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Why Elon Musk’s Comment to the WFP Was a Huge Benefit for Blockchain


www.financemagnates.com 09 November 2021 12:51, UTC
Reading time: ~7 m

His comments came in response to UN World Food Programme (WFP) director David Beasley challenge of the ultra-wealthy — and in particular the world’s two richest men Jeff Bezos and Musk.

“$6 billion to help 42 million people that are literally going to die if we don’t reach them. It’s not complicated,” Beasley said on CNN’s Connect the World program with Becky Anderson. That sum would equate to roughly 2% of Musk’s net wealth.

However, as Musk rightfully commented, this aid must be transparent, so the public could easily and openly track how the money is spent. That is the reason why we must do it differently this time and think of new solutions, rather than going for the same old ones that failed too often.

Otherwise, we might find again that instead of fighting starvation, the funds fueled more waste, bureaucratic inefficiency and corruption.

Have you ever heard the term ‘Elite Capture’? My guess is probably not. We have written about it in detail. It refers to the use of public funds by an elite minority for their own benefit. A study conducted by the World Bank to decipher the percentage of elite capture of foreign aid funds siphoned off into private bank accounts, and discovered a leakage of 7.5% – a conservative number that increases with a higher percentage of aid to GDP.

In other words, leaders of aid-dependent countries receiving billions of dollars in foreign aid steal, embezzle, and cheat in order to take at least 7.5% of that aid (conservatively over a billion dollars between the years of 1999 and 2010) and direct it into their own bank accounts. 

Enraging, correct? 

I often wonder if the World Bank called it Elite Capture and not Fund Embezzlement because they did not want anyone paying attention to the fact that your and my tax dollars are going to buy someone’s villa, their child a nice car or just pad their personal bank account with tens, or even hundreds of millions of dollars.

In 2021 I ask – how does this make sense? How is it even acceptable and how can we change it? We suggest starting with minimizing Elite Capture in foreign aid.

What if we could ensure that the funds were actually going to the right place? 

Beasley later replied to Musk’s post on Twitter, saying he could assure Musk that the WFP had the platform in place for transparency and open source accounting. If (big if…) in fact they do, this would make them an anomaly in the government and nonprofit sector. Allow me to suggest something better than theirs, or the majority of current solutions: 

A transparent and unbiased solution based on blockchain technology – a powerful instrument that provides maximal visibility of financial aid project budgets and allows detecting fund leakage, if any. Let me show you how.

By now, aid organizations have heard of Blockchain. Orbs has even worked on solutions for the world’s top aid organizations and piloted the technology to track and trace funds in their care.

Before we discuss why the adoption is not widespread, let us take a look at our suggested solution:

The solution maximizes blockchain’s transparency and immutability. In a nutshell, it documents each transaction and shares relevant metadata with all participants.

Whether it is a fund request, wire transfer or new supplier onboarding, the data is shared in varying degrees of access levels, depending on who the participant is, and cannot be changed once it is carried out.

Hence, this solution brings us back to the core of the challenge – how can we make sure that financial aid reaches the right destinations in an open and transparent way

The metadata may consist of trivial details like target and destination addresses (i.e. accounts) and others such as signatory rights, related KYC documents, alerts and more.

The data is recorded on a shared ledger, however, different participants have varying access levels, depending on their hierarchy. For instance, the funding organization sees all the projects they fund, management units see their project, sub-contractors see their employees and so on.

This solution can integrate with existing banking IT and standard payment platforms making the process seamless to users, while providing invaluable insights and control to aid organizations and auditors. 

Now let us discuss the real reason organizations are not running to adopt blockchain solutions that will provide them visibility on every last dollar. In part, it is because of the bureaucratic and opaque nature of these large structured institutions. 

It has been argued that some of these institutions require an overhaul and an update in order to adjust to the requirements of a society that demands accountability.

This may be so, but this argument is not for the scope of this piece and I believe that one can not entirely put the blame on them. In fact, some of the blame can also be put on the one fatal flaw of blockchain: it demands cooperation.

Blockchain is decentralized by nature, a concept that is puzzling to most of those who try to understand it. It means that while no one owns the platform, at the same time, everybody owns it.

As a result, all participants must cooperate in order to have the platform running. Not only in terms of the physical aspect, i.e. migrating to a new platform and operating the network, but mostly in the conceptual aspect of understanding the benefits of collaboration.

Whether it is defining the purpose of the new platform, how it is governed, how new members join and many other decisions that have to be made in advance. 

Therefore, too often politics is the main obstacle to deploying a blockchain-based solution, rather than its technological feasibility. Thus, millions of dollars keep enriching leaders of aid-dependent countries, who used to direct them right to their personal accounts. Leading the list of deposits to haven countries (read – monies that left their intended countries into offshore accounts) are Madagaskar, Rwanda and Tanzania with $193m, $149m and $145m respectively.

For our use case above of tracking funds – this means the WFP will need all its suppliers and partners to agree to use the platform. Therefore, the driving force to adopt blockchain may have to be a decision that comes from someone (e.g. Elon Musk) who has enough power and influence to convince the conservatives to make the first important steps towards accepting innovation.

For example, the countries that fund the WFP could decree that funds will not be distributed or disbursed until and unless all partners agree to cooperate on a transparent system.

Otherwise, willful cooperation seems a distant possibility. Imagine the change that a direct mandate to cooperate on a blockchain platform could produce – effectiveness of foreign aid and monies arriving at their intended destination. A better world for millions of needy people.

The world is moving towards understanding the need for transparency in monetary transactions, and my belief is that inevitably societies will demand it.

The more technologically advanced people become, the more the question of ‘where is the money going’ will begin to be answered, and blockchain can provide the answer.

Blockchain has enormous potential to change the world through its ability to transfer assets with complete transparency. This would protect foreign aid and charitable giving from corruption and fraud, accounting for every last dollar given.

Elon Musk has correctly pointed out one of WFP’s most profound challenges – too often substantial portions of financial aid budgets end up in the wrong people’s pockets, instead of fighting world starvation.

Having said that, the WFP is not the only organization to blame. Most, if not all governments and aid organizations,are not able to track and trace financial aid funds down to a satisfying level of detail.

As a direct result, the public has lost its trust in charity and giving to those in real need. Perhaps Musk’s spotlight on the issue will bring about a call for change.

Blockchain is here to answer that call.

Written by Netta Korin: With over 15 years of ongoing experience serving on multiple boards in Israel and America, Korin sits at the helm of Orbs and the Hexa Foundation. Korin also has experience in the Ministry of Defense and the Prime Minister’s office.

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