof of Impact for education programs

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These funds are usually referred as

« Cost of Delivery »

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Proof of Impact for education programs

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BETTER ALTERNATIVE

See it as « Valuation of Impact »

Education = weath

These funds are usually referred as

« Cost of Delivery »

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Proof of Impact for education programs

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Transfer this value 100% directly to the community
Conditional on of verifying pre-agreed impact events
e.g. X girls attending school during the next 5 years

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Proof of Impact for education programs

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SOLUTION

Community members collect evidence by taking photo though the app wallet

Pictures have a GPS location & a time-stamp

Pictures are shared in a distributed network (blockchain) could be millions of ppl

Verification

Results are written in the blockchain

Smart contract & token emission

reward

Community

Members of that community with smartphones act as verification nodes. This includes girls in the community, parents, teachers. They are prompted inside an app to take pictures of their environment at random intervals. Teachers take picture of their class. Students take pictures of their colleagues & teachers. Every picture taken will have GPS location & a time-stamp. The app used is nothing more than a token wallet with a verification feature. People n the community value the token (which is essentially cash).

Pictures are uploaded on a global distributed network that could include millions of people globally — essentially nodes on the network. All these people have a token wallet on their phone where they store & trade value, make payments etc. They have opted in to act as verification nodes. Users answer simple questions about the pictures (“do these students look engage?” “how many girls do you see in this picture”?). The more powerful nodes can run AI/ ML scripts that evaluate patterns on these pictures. Eventually, a consensus of impact is achieved, which unlocks payment for the community & a small verification fee for the verifiers (who act as miners on this network). It all gets written on a block. This process can be optimized along proof of stakes principles and/ or adding machine-generated data as available.

��

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Proof of Impact for education programs

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SOLUTION

Seems familiar?