When people give money to nonprofit groups, the impact of their donations isn’t easy to track. While it’s possible to earmark funds to specific projects, typically donors don’t see the outcome of the project until the charity releases an annual report months later. Even then, while nonprofits typically summarize the overall impact of their various programs and initiatives, the actual impact of specific donations is hard to measure.
This is a problem that the blockchain-based platform Ixo is working to solve. Ixo is an operating system that uses blockchain and Web 3.0 standards to help not only collect and measure, but also tokenize, the verified impact of contributions to specific charities or companies. This will allow individuals to pay for a particular outcome, whether it’s reducing carbon emissions in the atmosphere, or boosting the number of students who get school meals.
Ixo uses multiple proof points to monitor and verify outcomes, ranging from wireless IoT sensors and satellite imagery to artificial intelligence and data marketplaces. The goal is to integrate data verification into the monitoring and reporting process of a project. Applications built on top of the Ixo protocol are being used to track attendance in pre-schools in South Africa, to improve impact financing for zoos and aquariums, and to trace reforestation efforts in Madagascar. Once the protocol is fully functioning, organizations and individuals will be able to set up their own projects.
Traditionally, “the transaction layer, how money goes from Alice to Bob, represents value flows. It doesn’t represent any knowledge or proof of what those value flows are achieving,” says Shaun Conway, founder and president of Ixo Foundation, which is based in Liechtenstein. “When you restore a forest, or when you educate a child, or when you generate renewable energy in an environmentally friendly kind of way, those activities have intrinsic value to society, to the economy, and to the environment. Up until now, we have not really had any mechanisms to capture that value as a form of capital.”
Carbon credits have come closest to Conway’s goal of linking education, health or environmental outcomes to units of value. Ixo has been working with The Gold Standard, a standard and certification body focused on climate, as well as the carbon finance consultancy South Pole, to digitize and tokenize carbon credits so they’re cheaper and faster to produce, and more tradable.
South Pole works with companies that want to reduce (or are regulated to reduce) their climate emissions, as well as governments that have codified climate targets.
Using blockchain technology reduced the verification cost from $20,000 to $3,000, and accelerated the process of generating the credit from 24 months to just two months
“The process by which you can create a carbon unit is very regulated,” says Ingo Puhl, South Pole’s managing director for Thailand. Before its partnership with Ixo, South Pole Group used a 20-year-old paper-based system that required verification agencies to come to Thailand, look at all the records, and submit a report to a body like the UN and request issuance of credits. Ultimately, it would take two years after the emission-reducing activity had taken place to receive carbon credits, and Puhl estimated that the cost was anywhere from 40 cents to $1.50 per credit. Using blockchain technology potentially reduces the verification cost from $20,000 to $3,000 (though the partnership is still in pilot phase) and accelerates the process of generating the credit from 24 months to just two months, according to Puhl.
Ixo’s protocol is entirely open source. Because the goal is to enable individuals and organizations to quantify and verify impacts, the foundation has standards for data verification and performance frameworks. “We actually have a blockchain specifically for Ixo, built to be able to take in new data, format verifiable claims, and have them stored in a decentralized way,” says Conway. The Ixo blockchain feeds into other blockchains, such as Ethereum, to trigger applications running on it. It tracks transfers between counterparties and even has the mechanism to trigger transactions and to provide the data verification and proof that it’s happening.
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Ixo isn’t alone in trying to solve philanthropy’s impact measuring issues. Proof of Impact is another protocol (now in beta) planning on using the blockchain and smart contracts, and to create impact tokens to enable impact funding and delivery at scale. Alice is a social funding and impact management platform hoping to incentivize charities financially if they meet their goals.
To make money, Ixo plans to refer projects to service providers that can verify their claims of impact. Service providers set fees per claim, then Ixo keeps a percentage of that fee. A smart contract generates impact tokens (not to be confused with IXO tokens) for projects statistically likely to succeed, based on the proportion of successful impact claims verified against the target number of claims an organization makes.
“The decentralized web is enabling coordination and incentivization towards doing stuff that’s actually going to be improving the fate of humanity,” Conway says. “My hope is that we can actually use these technologies for the betterment of humankind and to address big problems.”
This post has been updated to show that South Pole’s partnership with Ixo is still in pilot phase.