| Notes |
Alice may be the application that has come closest to developing and implementing a complete solution connecting the finance to results to payment cycle, albeit not at scale, and with a couple of workarounds. The St Mungo’s homelessness social impact bond is the first payments-by-results project to be put on the blockchain. However, it only addressed the outcome payment side of the equation; there was no impact investment involved.
This intervention aimed at getting rough sleepers in London into stable accommodation. Fiat donations 15 from the public were held in a segregated account and represented on the blockchain as tokens. Once the agreed specific impact metric targets were verified, St Mungo’s received tokens representing the donations that it could redeem for the corresponding amount of fiat held in the segregated account.
The segregated account solution described above was provided by Mango Pay. 16 This pragmatic solution exemplifies the Alice approach: innovation is key, but not worth that much unless you can make your innovations accessible to
the mainstream through regulatory compliant existing systems. Alice also started integrating the use of a so-called “stablecoin” 17 called Dai for donations. This allows people to donate in cryptocurrency, which is automatically converted into a stablecoin, hence solving the volatility conundrum. Donations made in fiat will still work according to the same segregated account system for the foreseeable future, at least until the stablecoin sector matures.
In terms of the application, Alice has a robust technical infrastructure – or rather set of platforms. Through a solution where they ‘burn’ tokens once the agreed result has been verified and paid out, they secured for Gift Aid status from Her Majesty’s Revenue and Customs (HRMC). As noted, Alice’s aim is to be able to reach as broad an audience as possible, so it was important that their charity clients could claim GiftAid. HMRC allowed this, and more generally tax relief, if it was applied to donations only once they are paid out, to avoid a messy tax clawback in case donations are reimbursed to donors (e.g. if the charity does not achieve its targets).
The token Alice uses to represent donations is pegged 1 to 1 to the GBP. This is like Tether, a stable coin designed to be pegged to the price of the USD. Addressing the super-volatility of many cryptocurrencies is necessary if the use of this specific technology is going to go to scale. In future, Alice will likely use Dai, which is pegged 1 to 1 with the USD through a crypto- economic over-collateralisation of the coin with Ether, the second-most valued cryptocurrency after Bitcoin, and if there were a cryptopound issued by the Bank of England, Alice would adopt it immediately – again reflecting their aim of integrating with mainstream solutions in order to make Alice accessible to the greatest number of people and institutions.
What does the future hold?
There are broadly speaking two types of stablecoins: the first are pegged coins, which
are backed 1-to-1. Tether is the leader but very opaque, and a number of others like Gemini (founded by the Winklevoss twins) and TrustToken (backed by Andreesen Horowitz), amongst others are increasingly popular. HelloGold uses gold as a pegging mechanism. The second are collateralised coins such as Dai and Havven.
While the demonstrated use cases of the Alice platform (St Mungo’s, which ended in late 2017, two ongoing live pilots, and another 3 to be launched in the coming months) relate only to donations, the vision is very much to use the same underlying technology to facilitate impact investments at all ends of the scale spectrum. Diagram 9 charts the full suite of Alice products, along with their state of development. |