Stable Tokens

Ethereum Hackathon ETHDenver Partners With UNICEF on Blockchain Bounty System by Robert Greenfield

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By: Marie Huillet

Upcoming Ethereum (ETH) hardware hackathon ETHDenver is partnering with UNICEF on a blockchain bounty token system, according to a press release shared with Cointelegraph Jan. 31. The token aims to incentivize developers to create projects which promote social good, the press release notes.

ETHDenver — set to take place February 15-17 in Denver, Colorado — has partnered with UNICEF Ventures, UNICEF France and ETH startup Bounties Network on the prototype for what it calls a “positive action token,” the firm stated in the press release.

While the token is yet to have a name — indeed, its creators are appealing to ETHDenver attendees to contribute to finding one — it forms part of an incentivization program dubbed “The Impact Track.” As ETHDenver Diversity and Impact Steward Nick Rodrigues has outlined, the program encourages developers to think systematically about the positive social impact of a given piece of technical innovation:

“For example, if someone had a project where they happened to develop a way to shard more efficiently which therefore required less energy consumption, they would be meeting a sustainable development goal.”

As a non-monetary, value-driven community coin, the token cannot be redeemed for fiat currency, as the organizers report. Instead, users can use their tokens to get early access to future UNICEF and Impact Track events, mentorship sessions, incubator-style support, and similar offerings. ETHDenver has also pitched the token as “digital public acknowledgement of positive actions.”

In a separate blog post published Jan. 30, ETHDenver and blockchain startup MakerDAO (MKR) — creator of the Ethereum-collateralized stablecoin Dai (DAI) — have also announced the creation of an ETHDenver pop-up token economy based on an ephemeral “localcoin.”

Hackathon attendees will reportedly each be issued with a unique “xDai” wallet, which runs on their phone’s default web browser and is pre-loaded with the localcoin, dubbed “buffiDai.” The coin is pegged to the Dai and redeemable for food, drinks and activities at the event, the blog post reports.

As previously reported, the positive action token represents just one of UNICEF’s many forays into the blockchain space. Last month, the UNICEF Innovation Fund announced it would be investing $100,000 in six early stage and open-source blockchain companies working toward humanitarian goals.

In February of last year, the organization appealed to PC gamers to use their computers to mine ETH and donate their earnings to a charity campaign for Syrian children.

Here’s a Concrete Way to Put Your Cryptocurrency to Use for Florence Relief by Robert Greenfield

The Rockaways after Hurricane Sandy. (copyright Babita Patel)

The Rockaways after Hurricane Sandy. (copyright Babita Patel)

Hurricane Florence is likely to be disaster for the record books. Then again, so were last year’s hurricanes Harvey and Maria. Mega disasters appear to be the new norm, with damages in 2017 alone reaching $306 billion — the most expensive year on record in the United States. And when disasters strike, people want to help in any way possible.

Humans are fundamentally altruistic, eager to lend a helping hand, send supplies, or open their wallets to help their neighbors down the street or across the country. And yet, although individual donors gave $6.5 billion to humanitarian causes in 2017, enormous funding gaps consistently remain in any disaster response. A significant lack of evidence of organizational transparency and trust that donor funds will be used effectively has notably stifled giving.

Why is Aid So Inefficient?

Aid response is complex and expensive, with billions of dollars spent every year on staffing and logistics. It’s also a sector that’s prone to inefficiency and waste. So many institutions are involved in the transfer and deployment of cash. Subsequently, up to 10 percent of funds go into costly transaction fees every time money crosses borders; 70 cents out of every dollar are spent on logistics. It is estimated that charities spend almost 37 percent of donations on overhead costs during relief efforts, largely because the process of getting money from donors to organizations and then into the field is slow, expensive, and susceptible to fraud.

At NeedsList, we have been streamlining the process of getting supplies and cash into the hands of frontline disaster and aid groups through our platform, which allows donors to purchase supplies directly from local businesses to be sent to the field. Since we launched a year ago, donors have directed hundreds of thousands of dollars in resources–including supplies, donations, and volunteer hours–to hundreds of small aid organizations around the world doing effective, often overlooked humanitarian work. For us, the catastrophic disasters of 2017 were a wake up call. We didn’t only want to do more–we needed to do more. The increase in the number of natural disasters calls for new tech-enabled solutions to get money to where it’s needed more quickly than ever, and with more transparency.

Relief center in the Rockaways after Hurricane Sandy (copyright Babita Patel)

Relief center in the Rockaways after Hurricane Sandy (copyright Babita Patel)

How Cryptocurrency Can Help Streamline Aid

Today, we’re excited to launch a blockchain-enabled Disaster Response Campaign in partnership with Project Bifröst, a cryptocurrency payment system that’s making humanitarian aid response cheaper, faster, and more effective. Project Bifröst is the first venture created by ConsenSys Social Impact, a venture that uses Ethereum to create blockchain-based solutions to tackle urgent humanitarian needs.

