Can the Blockchain Bring Peace to the Middle East?

Addressing the Challenges of a Post-War Gaza with Blockchain-Based Smart Contracts

As Israel continues its offensive in the wake of the horrific October 7 attacks, many are asking, “What will Gaza look like after the war?” Israelis and Palestinians alike are wondering, “Who will control Gaza? Will there be a two-state solution?” and “Can Israelis and Palestinians truly ever live side-by-side again?” None of the answers, it seems, will do. Whether it’s establishing a multinational Arab-led coalition or transferring control of the Gaza Strip to a civilian government under Israeli security control, no sooner is an approach introduced into political discussions than it is immediately dismissed because of notions that it simply won’t work.

One thing seems clear: issues pertaining to sovereignty, multi-state cooperation and financial accountability will need to be addressed no matter what the solution is. In other words, whether formally bound or not, the various actors in the region will need to deal with one another in an environment thick with mistrust. Shockingly, the diplomatic breakthroughs introduced by the Abraham Accords have not eliminated the deep-seated skepticism ingrained over generations in the complex web of relations between Israelis, Gazans, and the Arab states. The issue of trust remains a significant impediment to any plan for the future of Israel and Gaza.

We looked at some of the likely issues that Israel and Gaza will face in a post-war era and suggest a novel solution: make trust among actors unnecessary. Instead, we propose utilizing blockchain-based “smart contracts” to bridge the trust gaps between actors, removing our reliance on individual stakeholders and placing it on the technology instead. We believe that regardless of who is in charge of securing Gaza after the fighting has stopped, all stakeholders will benefit from utilizing smart contracts to automate as much as possible.

Understanding Blockchain and Smart Contracts

Before delving into the specifics of how blockchain technology can address the challenges of mistrust in the Middle East, it is essential to understand what blockchain technology and smart contracts are. The blockchain is a decentralized digital ledger that records transactions across many computers in such a way that the registered transactions cannot be altered retroactively. Each "block" in the chain contains a number of transactions, and once added, the data in any given block cannot be changed. This feature ensures transparency and security, as identical copies of the ledger are maintained across multiple computers and are accessible to all participants, making them nearly tamperproof.

Blockchain technology is often labeled "trustless" because it enables secure and transparent transactions without the need for mutual trust between parties or reliance on a central authority. This paradoxically enhances trust among stakeholders. The decentralization of blockchain means that no single entity has control over the entire network, making it resilient to fraud and corruption. Every transaction is recorded on a public ledger, transparent to all participants and secured through cryptographic techniques, ensuring that once a transaction is added, it cannot be altered or deleted. These features collectively ensure that trust is built into the system itself, not placed in any individual or institution. Thus, while blockchain operates on a trustless model, it ironically strengthens trust by providing a transparent, immutable, and secure framework for transactions, fostering a new form of confidence based on the technology's inherent characteristics.

Blockchain Uses Smart Contracts to Address the Issue of Trust

Smart contracts are self-executing agreements, with the terms encoded directly into the blockchain. They remove the need for traditional intermediaries in favor of cryptographic algorithms and a consensus mechanism to secure transactions. This ensures that once predefined conditions are met, the contracts automatically carry out the agreed-upon terms, reducing the possibility that unknown factors in the future (e.g. a change in a country’s leadership) will derail the agreement. Essentially, smart contracts let us automate contractual obligations by predetermining future outcomes and agreeing upon their consequences ahead of time.

Creating a smart contract involves outlining its terms in advance to cover all potential scenarios that might arise during its duration. This necessitates that parties anticipate a broad range of possible situations to incorporate into the contract's terms. Once deployed to the blockchain, a smart contract's code becomes unchangeable, and any alterations necessitate voiding the original contract and creating a new one. Similarly, new transactions recorded on the blockchain become immutable and transparent, creating a system where trust is inherent in the technology, rather than reliant on external entities or stakeholders. By leveraging code to uphold conditions agreed upon during a consensus period, uncertainties about future performance are removed from the equation. With clearly defined possibilities for each event, parties understand the all the possible actions of stakeholders and the outcomes associated with each of them.

Instances Where Blockchain Has Resolved Trust Issues

We have already seen smart contracts resolve trust issues and dramatically improve processes in various use cases where trust has been paramount:

1. Finance

   The most well-known changes brought about by the blockchain have been in the financial sector, but even here, there are more use cases than initially meets the eye. In 2016, Barclays, in partnership with Israeli startup Wave, completed the world’s first trade finance transaction using blockchain. This transaction involved the use of smart contracts to automate and secure the exchange of trade documentation between parties. The process traditionally took 7-10 days but was reduced to under 4 hours using blockchain. In 2019, Santander became the first financial institution to use smart contracts to issue and settle a bond entirely on the blockchain. The bank issued a $20 million bond, with the smart contract automatically executing the bond’s issuance and interest payments directly to the investors’ wallets.

