Countries planning for the end of COVID-19 lockdowns face a host of daunting technological, government and public health challenges. One of these challenges is implementing a contact tracing system that doesn’t double as a dystopian surveillance tool. But there are more. How can governments quickly, credibly and transparently distribute government assistance to individuals, especially the unbanked? How can companies enable adaptive supply chains for high-demand goods such as PPE and ventilators, including the potential for 3D printed goods? How can data be shared across independent organizations and entities, such as hospital groups, states and cities, that don’t normally collaborate? The list goes on and on.
Stephanie Hurder, a CoinDesk columnist, is a founding economist at Prysm Group, an economic advisory focused on the implementation of emerging technologies, and an academic contributor to the World Economic Forum. She has a PhD in Business Economics from Harvard.
“I’ve read the plans to reopen the economy. They’re scary.”
That’s how Vox journalist Ezra Klein titled his piece reviewing four plans to transition the U.S. economy out of COVID-19 lockdown. Discussing the Herculean societal shifts required to implement contact tracing, which include requiring almost every American to download a geo-tracking app to their phone, he writes: “The technological and political obstacles are massive…Who is trusted enough, in this country in this moment, to shape this?”
As an economist advising permissionless and enterprise blockchain projects, I spend as much time explaining why DLT is not useful as why it is useful. What is stunning to me about the list of challenges above is how many of them DLT could help to solve.
DLT has an opportunity to add tremendous value to the United States at this time of huge societal and economic upheaval. To see why, it’s essential to understand the levers by which DLT and associated technologies, such as smart contracts and zero-knowledge proofs, create value. At Prysm Group, we have developed a framework for DLT value creation we call the 3 Cs, which I previously discussed here
- Coordination: A shared ledger enables the use of a unified set of data across various companies and organizations. This reduces the costs of sharing and reconciling data, and enables insights derived from multiple data sources.
- Commitment: Smart contracts and distributed consensus increase the credibility of agreements to take future actions and make payments. The cost of executing and enforcing contracts goes down.
- Control: Distributed storage and zero-knowledge proofs allow data owners to selectively share their sensitive or personal data, making them more likely to participate in data sharing consortia.
Combined with tailored, use case-specific design choices, these are exactly the types of tools that can help solve major virus-driven problems.
In previous columns, my colleague Cathy Barrera and I have discussed how DLT can add value by credibly implementing automatic stimulus payments and enabling marketplaces for 3D printed supplies. Consider now the case of contact tracing.
SIMBA Chain, a DARPA-funded government contractor, is partnering with the Stanford Medicine Healthcare Innovation Lab and Prysm Group to develop an incentive-compatible, privacy-preserving solution that won’t require users to expose their personal data. The solution, which leverages zero-knowledge proof technology to enable privacy protection, retools a secure blockchain messaging system developed for the U.S. Department of Defense and integrates a disease detection AI algorithm leveraging consumer wearables.
The ability to create projects from the ground up without relying entirely on governments, universities or large corporations has never been more important.
Aside from the technology itself, the decentralized governance structures established by the DLT community provide another path to address COVID-19 induced problems such as contact tracing and adaptive supply chain management as our standard institutions struggle. As the federal government stays paralyzed, universities are overwhelmed by the transition to online instruction, companies lay off hundreds of workers, and states and localities look to create their own ad-hoc governing coalitions, the ability to create projects from the ground up without relying entirely on governments, universities or large corporations has never been more important.
DLT projects will need to engage in smart economic design to deliver solutions to problems of this magnitude. In order to gain adoption and have real, positive impact, those projects should consider the following:
1. Get serious about incentive compatibility
The Verge tech journalist Casey Newton says adoption rates for even the most successful contact tracing applications have been universally low. Even the best technologies – especially contact tracing solutions – are of little use if no one will use them. Understanding how individuals make the choice of whether or not to adopt a technology, and how to incentivize them to adopt these new solutions using both monetary and non-monetary levers, is essential for any large-scale program.
2. Adopt a user and expert-driven development approach
Designing effective incentives requires a deep understanding of how people will use (and potentially misuse) products, and expert knowledge of the systems and environments in which the product will operate. This understanding cannot develop in a bubble; it requires ongoing communication with users and subject-matter experts. Public health, law and economics insights will be essential to incorporate throughout the development process.
3. Focus on adoption early to achieve fiscal sustainability later
DLT-based projects exhibit network effects: their value grows as more users join. Projects that are developed in response to the current crisis may initially need to be funded with public money, but can evolve to be fiscally self-sustaining in the long run. Platform development teams should focus on bootstrapping early, building a robust user base, and then shift to monetization and profitability as the economic value delivered increases.
For example, if the privacy-preserving contact tracing system discussed above is adopted widely, this could lead to significantly reduced costs for insurance companies, who would face huge fiscal challenges if millions of people become infected with COVID-19 and require intensive medical care. While the willingness to invest upfront to launch such a project may be low due to the substantial uncertainty in the current environment, in the long term health care payers could have significant willingness to pay to sustain such a service. A product offering like this could be a valuable addition to existing large blockchain consortia already working in healthcare, such as the Health Utility Network or Synaptic Health Alliance.
The challenges presented by COVID-19 require drastic and creative solutions. Blockchain and DLT have the right features to address some of the biggest obstacles to overcoming these challenges. If groups currently building with these technologies rise to the occasion using the right economic approach, DLT has the potential to shift from a niche technology to mainstream contribution.