The Future of Tokenization and Social Impact
- This is the first in a series of essays discussing the potential role of blockchain technology in social impact interventions. This initial essay is not a full explanation of the technical aspects and opportunity of tokenization for social impact, but it is a start and hopefully others can contribute to the thinking outlined here to improve our ideas moving forward. All thoughts and collaborations are welcomed.
Balancing Potential with Responsible Use
The promise of blockchain technology to achieve various types and levels of social impact has been widely discussed[1] as pilot projects are on-going[2]. The possible primary value-add of blockchain technology could very well only realized with the effective use of digital cryptographic tokens that unlock the potential of solving social problems more effectively than current practices.
The use of tokens to achieve social impact is not new as tokens already have a legacy of use in international development practice and other behavior change interventions[3]. What is new is the capabilities of tokens ausing cryptology on a blockchain and it these capabilities that unlock new opportunities for social impact. While the future of tokens, tokenization and de-centralization (all the buzz words flying around the emergence of blockchain technology) is unknown, the conceptual potential is there and if the potential is to be realized then the social impact industry might need to become as familiar with tokens and tokenization as they are with concepts like “theories of change”[4] or “local systems”[5]. Hopefully this essay can help some build that understanding.
We start with outlining what a token is and why social impact practitioners and decision-makers should be thinking about them before we move into how tokens have been used as behavior change tools for decades before blockchain appeared on the scene. Then we discuss how social impact practitioners already use tokens to achieve their objectives before discussing the types of problems tokens could be used to solve moving forward.
What is a Token
First things first, what is a token? We use them every day without really thinking about it. Grocery store receipts, automobile titles, training certificates and movie tickets are all tokens with correlated behaviors associated to them. The grocery store wants to prevent theft, so you have to have a token (i.e. receipt) to take goods out of the store. The movie ticket is good for only a specific movie at a specific time, so whoever holds the ticket (whether they paid for it or found it on the street) can only go to that specific movie and that specific time, they are not free to see another. The common attributes to these examples are that there is 1.) an asset, 2.) rights to perform an action on the asset and 3.) a desired behavior by the token issuer. The grocery store receipt gives you the right to depart the store (right to an action on an asset) with the groceries (the asset) because the grocery store (the ecosystem) is using the receipt the (token) to mitigate theft (undesired behavior). Likewise the automobile title (the token) gives you the right to sell (the action ) the car (the asset) without fear that someone else can claim ownership and thus the profits from the sell (the behavior).
The evidence bases around the use of tokens to achieve specific behavioral outcomes has stemmed from a fascinating history of experimentation in various ecosystems like classrooms[6] and health care facilities[7]. For example teachers have used stickers (tokens) that can be exchanged for prizes (right to the asset) to reward students who perform well (desired behavior) inside a specific ecosystem (classroom). Hence the ecosystem of the classroom is “tokenized” to a degree, meaning it has become, in part, a tokenized economy. A token economy is an ecosystem managed based on the targeted reinforcement of desired behavior and various mechanism of punishment for un-desired behavior using various principles of operant condition and behavioral economics.[8]
A Legacy of Token Usage
Social impact interventions use tokens frequently to achieve their aims. Land titles (the token) are issued to give the holder (the beneficiary) the right to invest in or sell (the action) the land (the asset) to improve access to financial services due to the newly acquired collateral (the desired behavior)[9]. Hence, we see common themes develop in the use of a token that lends to a draft operational definition, a token is 1.) a representation of an asset with 2.) the rights to perform actions on that asset and 3.) desired/undesired behaviors correlated to the ecosystem the token is used in. I can use my driver’s license (token) to demonstrate my citizenship (asset) to vote (right to perform the action on the asset) to avoid voter fraud (undesired behavior) in an ecosystem (my geographic area).
The emerging picture is one of tokens being used for everyday purposes to incentivize/disincentivize specific behaviors even when we are not fully aware. Just as the everyday purposes are varied so too are the token designs. A grocery store receipt is cheap to produce and easy to forge but the incentives to create the forgery are small given the low payout, hence the token (receipt) can be simple in design and production to dissuade theft (the undesired behavior). However a driver’s license is more complicated due to the consequences surrounding the desired/undesired behaviors. Drivers license (token) demonstrate more than citizenship, they demonstrate a proficiency (asset) that allows the owner to operate a motor vehicle (action) and without the demonstrated proficiency, the driver is more likely to get into car accidents (undesired behavior).
The social impact space makes frequent use of tokens any time a voucher is used as part of a conditional assistance program or a humanitarian assistance effort. Land titles, financial service products and emerging carbon sequestration markets all use different types of tokens to represent different types of assets, rights to those assets and desired/undesired behaviors. An assessment of how social impact interventions use tokens, what type of tokens, to what purpose and to what effect would be a necessary first step in developing action plans for how blockchain tokens can possibly improve this work.
Enter Blockchain Technology
Such an assessment takes on added priority because of the emergence of blockchain technology which allows tokens to not only be digitized, but cryptographically locked and automated into smart contracts. What this means is that the token can be easily modified for experimentation (due to its digitization and the ease of modifying its code with just a few key strokes), secure from manipulation by nefarious actors due to the strength of the cryptographic lock and the mechanisms to induce the desired behavior are automated into a smart contract. While these three attributes warrant further discussion for now it is sufficient to understand that blockchain tokens are already being used to decentralize financial services[10], manage supply chains[11] and provide other tools for social impact. The tokenization of numerous industries and social structures has already begun with the questions being to what extent and at what pace of change. Regardless, it is time for the social impact space to develop an understanding of tokenization to better use tokens for improved outcomes.
