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Blockchain technology and the governance of foreign aid

Published online by Cambridge University Press:  26 November 2018

Bernhard Reinsberg Open the ORCID record for Bernhard Reinsberg [Opens in a new window]
Bernhard Reinsberg*
Affiliation:
University of Glasgow, School of Social and Political Sciences, Adam Smith Building, 40 Bute Gardens, Glasgow G12 8RT, UK
*
*Corresponding author. Email: [email protected]
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Abstract

Blockchain technology has been considered a vehicle to foster development in poor countries by promoting applications such as secure delivery of humanitarian aid, digital identity services, and proof of provenance. This article examines whether (and if so, how) blockchain technology can enhance the effectiveness and efficiency of foreign aid governance, thereby moving beyond completely anonymous contexts. Foreign aid governance is plagued by lack of credible commitments among states, which are further exacerbated by information asymmetries and which often undermine aid effectiveness. In this context, blockchain technology holds two promises. First, through the guaranteed execution of smart contracts, it can strengthen the credibility of state commitments, for example collective burden-sharing rules among a group of donors or recipient country compliance with policy conditionality in return for aid. Second, through leveraging prediction markets, blockchain technology can allay information problems related to the verification of real-world events along the entire aid delivery chain.

Keywords

Foreign aidBlockchainEthereumsmart contractsinternational organizationsWorld BankUnited NationsNew Institutional Economicscollective action problems
Type
Research Article
Information
Journal of Institutional Economics , Volume 15 , Issue 3 , June 2019 , pp. 413 - 429
Copyright
Copyright © Millennium Economics Ltd 2018 

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