Vision
For all students in Africa to be able to further their education and realise their full potential, regardless of their draw in the lottery of life.
Elevator pitch
Many talented students in low-income countries lack the economic means to realise their potential, but philanthropists hesitate to donate. The impact of their funds is unclear, but attaching conditionality to ensure that funds are used for their intended purpose is costly. Administrative costs are also high due to high transfer costs and the need for having several middlemen. DirectEd solve these problems by combining the power of decentralised identities and blockchain technology to provide a transparent, secure, and low-cost means of making conditional peer-to-peer donations directly to students.
Problem and Solution
<u>Problem 1</u>: Education is widely agreed to be a crucial factor in a country's economic development, but despite its importance, it is generally underfunded and deprioritised. Part of the reason for this is the difficulty of assessing the causal impact of more education. Also, interest rates are extremely high typically in the two digits range [1] and it is not uncommon to see interest rates well over 100% (e.g. Malawi [2]), which leads to fewer students from poor backgrounds pursuing a tertiary degree.
Solution. By focusing on poorer regions where all students otherwise wouldn't be able to study at university we target our relevant group. To assess the impact of our program, we will use a scientifically rigorous impact analysis, which we will develop together with our advisors.
<u>Problem 2</u>: Crowdfunding and donations services give opportunities to those who have none. However, they are often inefficient due to many middlemen, high transfer costs, and high costs for ensuring eligibility of recipients. They also lack transparency, i.e. you do not know exactly what your donation is being used for.
Solution. By processing donations directly through the Cardano network, and distributing them to individuals verified with DIDs, obstacles such as mistrust, fraud and administrative costs can be greatly reduced.
<u>Problem 3</u>: As previously mentioned, many donation services lack efficiency and transparency, which has decreased trust amongst donors. Blockchain technology could solve these issues, but using this technology for donation services is uncharted territory , which means that trust is low and must be built up.
Solution. Through pilot projects, and collaboration with several universities in the region, DirectEd will help teach recipient and donors about the benefits of using blockchain technology, which will also generate trust towards Cardano.
[1] International Monetary Fund, International Financial Statistics and data files. "Sub-Saharan Africa (IFC classification)” Accessed 14 03 2022. <https://data.worldbank.org/indicator/FR.INR.LEND?locations=C9>
[2] MicroLoan Foundation. “Interest rates. Accessed 14 03 2022. <https://www.microloanfoundation.org.uk/Files/0910> Interest Rates.pdf
Product
Link to roadmap in Github: <https://github.com/users/bubblyc/projects/1/views/1>
Process flow in Miro: <https://miro.com/app/board/uXjVOKD9W-A=/>
Research papers and technical specifications: Research Papers & Tech Spec
Step by Step Process
This is a description of the process flow in chronological order, from DirectEd identifying relevant high schools, to students receiving scholarships.
- DirectEd identifies high schools in low-income areas. In Ethiopia, these schools have been onboarded to the Atala PRISM decentralised identifier system. In Kenya, we help schools become issuers of verifiable credentials and help students set up DIDs. We link those DIDs to Cardano wallets, preparing the students to receive scholarships.
- DirectEd specifies a smart contract for each high school. The smart contracts do four things: (a) specify the threshold for scholarship eligibility, (b) randomly choose scholarship winners if the number of eligible students exceed funds available, (c) specify total size of each scholarship and (d) specify progress requirements needed for release of next portion of the scholarship.
- Donors pledge donation amounts to one of many smart contracts, each representing a high school. Initially, only ADA donations will be supported, but over time other currencies will be accepted as well, starting with stable coins, other cryptocurrencies, and lastly fiat currencies. Donors receive an NFT minted by DirectEd, that can be used to prove that they have donated and unlock access to a progress tracking page for the specific cohort they donated to.
- High schools issue credentials, containing grades, to decentralised identifiers (DIDs) belonging to students. A student can then apply by sharing this verifiable credential with the smart contract.
- Once the scholarship application window is closed, a randomisation amongst eligible students decides the scholarship winners if the number of eligible students exceed the funds available.
- Students register at university and the registrar issues a credential to the student’s DID. Students share their proof of registration to the smart contract, which triggers the first scholarship disbursement.
