23 May 2016

Blockchain could guarantee integrity of redemption terms

I've written before about hidden metrics as applied to Social Policy Bonds. Briefly, the aim is to overcome the sort of gaming that we see nowadays with certain micro-objectives: here, for example. Campbell's Law, if we're not careful, could apply. One answer, as I wrote, would be to target broad outcomes without specifying exactly how we shall determine whether our target has been achieved. So, say, we are aiming for 99 percent literacy of 15-year-olds in a country. We could issue Literacy Bonds, redeemable only when surveys show that that goal has been satisfied. We could say at the outset what the broad outlines of these surveys would look like: say a minimum of 250 boys and 250 girls randomly sampled from another random sample of 10 regions out of 100 regions. The identity of these regions need not be revealed or even determined until the bond market reckons that the literacy target has been achieved. At that point, the regions to be surveyed could be randomly chosen. That would work, provided the randomizing could be seen to be done transparently and fairly.

But the current Economist points to what might be a more elegant solution. It discusses using blockchain technology to distribute public keys to the protocols of the many thousands of medical trials carried out annually to ensure that the pharmaceutical companies sponsoring these trials cannot alter trial protocols. This, the sponsors have been known to do because the drugs being trialed have some positive effects, but not those specified at the outset of the trial. Such 'hidden outcome switching' can exaggerate the value of the drugs being trialed.
The blockchain is a database that acts as a public ledger of all transactions with the currency, and is thought to be almost completely tamper-proof because it is validated and stored independently on thousands of different computers worldwide. This provides a way ... to check that results have not been fudged. Better with bitcoin, the 'Economist', 21 May
Anyone with a copy of the trial protocol could generate the original private key, and check that it generates the same public key when it's decrypted using the same algorithm that encrypted it. 'Public keys for protocols should be uploaded to trial registries ... and included in research papers. Researchers and medical journals could speedily check whether the right results were being reported.'

More important, from the Social Policy Bond point of view, is this possibility, which concludes the Economist article:
Another benefit, paradoxically, is that the protocol for studies could be hidden until completed. This might be useful for commercially sensitive trials of new therapies. As long as the public key was uploaded to a registry when the trial began, the protocol could be verified later without the worry that it had been changed during the study.
If, instead of 'protocol for studies', we substitute 'detailed redemption terms', then we could use the same technology to could guarantee to investors in Social Policy Bonds that the backers of the bonds they own would not attempt to evade their obligations by manipulating the terms under which the targeted goal shall be deemed to have been reached.

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