Years ago when blockchain was initially discovered it was believed that Bitcoin would be an elixir to international blockchain aid tracking. This implies ensuring that the money of the donor is spent in the way it was supposed to be. Even though digital currencies are evolving at a fast pace, it is now difficult to convince ourselves that Ethereum (ETH) and Bitcoin (BTC) will be potent international aid relief in our upcoming days. However, there is a new hope of track and trace blockchain in the CBDC (Central Bank Digital Currencies).
How Can CBDC Offer Better Blockchain Aid Tracking?
CBDCs should be providing a real solution in blockchain aid tracking. In Fact, according to the latest announcement by the Bank of Israel, the potential issue of digital Shekel can change the game for nationals who are looking to track aid funds to some particular regions, specifically to Gaza.
Blockchain can be utilized in tracking relief funds to ensure that the funds reach their respective destinations on time. The present scenario of Gaza is an example of misuse of funds because as per the estimates Hamas has extracted $1.25 billion in the “international humanitarian aid fund” to provide financial support to the terror activities against Israel.
It is being seen happily that the donor nations have come to identify that their funds are not used appropriately by Hamas and are therefore looking for alternative ways to ensure that this does not happen for long. And one such alternative is blockchain aid tracking, where the transactions and expenditures can be accurately monitored through the technology of blockchain. This method is aimed at offering complete transparency for budget management of any project by being able to track the funds and getting to monitor all “know your customer” (KYC) processes in order to guarantee that the funds provided as aid reach only the recipients that are whitelisted.
Any solution for the blockchain and tracking must include 2 core elements: the blockchain fund transfer mechanism and the blockchain tracking mechanism. In the long years of working towards attaining this solution, it has been seen that perhaps the most prominent hurdle is mixing the two elements. This can be understood as complete control over the transfer of funds is not only difficult in implementation but also relies on third parties and external constraints. Thus the biggest challenge is offering a payment platform that is completely digital and that is widely accepted and implemented by all third parties.
Because the various funding organizations differ in terms of vision and being tech savvy, and because there prevail usual constraints like infrastructure in the nations supported or various degrees of trust in the traditional banking system, there requires a flexibility for organizations to increase the tracking power to the condition at hand.
Blockchain Aid Tracking: Levels Of Implementations
In effect, there are 3 levels of implementation to a blockchain aid tracking solution that is differentiated by their various degree of control over the transfer of funds, which is evaluated by the level of conglomeration among both the mechanisms. Here are the 3 implementation levels:
Transfer of funds takes place over an external platform that is not combined with the solutions. This needs the users to report transactions and get them approved properly before the transfer takes place. Only the transfers are updated manually as they are executed. In essence, this in effect is operating a parallel system of accounting, but this time on the blockchain. While initially, this method might not seem to vary from prevailing solutions, it is in fact a great development when compared to the ways things work presently. Firstly because this is immutable. Secondly and most importantly as at least in theory all the transactions are approved and reported in real time and there is transparency to the funding nations, as opposed to only the units of project management.
Over an external funds are being transferred which is integrated completely using APIs (Application Programming Interfaces) to the blockchain aid tracking. While the fund transfer does not have complete control over the blockchain asset tracking mechanism, the feedback is completely automated. This decreases user intervention for a more acute reporting. This method offers a substantial upgrade in respect to the platform’s reliability and automation but it is much more complex in implementation. The collaboration with third party platforms such as SWIFT and banks becomes the main weakness here, as we must rely on their cooperation for it to operate effectively. In that perspective, this is the only one method among the three where implementation is not completely in our control.
Transfer of all funds is done over the platform which implies that they are completely digitized and integrated seamlessly with the blockchain aid tracking mechanism. This method enables complete control over the transfer of funds in real time by offering maximum transparency. The main challenge is having a fund transfer platform that is based on blockchain and is approved by most conservative institutions like the banks, government, etc, which enables CBDC the perfect solution, as governments are more likely to trust a currency that is issued by the government than Bitcoin, or Ether.
As we can witness that CBDC offers the most seamless, and best method for stopping the misuse of aid relief funds through blockchain aid tracking. It is worth noting however that, no matter which method among the three mentioned above is chosen, each option offers one of the most crucial features for any budget monitoring mechanism, which is missing presently in the international community and that is immutability. This implies that each transaction and all of its metadata are documented forever for current and future audits, without the option to erase or edit it once it has been put up.
Along with that, blockchain for logistic tracking can also be brought into the game. This mechanism of tracking through blockchain can be of great help not only in aid management but in all other sectors as well.
Frequently Asked Questions On Blockchain Aid Tracking
The blockchain aid tracking is a mechanism, where the transactions and expenditures can be accurately monitored through the technology of blockchain. This method is aimed at offering complete transparency for budget management of any project by being able to track the funds and getting to monitor all “know your customer” (KYC) processes in order to guarantee that the funds provided as aid reach only the recipients that are whitelisted.
As per the theory, it’s possible to track stolen bitcoin by observing the blockchain – in practice. However, this is made difficult by both the anonymous nature of the crypto and the fact that it is more likely that the thief will use bitcoin exchange to trade the digital currency for normal cash straight away.
Bitcoin is also traceable. While the cryptocurrency can be formulated, transferred, and held beyond the purview of any financial institution or government, the record of each payment is kept in a permanently fixed ledger, known as the blockchain. That implies all Bitcoin transactions are out in the open.