- Further disbursements are similarly conditioned on evidence of successful progress as evidenced by verifiable credentials issued by the university or other education provider.
- If scholarship students fail to satisfy some of the conditions within the pre-specified time frame written in the smart contract, whatever funds remain are returned to the donor addresses.
The platform's 3 main components
Our website will link to a portal, where users will be able to log in using SSI OAuth 2.0 (students and schools) or on NFT-enabled access (donors).
- Teachers (schools/university staff) – an admin page where they can change which students are part of their cohort and issue credentials containing grades or other information to the student DIDs.
- Students – an onboarding page where they get help with setting up their DID and wallet, a scholarship page where they submit applications or progress updates to smart contracts, and an active scholarship page where the conditions stated in a given smart contract is translated into understandable terms for the student.
- Donors – a donation page where they can choose which school they want to donate to, a profile page where they can see their donation history and NFT rewards, and a blockchain page where you can verify all transactions and smart contracts.
Unique Selling Points
There are a number of crypto and non-crypto donation platforms out there. We stand out in five main ways.
- Conditionality. We work on smart-contract enabled conditionality. This gives us three key advantages. First, once fixed costs are accounted for, this reduces the large administrative costs that are associated with attaching conditionality. Second, it naturally creates a mechanism for progress tracking, feedback and impact evaluation for donors. Third, it improves educational outcomes as it provides incentives for students.
- Digital identity integration. IOHK, the company behind the decentralised identity solution Atala PRISM, have already signed the deal with the Ethiopian ministry of education, onboarding 5 million students. As similar deals are struck around the continent, our ability to scale increases massively as we do not have to set up the basic infrastructure for the issuance of verifiable educational credentials. As Atala PRISM is built on top of Cardano, seamless and secure integration is possible.
- Transparency. In contrast with legacy systems, all transactions are public meaning that a donor can check for themselves if a transaction did indeed go to a given address connected to a certain DID that has shown to have satisfied certain properties. This eliminates the risk that middlemen charge “fees” for ensuring the safe delivery of a given donation. Recipients have a means of checking exactly how large funds are and the exact immutable conditions for release of such funds (e.g. grade requirements etc). This reduces uncertainty.
- Rigorous impact evaluation. With the support of our academic advisors, we hope to build the product with rigorous impact evaluation in mind from the very beginning. This will help us quantify the value of the donations. Impact evaluation could focus on (a) how reduced information asymmetry affects donor sentiments, (b) evaluating the extent funds were lost to corruption (c) student learning and life outcomes.
- Donor experience and community. We radically improve on the donor experience compared to existing alternatives. Not only do we hope to build a community where sponsors can interact, engage, and mentor the cohort of scholars they support, unlocked through our portal, but we make it possible for donors to prove their donation through a NFT. We believe this will become an industry standard for tax deduction purposes in the future. The proof of donation NFT will not only be a cool gadget, but it will grant access to a community and possibly even a necessary component of all donations in the future.
Donor segments
Possible donor segments are individuals, companies, foundations and institutions. Initially, we are primarily targeting individuals from the crypto community, especially the Cardano community. The reason for this is because we see high potential in this segment, and since organisations take longer to persuade. Individuals from the crypto community will have a greater understanding of the mechanisms involved. Due to the general growth of cryptocurrencies, there are also considerable funds available in this segment.
We will also seek to partner up with charitable stake pools. Many of them donate a portion of their profits to a good cause. We believe we can find strong synergies with pools as we are a Cardano project and delegators will be able to verify that donations have gone where they were supposed to go.
Value-added for Cardano
This project also lead to several benefits for Cardano, on top of what has been mentioned so far. Cryptocurrency requires trust and a lot of understanding, and has a relatively high barrier to entry. By onboarding educational institutions and schools, we gain the trust of these institutions, which provides a clear stepping-stone for IOHK and the Cardano Foundation to leverage the trust to sign large-scale deals with governments to build their infrastructure. The scholarship also gives strong incentives for young African students to invest time and effort into learning about it. Moreover, field studies on the adoption of microcredit have been shown to be heavily contingent on trust in the credit institution. This means that the scholarship will create familiarity to Cardano and thus constitute a stepping-stone for crypto-based microfinance in the future.