There is no consensus on the definitions or best practices for tokens, tokenization and the emerging disciplines related to their use including Token Engineering[12], Crypto Economics[13], etc. The space is in its infancy and there are early efforts around defining typologies[14], standardizing token taxonomies[15] and the development of evidence bases to inform best practices.
Hence as the social impact industry seeks to develop its understanding of the new potentials blockchain tokens bring, it can rely on this emerging evidence base but also its own legacy of using interventions (and the manner in which they are designed and manged) to acheive social impact.
Blockchain Tokens as Interventions
Tokens are interventions. They are interventions because tokens have all the same design attributes as a intervention (ie. activity) with its associated theory of change. For example a conditional assistance program may want to reward school attendance (desired behavior) with a voucher (token) for school supplies (rights to the asset) in a local community (ecosystem). In so doing the activity is creating a tokenized ecosystem comprised of all the actors involved in achieving the desired behavior (students, parents, techier, school administrators, etc.) and their required actions (including the mechanism needed to achieve them) to obtain the outcome of improved school attendance. The voucher (token) can be modified to be valid for more or less of a reward or other experimentations with the intervention design or management, can be integrated into a larger activity or be a stand-alone intervention. But the token voucher could have its own theory of change around the inputs, outputs, assumptions and mechanisms needed for the voucher to achieve the desired behavior. Meaning what level or type of reward or punishment for the various actors faciliates them performing the desired behaviors necceasry for the outcome.
We create theories of change based on problem diagnostic (usually part of a due diligence process), hence theories of change (and the activities they model) are usually set against specific set of problems it is meant to alleviate or diminish. The theory of change allows the intervention to be measured and assessed to determine its effectiveness in solving the problem with adaptive management and other tools being used to modify the intervention as needed (i.e. experimentation).
However the costs associated with this experimentation are often high and slow given decision authority to experiment is usually centralized, risk adverse and tightly prescribed. The possibility of blockchain tokens creates opportunity for cheaper, faster and (hopefully) better-informed experimentation due to the low barriers in modifying the intervention design captured in the theory of change coded into the token. The key is ensuring that those keystrokes modifying the token design (ie. modifying the design of the intervention) are informed by rigorous evidence on the performance of the token (or more specially the mechanisms coded into the token) and the inclusivity and ethics of the process to adapt it.
Moving Forward
Future essays will cover the below topics in an effort to kickstart a research agenda for the informed use of blockhain tokens for social impact. The essays will be suplemented by published works in journals, webinars and other discussion forums. These will be communicated on the Emergence twitter (https://twitter.com/EmergenceI) and LinkedIn pages (https://www.linkedin.com/in/michael-cooper-monitoring-evaluation-blockchain-1a035a134/). All thoughts, comments and contributions are welcome as the research agenda takes form and is then carried out.
Upcoming essays and publications will cover the following questions:
1.) What social impact problems can be alleviated/diminished through the use of a blockchain token?
This question overlaps with the current standardization efforts with the various token taxonomy frameworks and gorwing evidence base from current use cases. However these taxonomies and emerging evidence bases must be correlated to a typology of problems that the tokens were used for. Such a correlation will be neccesary if social impact practicioners are to know when and how to use them.
2.) How do we design, manage, adapt and empower tokenized ecosystems?
Tokenized ecosystems have new sources and types of data to inform adaptation on different timelines than what the social impact industry is used to. Given token are interventions then they should adhere to the quality control and best practices around intervention design and mangaement. However, because these interventions will be digital (in that the intervention design is captured in code in the token) can thus can be easily modified for experimentation, new design and management protocols will need to be developed that account not only for the new skill sets needed (Token Engineers, Computer Scientists, etc.) but the processes needed to manage the adaptation of the token over time.
3.) With this new capacity, what new ethical protections are needed?
Tokenized ecosystems bring with them new concerns over ethical treatment of those within the ecosystem. The ease of experimentation could introduce great potential for harm if the experimentation is not well informed and ethically implemented as the use of blockchain technology introduces new concerns over the immutability of the data on its ledger, etc. While pilots and experimentation are needed to create the efficiencies needed to fully realize the potential of tokens for social impact, this experimentation will need to designed in a way to carefully identify unknown ethical concerns.
[2] https://consensys.net/blockchain-use-cases/
[3] https://www.devex.com/news/opinion-7-ways-to-use-blockchain-for-international-development-90839
[4] https://ieg.worldbankgroup.org/blog/using-theories-change-international-development
[5] https://www.usaid.gov/policy/local-systems-framework
[6] https://study.com/academy/lesson/token-economy-in-the-classroom-definition-examples-quiz.html
[7] https://ps.psychiatryonline.org/doi/10.1176/ps.50.7.941
[8] https://en.wikipedia.org/wiki/Token_economy
[9] https://www.jstor.org/stable/40926558
[10] https://consensys.net/blockchain-use-cases/decentralized-finance/
[11] https://www.accenture.com/us-en/services/blockchain/blockchainforgood-index
[12] https://tokenengineeringcommunity.github.io/website/
[13] https://blockchainhub.net/cryptoeconomics/
