The world's largest multilateral development bank is launching a blockchain lab as part of a bid to pilot projects that can improve governance and social outcomes in the developing world.
The World Bank, based in Washington, DC, officially launched the venue Tuesday morning to serve as a forum for learning, experimentation and collaboration on distributed ledger technology. The blockchain lab will now seek to bring together internal and external participants to work on blockchain use cases of significance to the bank's more than 80 client countries.
Core focus areas will include land registry, digital identity, aid distribution and financial infrastructure.
Trust and poverty
At the event launch, Denis Robitaille, vice president and chief information officer of the World Bank's technology division, said that the lab's objective is to explore and build with its non-profit and technology partners, and to produce proofs-of-concept that can then be rolled out in the field.
The lab will focus on empowering the bank to be a thought leader in the space as more countries explore blockchain solutions. It has been set out to do this through facilitating greater understanding of the technology itself, as well as its accompanying security, legal and policy implications.
These pillars, bank officials emphasized, are critical to the World Bank's mission of eliminating extreme poverty and raising living standards worldwide.
The institution is also viewing blockchain as a potential vehicle for building and restoring trust in institutions, which has fallen precipitously around the world in recent years. New research by Edelman recently found that only 15% of people trust the systems in their countries to work for them, and that trust across every sector declined for the first time ever in 2016.
Sebastian Molineus, director of the World Bank's finance and markets global practice, argued that blockchain's true potential is not just in individual use cases, such as payment facilitation, but in rewiring the entire financial infrastructure of developing countries.
Molineus told the audience:
According to Molineus, the impetus for the lab was organic demand among bank staff, client countries and stakeholders, as well as the rapid exploration of DLT by other multilateral institutions like the United Nations.
"One of the surprises was how often private sector banking clients are asking for more information, more guidance and more 'mind partners' as they think about how to deploy this technology in their areas," said Susan Starnes, head of supply, trade and supply chain solutions at the International Finance Corporation, a division of the World Bank.
Bank officials also emphasized that they believe there is ample potential in using the technology to improve transparency and streamline procedures within the institution itself.
"What really struck me is that we can actually now track every single dollar that our development partners are giving to members," said Molineus.
He went on to emphasize that such increased efficiency and transparency in project lending could dramatically improve project outcomes.
Arunma Oteh, the bank's vice president and treasurer, said that using blockchain as a structured finance vehicle could allow the bank to issue debt and raise funds more cheaply on capital markets, and therefore enable it to issue project loans to developing countries at lower rates.
Understanding the risks
However, the bank is also keen to understand the potential challenges and pitfalls associated with blockchain.
Randeep Sudan, a digital strategy and government analytics advisor at the World Bank, called for a tempered approach to blockchain, stating that the potential benefits must be embraced with an accurate grasp of the risks.
He remarked that environmental and energy consumption issues must be considered, particular as the World Bank is highly sensitive to climate change and environmental aspects.
Sudan noted, for example, the electricity use that bitcoin mining, the process by which the protocol verifies transactions and rewards participants, requires, stating:
Sudan also pointed to other concerns, such as the consumer's "right to be forgotten", which has been legislated in the European Union, and the potential development of quantum computing in the future that could break modern cryptography.
Starnes emphasized that the technology must be accompanied by proper understanding, training and value systems for its full potential as a development tool to be realized
Event image via Aaron Stanley for CoinDesk
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