The longer vision of DirectEd
We also hope to develop DirectEd by partnering up with education platforms/providers and industry partners. One model would be that firms looking for specific skills in workers that they cannot find specifies a scholarship (smart contract) that contain conditions for eligibility (e.g. sciences high school student, good grades), milestones, and scholarship amount. This could be a short 8 week digital course over summer. Students who complete all the milestones are then able to directly apply to get a 12 months internship-work job contract. This creates a more direct and relevant educational journey and reduces the resource waste stemming from learning that is not closely tied to the needs of the labour market [3]. Specifically, we could also set up scholarships for learning blockchain development. If Cardano is to become the backbone of the digital infrastructure in Africa then a lot of developers will be needed. Our platform would give learners clear paths to employment, provide incentive mechanisms, and give firms assurance that their funds are being put to good use.
Other use-cases that we may pivot towards
Though our technology will first only be applied to scholarships, the underlying technology has many use-cases that we aim to pivot towards once the scholarship platform has been set up.
- Reputation building. Students receiving the scholarship will be able to build a reputation as they show that they are trustworthy by reaching targets that were set out. This may be the first step towards building credit rating and gain access to DeFi microlending.
- Government conditional cash transfer schemes. With our technology, it will be possible for governments to pre-specify which verifiable credentials are required for eligibility and what conditions must be satisfied. For example, they may specify that a person must be of age X, live in region Y, and do a health check-up at a pre-approved health clinic from a list Z. Each one of these elements would require a verifiable credential and the list of approved health providers would have conditions.
- Official development aid. Once blockchain traced supply chains have become more mature, this type of verifiable credentials mechanism can vastly reduce the amount of money lost to corruption as official development aid funds can explicitly be tied to the purchase of physical goods and receipt (in the form of verifiable credentials) of such goods.
IP and legal status
As our main contribution lies in the smart contract functionality, the core of our project will be open-sourced. We believe in the principle of open-sourcing all of our code and will seek to do so as soon as our business model matures.
We have not incorporated but intend to incorporate as a Charitable Incorporated Organisation in the UK. We may start NGOs in Kenya and Ethiopia or partner with existing ones, depending on our needs. For other use-cases mentioned above, we may start separate legal entities.
By creating a high functioning scholarship platform based on Cardano’s blockchain technology we will attract new users to Cardano on both the recipient side and the donor side. Students and teachers will join Cardano’s ecosystem to partake in the scholarship program, and this will lead to an increase in the number of issuers, holders, and verifiers of DIDs. The scholarship program will enable students in the community to develop and grow by furthering their studies, and this will likely lead to long term effects like an increased employment in qualified jobs, e.g. teachers, entrepreneurs, and experts, and this can lead to a positive snowball effect for society and Cardano.
- Legal: Specifically, it is unclear to what extent we will be allowed to operate in Kenya and Ethiopia. Ethiopia has capital control and it is unclear to what extent it is legal to use crypto, but given the significant collaboration between Cardano and the Ethiopian government focused on the educational sector, the risk for legal hurdles during piloting is low. In Kenya, we need permission to operate in schools if we work directly with student records.
- Mitigation: Our team members Moses and Fasika are living in Kenya and Ethiopia, and they are monitoring changes in legislation. We have gotten approvals from schools in Ethiopia and Kenya to operate.
- Security: This refers to personal data, crypto security, and implementation. How do we guarantee that personal data is not mishandled and lost to malicious parties? This also refers to the security of the smart contracts we deploy.
- Mitigation: We will consult experts on personal data laws in each country. We can also make use of professional smart contract audit services.
- Collaboration: The high schools/universities/students' willingness to join the project may vary depending on many factors.
- Mitigation: We need to make sure to have mutual expectations of conditions and deliverables that satisfy all parties involved in order to deliver a smooth pilot project.
- Financial sustainability: Lack of further funding may hinder our product to develop further.
- Mitigation: In the short term, by delivering on the KPIs provided to Catalyst, we should be able to secure further seed funding. We are also looking at other funds and incubators, e.g. OX1 Incubator. In the long term, we have to develop a revenue-generating process, be it as fundraisers or by starting a for-profit company with a slightly different focus.