For the first time, people can donate the Dai stablecoin (created by MakerDAO), a price-stabilized cryptocurrency pegged to the U.S. dollar, towards disaster relief and preparedness efforts in the U.S. and abroad. This means that for the first time, there is a value associated with crypto donations that is stable and not prone to fluctuation, which is the hallmark of other cryptocurrencies.

Here’s how it works: We’ll be collecting Dai into our Disaster Response Campaign on a rolling basis. Half all donations will be immediately deployed to purchase urgently needed, basic supplies from local businesses in communities around the world where there are active relief or recovery efforts are underway. The other half will be set aside for disaster preparedness for the future. Right now, we can purchase clothing and hygiene products from local vendors in Kerala to help organizations aiding flood victims. We can buy solar or battery-powered lanterns for hurricane-hit communities in Puerto Rico. And we can be fully prepared to help the dozens of organizations that will be first responders to the fallout from Hurricane Florence.

The long-term implications of using the Dai stablecoin in humanitarian response are obvious: getting traceable cash to organizations in need more quickly, without the waste and with few transfer fees, that can be spent locally.

Although blockchain is in its early days, its potential to revolutionize the aid sector is extremely promising. If we can increase trust in donor giving through the transparency and traceability that Dai provides, donors may be willing to give more generously to projects that will have a real impact on the lives of those in need.

We’re excited to be running this experiment in cryptocurrency-powered giving for hurricane relief for Florence. If you have some Dai or ether, you can donate here, and we do of course accept USD as well. We’ll be updating donors with an ongoing list of organizations their funds are being directed to as relief efforts get underway.

To learn more about how to buy Dai, or about Project Bifrost, go here.

Unbanked for Good: Digital Currency and Self-Sovereign Finance by Robert Greenfield

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In the social impact landscape, “banking the unbanked” has become a popular, if somewhat misguided, refrain. As blockchain technology gains traction globally, and as smartphones reach more and more low-income communities, the horizon of self-sovereign finance is putting pressure on the now commonplace initiative to “bank the unbanked.” Considering that many of the basic services offered by the traditional banking system are opaque, slow, and expensive, the time is ripe for a crypto-economic alternative.

As we look back on the old system and explore the true meaning and the prospect of self-sovereign finance, there are a few key questions to consider:

  • Do we want to expose our most economically vulnerable communities to the risk of operating within the traditional banking system, one that is commonly fraught with incentives to defraud under-resourced populations?

  • Are wide-scale economic monopolies in developing economies a good strategy for economic equality and sustainable development in those regions?

  • Can the cost of being banked be exponentially minimized for current non-consumers, or will this cost simply be levied against the existing consumer base?

  • Can stable token partnerships with incumbent mobile payment networks create a system through which unbanked consumers can establish financial self-sovereignty and control their assets with their phone at any time?

Financial Equality vs. Economic Equality

The definition of “financial equality” is hotly debated in the social impact space, particularly when comparing the developed and underdeveloped worlds. Being “banked” can still be a long way from financial equality, and many draw a hard distinction between financial equality and economic equality––the ability to become socially mobile and enjoy different economic opportunities.

“Financial equality” and “economic equality” are often used interchangeably, which underscores the cultural misunderstanding of both systemic inequality and the subjectivity of need. In an American context, financial equality is more akin to broader access to financial services, rather than economic opportunity. In many westernized countries, bank account creation and yearly income are often used as a financial equality key performance indicator (KPI).

Financial equality, however, is a mere feature of greater economic equality and opportunity, which are oftentimes predetermined by the lottery of birth. Many consumers are born into positions of little or no purchasing power and face discrimination when applying for jobs or loans. They simply cannot afford social mobility.

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In the U.S., approximately 15 percent of consumers — roughly 37 million adults — do not have a bank account (PEW). Many of these unbanked Americans earn less than $25,000 a year. Interestingly, an estimated 21 million of these 37 million had previously held bank accounts, but they exited the banking system because of the high cost of overdraft fees. When asked whether they would like to have a checking or savings account in the future, 77 percent said no. However, without bank accounts, these people are unable to access to lower-cost, mainstream financial services and at a much greater risk of loss or theft of funds.

