First, a very brief description of crypto and its ecology. Fiat money (like US$, € or £) is issued and backed by a national or supranational central bank and, except for notes in circulation, is transacted and represented in bank ledger accounts. Dominant crypto-currencies, representing about half of all crypto, are Bitcoin and Ether (crypto-currency behind Ethereum), which between them have a market capitalization of over $1 trillion – this compares with about $100 trillion in total world fiat currency. Ethereum differs from Bitcoin in that it is a digital platform for authenticatable applications like contracts mediated by Ether. Bitcoin and Ether are held in digital wallets (like accounts) and are transacted without the involvement of banks, or supervision of central banks, with all historic transactions represented as a digital block (blockchain) transparent for anyone to inspect (decentralized ledger). Transactions are authenticated by means of network users digitally solving mathematical problems for which the prover is rewarded with crypto-currency. This authentication process is intense, and worldwide uses the electricity output of a small country (crypto-mining). There are other minor cryptos, that I think of more as tokens, that can be earned for things like attention or non-monetary contribution that can be cashed for fiat currency or another crypto. China has outlawed domestic unofficial crypto-currency activities and has developed its own central bank digital currency (CBDC) – with rollout to accelerate this year. A CBCD is a virtual currency, issued and controlled by a central bank, allowing transactions from mobile devices without the mediation of commercial banks. Almost all major economies of the world are researching their own CBCDs, and it is safe to say that with China leading the way other major economies will not want to be left behind.
The future of crypto-currencies is uncertain, though enthusiasts see only a growing and glowing future. The invention of blockchain and decentralized ledgers is a truly amazing innovation. Advocates of crypto also welcome the independence from commercial banks, central banks and government control. However, should we give up on central bank control of our money and will central banks yield that role? Crypto-currency provides a more straightforward and scalable option to hiding illicit transactions from authorities. The use of massive amounts of computer processing, and associated use of electricity, for validating transactions and mining crypto is a significant concern. Today crypto-transactions, reflected in blockchains, are very secure, however, that may change especially as quantum computing makes decrypting blockchains more feasible. There have been cases of crypto wallet holdings that have been hacked, but there are security measures that protect against that, just as is the case with fiat money holdings.
So now, let’s finally turn to UNICEF’s crypto-initiatives. In looking at the writeups of grants funded by the Crypto Fund, I don’t see anything I think would put children at risk. It’s another question whether the projects turn out to have long term viability and are of programmatic benefit for children, but that requires a much more in-depth evaluation. The Utopixar Coinsence Tunisia project looks interesting. It involves a crypto-token that mediates and incentivizes value contributions to projects for children. On a cursory review I did not see other projects that couldn’t be approached in a more conventional non-crypto way. But let’s see how these initiatives work out.
On Non-Fungible Tokens (NFTs), UNICEF is set to auction 1,000 digitally authenticated works of art. The buyer at auction will pay UNICEF in Ether since the NFT will use the Ethereum platform. The transaction, and any subsequent sale of the NFT, will be validated and reflected in a blockchain ledger. The non-fungible aspect means that the work of art can only be transacted whole as a unique digital object. There is apparently a growing market for NFTs, and if this enables UNICEF to develop a new avenue of fundraising why not?
Tony Bloomberg
Thank you Tony for offering your views and giving some of us non-financial folk a glimmer of understanding this new world of crypto/NFTs that UNICEF is now a part of. Doreen
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