Shaping the World with Blockchain: Using Smart Contracts to Support Local Communities

I was delighted to find out recently that I had won third prize in Nesta’s essay competition, which invited people with an interest in blockchain technology to describe how such innovations might help us organize ourselves in the future.

The brief was deliberately left wide open, and the ten essays that were shortlisted considered a variety of subjects, from open data and the environment to copyright law and democracy. You can read all the shortlisted essays here.

The original call for papers was made in late 2019, before the COVID-19 pandemic. I chose the topic of local communities because this was something I had spent a lot of time thinking about last year; the challenges facing our high streets as shopping moves online and funding for social enterprises is squeezed further and further was already on my mind.

Of course, the restrictions and lockdowns that have happened this year have exacerbated things even further, and high streets that previously had a handful of empty shops and cafes now have many more premises that are boarded up, some of them permanently.

There is no easy answer in our current economic system to the question of how to fund venues and facilities that can benefit local communities. There is often too little profit to interest large businesses, while government funds can be slow, insufficient - and are often mismatched with the needs of local communities. I spent a lot of time thinking about how boarded-up shops might be repurposed and pubs and cafes might be saved by the people who use them every day.

Then the COVID-19 crisis happened, and suddenly many local pubs and shops became quite literally lifelines, delivering food and hot meals to vulnerable people - and I realized the issue needed to move up the agenda even further.

We do not want to emerge from the current crisis with the hospitality industry decimated - nor is it desirable for government funds to prop up businesses indefinitely that might fail for a whole load of other reasons than pandemic restrictions. So, I decided to write an essay about a particular way of using blockchains - distributed ledgers - as a funding mechanism that would allow local people to take over enterprises and run them as a collective, without being overloaded with paperwork and power struggles.

You can read a fuller version of my proposition at the link above, but the idea is something like this: a special feature of some blockchains, called smart contracts, allow for the automatic execution of certain agreements and payments, and among the functions that can be carried out by this software, instead of having to gather people in a room to vote and sign pieces of paper, is the ability to vote and agree on governance issues.

The Government already makes it possible for groups of people to combine to set up businesses such as pubs and shops under the Asset of Community Value scheme. Community pubs are a popular and growing sector, but they are often concentrated in the more prosperous areas of the country, where participants are more likely to be able to access legal advice and financial support.

I believe that many would-be community publicans are deterred by the onerous responsibilities of filing paperwork, running meetings to decide on policy and other administrative burdens. The current legislation requires the organizer(s) to keep duplicated signed copies of paperwork or face the responsibility of penalties if these are not kept up to date.

Smart contracts - misnamed because they are not smart and they are not contracts - are essentially a way of allowing technology to do the heavy lifting. Under my proposed system, it would be possible to set up a simple template agreement to launch a community venture of this type and to carry out most of the admin duties via a simple mobile app.

With populations who are transient, or whose interests may shift over time, it is easy to see how this could be seen as a disincentive. Blockchains are already being tested by governments all over the world as a low-cost solution for keeping reliable records, because of this technology’s unique feature of maintaining multiple copies of the same data that are all compared and processed in such a way that the information is identical, wherever it is held.

The Land Registry in the UK has already conducted a successful blockchain transaction, so it seems likely that the technology will find its way into other sectors over time.

In addition to the fact that no one person now needs to take responsibility for keeping and amending paperwork because the records would be held on an independent, neutral and untamperable data structure, we would also have available certain programmable features that would offer possibilities currently lacking in the current community enterprise rules.

For example, someone with time on their hands but no money to invest in the enterprise could be issued with tokens according to the time they volunteered behind the bar or the shop counter and be rewarded with an increased stake in the venture.

At a time when our local communities are more in focus than ever before, and as we figure out what we want our post-COVID world to look like, we owe it to ourselves to investigate all areas of technology that can help us build a society we are proud of, and in which we all have a stake.