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Distributing the Benefit of Mineral Resources Using Blockchain

Updated on August 7, 2017

A Key Question

Are You Satisfied with the Way Mineral Proceeds are Managed in Your Country?

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A better Model for Mineral trade


The Awaiting Transition in Mineral Industry

Mineral resources exploration, extraction, processing, sharing and benefit distribution have been one of the hot topics in global political and economic discourse. The current resource management is a model remains critical driver of negative change to the ecological resilient-spirit of the planet earth and also has significantly harmed the resource-rich nations of the third world. However, I would argue that the characteristic functionalities of Blockchain-based technology which include; trust-worthy storage capacity system, immutability recording, peer to peer distributive and cloud-based computing networking, historical storage capability, private key-enabled encrypted system, public key-enabled storage capacity, inclusive and participatory mechanism operating system, and security against third parties, visibility and easy to verify methodology made this emerging complex Internet-enabled technology so uniquely placed to add value to mineral extraction and would restructure the established institutional framework which has failed to address many key challenges in mineral resources management for sustainable development. Blockchain could help solve the problems associated with "resource war" and help fosters inclusive decentralized model for the global economy. Blockchain-enabled contract platform would help address some of the loopholes left by current policies governing mineral extraction,the production and management would ultimately serve as a better model for inclusive design to facilitate maximum utilization of mineral resources and to create and sustain an accounting system for ecosystem services and conservation measures for the planet earth recovery.

Blockchain integration and deployment into natural resources management and accounting remain a potential "gold mine" platform to be explored by nations plagued by "resource curse"- a global phrase understood only by nations that are being ripped off their endowment via unfair trade agreement and corrupt leaders.


Challenges and Hope

After centuries of resource robbery and consistent host national leader mismanagement of the proceeds generated from mineral sales, a global initiative to address the trust issues and to implement measure for better mineral equity arrangement, sharing contracts, reporting, disbursement tracking system and best practices and principles for sustainable development led organisation like the extractive industry transparency initiative EITI formation. This global standard for mineral productions and management watchdog was created out of necessity. First, to eliminate the discrepancies in mineral resource accounting practiced in the production zones of the world, to make public, the use at which the revenue generated by the government open. Since its creations in 7th June 2003, its principal objectives remain far from being realized and has been critiqued for not being effective to deliver its promises. The EITI standards rest on three pillars: (1) All revenues from extractive industries should be regularly published and independently verified, (2) Publication of data should be managed by a multistakeholder group composed of members from the government, the extractive industries, and civil society organizations, and (3) Data should be effectively shared with the country’s citizens and stimulate an informed debate about how natural resources are governed.

In its efforts to continue to serve as a platform for dialogue among the mineral resources stakeholders in so many countries, the Extractive Industries Transparency Initiative has published its comprehensive national reports, expressing its commitment in mineral industries for sustainable development using a global standard for revenue sharing and reporting and helping to build transparency by requiring information along the extractive industries value chain from the point of extraction, to how the revenue makes its way through the government, to how it benefits the public. For example, the low value-added to the raw ore extracted and sold, and, because of the existing environmental issues attributed to extraction activities that have not been completely addressed have led country like the Philippines environmental department to close down almost 75% of the mining companies operation on its exclusive economic zone in 2016 and 2017 until they were reopened again after much congressional hearing. More example among many others include the inability of country like Nigeria with her huge hydrocarbon daily export to translate the revenue to national development and the failure of Venezuelan government to provide her citizens of basic economic necessities while ranking among the richest countries in the world in terms of mineral reserve and deposits. Blockchain enabled system has the capacity to deploy better measures on how to address these issues and will fine-tune the avenue for progress and data management in mining and drilling sectors that will ultimately add value to them through efficient and transparent revenue generation and compensation schemes and easy-entry platform for small group- creating host of business networks and environmental rehabilitation groups to manage the risk involved in areas of operations.

The key challenges to its operation is its voluntary in implementation of rules, no punitive measures for dealing with defaulters of the set rules and standards and not being able to directly affect the way companies do businesses in host countries. The application of Blockchain by extractive industry would empower the vital signs needed to heal the wounds left by the present system of things in resource management and will technically create the supporting system for those three pillars to stand firm on transparency ground. Apart from the better inclusive mechanism designed to distribute the income from mineral shares to host communities, Blockchain could leverage the resources of various expert willing to contribute to effective management of the environment under which these minerals are mined and process, creating new opportunities where they are needed.. It is reported that the greatest mineral scam is perpetuated by the national government through mismanagement of fund to lack of better environmental management framework. Blockchain system functionalities could help create the trusted mechanism by decentralizing the structures that are currently in places, set to exploit the masses of their fair-share. This will steward trust by generating needed information and means of payment for mineral sharing agreement between parties across the playing fields and make data available from the tax generated and how the funds were/are utilized. More also, the social and environmental programs that should be stimulated will be better tracked and implemented. Other major areas in which such potent ledger distributive technology will serve a massive participatory, inclusive resource sharing scheme and transparent governance include the monitoring of fund being channelled to global terrorism financing and exposing money laundering. Furthermore, as the need for renewable energy system intensifies, Blockchain could drive the exchange of green assets and energy in form of carbon credits between peers, thereby creating new business platforms for easy entry in any given community. This market force could trigger a massive overhaul in energy usage between large polluters and more energy efficient firms and individuals; generating economic incentives for the poor whose energy consumption remain relatively low compare to the rich ones in societies whose fair-share in energy and pollution tax escapes and appear as a big burden to the commons- creating a huge market failure and unaddressed externality.

Other Major Sectors That Blockchain-enabled System Will Play a Role

A crucial role of Blockchain-enabled platform to the extractive industry if it is to act as standard for resource management is to generate a better capital account from the excessive mineral derivatives and shares traded daily from the global market to benefit the places those derivative values originated. For example, the billions of mineral shares and variable figures being traded as stocks and derivatives are not translated back to the places of extraction. This remains a source of economic disparity in allocation of benefits to the third world economy whose minerals are traded.

Resource rich countries like Nigeria, South Africa, Liberia, Gabon, the middle eastern countries, Indonesia, Philippines, Chile, Venezuela, just to mention a few stand a chance to increase transparency in this great sector which remains untapped and would also scale up the value generated from mining proceeds from under-priced ores exportation and create more rooms for a broader market for better deals and best practices during operations.


The regional reports by the EITI from these grey zones are promising but more can be achieved in terms of equity and justice and inclusive economic growth that drive sustainable development, if Blockchain technology is implemented by the government. This measure might take some bold institutional adjustment but the aftermath would be an overall positive transformation that is needed. Above all, International organisation such as World Economic Forum, and other relevant international platforms have a significant role to play to drive this initiative. The old structural adjustment programs and trade policies haven't done much to create robust an inclusive system in order to alleviate these nations from poverty, and efforts to make the necessary changes remain daunting due to corrupt practices and bad policy frameworks. To realistically tap into the potentials of this piece of technological revolution, we will have to prepare our institutions and will power for a total overhaul. Blockchain remains one of the promising trust-bedrock under which much can be done and growth drivers created and sustain for the betterment of the people in resources rich nations of the earth.

© 2017 Prince Edike


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    • GreenPrince profile imageAUTHOR

      Prince Edike 

      15 months ago from Philippines

      Comments are welcome


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