Blockchain, Catastrophe Bonds, And The Future Of Disaster Relief
With all that people have built and accomplished, it’s easy to forget that we are on a rock that is still cooling and changing. Our world is dynamic, alive, and dangerous. We are disheartened to be reminded of this fact when natural disasters strike. Despite all of humanity’s imagination, aptitude, and technology, we are still at the mercy of the Earth’s natural occurrences, like weather. The recent events of Hurricane Harvey have once again shown us how susceptible we are. Until we devise ways to control things like hurricanes, tornadoes, volcanic eruptions, and earthquakes, people will continue to get hurt and suffer. And other people will be obliged to help them. This age old story is getting a new chapter – blockchain technology as applied to humanitarian aid. Is this another use case being thrown at blockchain to see what sticks? Is humanitarian aid blockchain’s highest calling? Is there truly a place for blockchain in disaster relief or is the hype driving implementation where it’s not needed?
For nearly a week now, Texans living on the Gulf of Mexico have been enduring the horrors of epic flooding caused by Hurricane Harvey. While many are suffering, the most significant swath of damage currently stretches north-east from Corpus Christi to Beaumont, and as far inland as Austin. The people enduring this natural disaster, being Texans, will surely recover and rebuild. However, there has already been significant property damage done, as well as precious lives lost. Once the waters finally recede, there will be a great deal of effort needed to restore cities like Houston and prevent reverberative crises like post-flood diseases from finding footholds. As the people of south-east Texas struggle to keep their heads literally above water, some blockchain enthusiasts are already wondering if we can send the people besieged by Hurricane Harvey more than just our goodwill.
Although the National Weather Service has described the flooding in Texas as “unprecedented” and “beyond anything experienced,” there is a larger, less reported flood happening on the other side of the world. Devastating floods have also hit India, Bangladesh, and Nepal. The loss of lives in Texas is tragic, but unfortunately pales in comparison to the more than 1,200 reported deaths caused by monsoon floods in South Asia. Over a million people have been left homeless. The South Asian region does not have the resources that the United States does to deal with catastrophes of such magnitude. As such, the suffering will persist longer and the people affected will be displaced physically and economically to a greater extent. Soberingly, recent global warming studies point to an irreversible trend of planetary warming that could be potentially enhancing meteorological events like hurricanes or rainy seasons. If true, this means the seasonal rains and storms around the Earth could become more frequent and severe. Much of the world’s infrastructure for coping with disasters such as these, however, is outdated. Everything needs an update. From the way relief is allocated on the ground in disaster areas to the financial products timed in accordance with seasonal storm cycles. This is where blockchain technologies like Ethereum enter this debate.
Blockchain Evolving Disaster Relief
Many seasonal storm cycles are accounted for in global markets via a financial product called a catastrophe bond. These bonds are likened to insurance contracts and are meant to raise money should a natural disaster strike. Generally speaking, catastrophe bonds, or CAT bonds, transfer risk from property or casualty insurers to investors, reducing risk for insurers. Investors take on the risk of a specified event taking place in exchange for a certain rate of return. If a specified catastrophe does occur, investors lose their principal and the issuer receives the funds to cover their losses. The wheels of CAT bonds do not spin fast enough, however, especially for disaster relief efforts where speed is paramount. Anything that can save time in crisis situations become valuable as third party, bureaucratic red tape often delays aid to those who need it most. Moreover, third parties often use part of donated funds for themselves as operational costs. Thus, blockchain technologies, like Ethereum, have a valid point of entry into the humanitarian aid sector by not only increasing the speed of monetary relief being administered, but also by allowing the funds to be tracked in a transparent supply chain and, thus, holding officials accountable for their administration of said funds.
Earlier this month, the first ever use of blockchain technology for CAT bond settlement occurred. Allianz, which is Europe’s biggest insurer, has also commented on the advantageous applications of blockchain to CAT bonds. Moreover, the Start Network, a United Kingdom-based humanitarian aid organization that counts more than 42 national and international aid agencies as members, has also calculated the advantages of blockchain technology, like Ethereum. According to the Start Network, “revolutionary ‘blockchain’ technology that could transform how the world does business is to be tested by the Start Network through the Start Fund, in the first ever trial of its use in rapid response to humanitarian crisis.” Ethereum powerhouse ConsenSys has worked with the Start Network on this project and the government of Estonia has also given 50,000 euros to drive this innovation.
International organizations like the World Food Programme have also taken note of how Ethereum and blockchain technology can improve disaster relief.
Blockchain technology stands poised to disrupt humanitarian and disaster relief efforts as much as it does other industries. The measurable gains in efficiency, transparency, and accountability obtained by using blockchain in relief efforts will save more than time and money. Inevitably the technology, if employed correctly, will save lives.
Until more robust systems are in place, organizations like Habitat for Humanity are using blockchain to accept Ether to help the victims of Hurricane Harvey. Hopefully in the future, aid will be instantaneous and transparent, and will help people of the good Earth better cope with the challenges of a dynamic and changing world.