Cryptocurrencies as a Store of Value

One early and longstanding argument from Wall Street against the viability of bitcoin (BTC) as legal tender is that it is a terrible store of value. A store of value is any form of wealth that maintains its value without depreciating (i.e. gold is a better store of value than milk, which naturally spoils). Of course, if the economic aim of a currency is to preserve value, then many cryptocurrencies fail by that standard. However, the advent of volatility-resistant stable tokens is starting to bring cryptoeconomic-store-of-value alternatives to the forefront.

Initially, Tether (USDT) was the promise child of this effort, but after repeatedclaims of fraud and collusion with the exchange Bitfinex, Tether has effectively disqualified itself from gaining mainstream consideration beyond the cryptocommunity. In theory, Tether receives deposits of US dollars from investors, and then creates an equivalent number of tethers (the platform’s native currency) and gives those tethers to the depositor. These tokens are supposedly backed on a 1:1 basis, but without an audit, it is impossible to know whether the Tether platform has the $2.2B in reserves it claims to have.

So what promising solutions exist beyond Tether? Makerdao’s DAI is proving to be an exceptionally strong alternative and with some of the most mature cryptoeconomic and decentralized structures in place to ensure stability to $1.00 USD. The cryptocurrency maintained a variance of less than 2 percent during the recent January 2018 market downturn. While everything else was losing 30+ percent of its value, DAI leveled out at approximately $0.98. We won’t delve into how DAI maintains stability, but Gregory DiPrisco’s “Maker for Dummies: A Plain English Explanation of the Dai Stablecoin” does an incredible job of decomposing the Maker system.

With continued positive performance, DAI––which is an ERC20 token––could better enable DApps to provide a 1:1 USD pairing for mainstream consumers, making the use of cryptocurrency a backend, operational efficiency mechanism rather than a front-end UX nightmare.

Smartphone Penetration vs. Mobile Payment Growth

Global smartphone penetration has increased steadily year-over-year since the introduction of smartphones to western markets. In fact, about 6 in 10 unbanked consumers in the U.S. have a smartphone. However, despite this increase in access, the use of mobile payments is significantly lower among the unbanked. According to research reports from Pew Charitable Trusts, approximately 39 percent of unbanked smartphone owners have never made a purchase, paid bills, or sent or received funds using mobile payments technology compared with 64 percent of banked smartphone owners. So why is it that unbanked consumers don’t take full advantage of all the features on their smartphones?

A major barrier to entry is the fact that unbanked consumers rely heavily on paper checks and cash for income and expenses, which have limited to no compatibility with mobile payment technologies. Despite the global smartphone penetration, the mobile payment industry is beholden to the constraints of unsustainable bank account expenses (i.e. “the cost of being banked”) and the bank-oriented methods of payment many of these consumers are familiar with. Only by making accounts more affordable and offering easy liquidity for the deposits of cash and paper checks can the mobile payments industry activate unbanked consumers.

A Future of Financial Self-Sovereignty

Establishing liquidity between the traditional banking system and DApps that leverage stable tokens is essential for mainstream adoption of blockchain-based payment technologies.

There exists a “mid-term future” for the prevalence of decentralized technologies where monopolies will play a role in supporting scalability.Blockchain technologists all hope for a universal, trustless environment where we can maximize the ability of under-resourced communities to participate in the global economy, but fierce user experience (UX) constraints must be adequately overcome for under resourced community stakeholders to be able to leverage the advantages of zed technology.

UX obstacles like the complexity of visualizing the use of cryptocurrency for the common consumer––even with something like DAI, which is approximately equal in value to the U.S. dollar––are massive cultural hurdles to mainstream adoption. If credible stable tokens can be backed by traditional banking institutions, so that it’s easy to redeem cash in the real-world and vice versa, the mobile payments industry can leverage a peer-to-peer banking economy where each individual has complete control of their assets in the palm of their hand. Of course, incumbents must be incentivized to provide such liquidity, or entrepreneurs must be clever enough to create ecosystems that can support it. Many banks are fighting to tokenize fiat currencies in an effort to gain the operational benefits of blockchain technology whilst maintaining complete control over the world’s money supply — a world that, ironically, reintroduces the issue of ‘double spending’ via fractional reserve banking. It is doubtful that the traditional banking system would readily empower unbanked communities to become financially self-sovereign.

But we have the technology now to achieve financial self-sovereignty. A decentralized, mobile payment system would ultimately eliminate overdraft fees, because over-drafting funds on the blockchain is impossible. The cost of maintaining a low balance would effectively be zero, and payment for services would be reconciled in an instant. With decentralized models, we can also layer financial products, such as loans, on top of a mobile-forward, self-banked system. We are on the cusp of a future in which we have complete control over our assets, a future in which the speed and cost of transacting is minimal, and in which the freedom and opportunities of true economic equality, and not just financial equality, are guaranteed for everyone.