UN World Food Programme (WFP), a non-profit organization that helps 80 million people across 80 countries by supplying basic necessities and food, has been utilizing the Ethereum blockchain to process money that is used to fund millions of people in underbanked and underserved regions.
Most operations of WFP are cash-based, and are processed using third party service providers like banks. According to a report released by the development team of Parity Technologies, which oversees the development of an Ethereum protocol called Parity, approximately 7 percent of donors’ funds are taken by banks as fees, and for every dollar, 93 cents are left to help people purchase food in local markets.
“Their cash-based transfer operations provide money to people to buy food in local markets, and in turn, utilise banks to process transactions. Already 93 cents of every dollar received goes directly to the hands of those in need, and blockchain is helping take donors’ money even further,” the Parity team stated.
Since 2016, the UN WFP have been focusing on the implementation of blockchain technology to reduce payment processing costs and maximize the amount of money received by millions of people in need. The UN WFP established an innovation project called Building Blocks with an aim to simplify, optimize, and reduce the cost of processing money between the donors and receives.
The primary merit of utilizing a public blockchain technology such as Ethereum is not necessarily cheaper transactions, but the ability of the UN WFP to audit their own accounts through the transparent ledger of Ethereum. Since the Ethereum blockchain is tamper-proof and unalterable due to its decentralized nature, it allows the organization and its donors to track their funds until they arrive to the receivers.
Essentially, each beneficiary or party on the WEP’s blockchain network is provided with a private proof-of-authority network running Parity. The protocol of individual networks on the Ethereum blockchain enable the UN to instantly verify and monitor transfers, without banks or any other third party service provider verifying balance sheets and conducting audits.
The elimination of banks and financial service providers in the process of sending, verifying, auditing, and monitoring funds led to a substantial decrease in fees, allowing more of the funds of donors to be received by millions of people in need.
“After the Building Blocks project finished their pilot phase of assisting 10,000 refugees in Jordan in May 2017, they found that they were able to reduce the number of cash transactions from 10,000 upfront payments to the banks to 200 settlement transactions to local retailers per month. This saved the WFP significant money in upfront costs, as well as 1.5% to 3% per transaction,” the Parity team explained.
The adoption rate of public blockchains like Ethereum could significantly increase in the future if large-scale organizations continue to rely on blockchain technology to process transactions to ensure that without rigorous auditing and monitoring, transactions are settled transparently on a public ledger.