2. Supply Chain Management

   In supply chain management, the concept of “track and trace” refers to the process of ensuring that goods reach their destination on time. Companies have been leveraging blockchain technology to prove authenticity, verify ownership, and transparently view the location of goods in transit. Walmart, in collaboration with IBM, launched a blockchain-based system to enhance the traceability of food products in its supply chain. Using IBM's platform, they implemented smart contracts to automate and securely record every step of the food journey, from the farm to the supermarket shelf. This initiative particularly targeted the tracking of leafy greens like spinach and lettuce allowing Walmart to trace the origin of over 25 products from five different suppliers. By doing so, the time it takes to trace the source of food items has gone from days to mere seconds, greatly aiding in cases of food safety recalls and enhancing consumer trust.

3. Retail

   The fashion industry is experiencing a paradigm shift from traditional stakeholder trust to a reliance on technology for greater transparency and accountability, especially in the realm of sustainability. This change is largely driven by evolving regulatory landscapes, such as the European Union's stringent sustainability guidelines that demand textile companies not just claim, but conclusively prove their sustainable practices through tangible data. In response, technological innovations like blockchain are becoming instrumental. For instance, companies like Eon are pioneering the use of The Digital Product Passport, a blockchain-based tool that embeds comprehensive sustainability and lifecycle information into a secure, verifiable digital record. This marks a significant transition towards a new era of fashion industry compliance, where technology ensures transparency and sustainability credentials are openly accessible, thereby reshaping trust dynamics between brands and consumers.

4. Corporate Governance

   The Delaware Blockchain Initiative, launched in 2016, has allowed companies to use blockchain technology to maintain shareholder lists and record stock transactions. This initiative has made it possible for corporate actions, like issuing shares or transferring ownership, to be recorded on a blockchain, offering a secure and transparent ledger to all the parties involved. This digital approach enhances trust among shareholders and regulators by providing an immutable and easily verifiable record of corporate transactions, reducing the potential for disputes and errors.

5. Voting Systems

   Estonia's e-Residency program offers one of the most advanced use cases of blockchain in voting. While not entirely based on blockchain, it integrates blockchain's principles to secure digital identities for online voting, providing a layer of security and trust to the electoral process. In the United States, West Virginia piloted a blockchain-based mobile voting application in the 2018 midterm elections, specifically for military personnel stationed overseas. The state partnered up with a Boston-based company to utilize smart contracts to create an immutable and secure record of each vote, ensuring that the vote once cast cannot be altered or tampered with. This initiative aimed to increase participation by making voting more accessible to those abroad, while also maintaining the integrity and confidentiality of the electoral process.

Comparability of Israel and Gaza Situation to Blockchain Trust Cases

The situation in Israel and Gaza, with its complex web of mistrust among the various parties involved, is comparable to scenarios where blockchain technology has been successfully implemented to compensate for a lack of trust among stakeholders. Just as blockchain has provided solutions in finance, supply chains, corporate governance, and voting, it can potentially address the trust deficit in the security dynamics of the Gaza Strip by ensuring transparency, immutability, and automated enforcement of agreements. Below, we address some ways that smart contracts could address potential obstacles in a post-war Gaza.

Challenge: Coordination, Cooperation and Security

Smart contracts could facilitate increased coordination, better cooperation and enhanced security for the region. For example, they could be used to manage border security operations, where actions are automatically executed once certain conditions are met, such as the detection of unauthorized movements. Smart contracts could also automate the trade and management of energy resources such as electricity or natural gas between Israel and Arab states, allowing energy companies to slash costs linked to conventional trading mechanisms, including transaction fees and administrative expenses. Additionally, the technology's use of cryptographic algorithms enhances security, granting access solely to authorized individuals and safeguarding against cyber threats. This results in an immutable record of transactions, playing a crucial role in preventing fraud and manipulation within the energy market.

How can the blockchain actually achieve this? By agreeing on acceptable terms and conditions and automating as much of the process as possible. For example, smart contract could facilitate the automatic purchase and sale of surplus renewable energy between countries, with transactions triggered by real-time supply and demand data. This system would ensure a seamless, transparent exchange of energy resources, maximizing efficiency, cutting costs and supporting environmental sustainability efforts across the region. Finally, smart contracts can enable the automated distribution of humanitarian aid based on real-time needs assessments, ensuring that aid is provided when and where it is needed without the possibility of interference.

Challenge: Sovereignty Concerns

Smart contracts can be programmed to respect the sovereignty of different nation states by automating only those actions that are agreed upon by all parties and are within the legal frameworks of each entity. For instance, in the case where post-war security is spearheaded by a multinational coalition, a smart contract could automatically enforce restrictions on military equipment entering Gaza, as agreed upon by the multinational force, without overstepping into issues of governance that remain under Israel or Palestinian control. A smart contract could also automatically manage quotas for goods, such as agricultural products, ensuring that trade volumes do not exceed the limits set by bilateral agreements. This automation ensures compliance with trade agreements without requiring constant human oversight, thus streamlining the process while respecting each party's sovereignty and legal frameworks.

In regions where water or environmental resources are shared or contentious, smart contracts can automate the allocation and management of these resources in accordance with agreed-upon treaties or international laws. For example, water usage rights from shared water bodies could be managed through a smart contract that distributes water based on predefined quotas while ensuring that any extraction does not exceed the limits set to prevent environmental degradation. This method allows for a transparent and fair distribution of shared resources, ensuring that all actions are in compliance with the legal and sovereign rights of all parties involved.

Challenge: Trust Among Users

Blockchain's transparency ensures that actions taken by participating stakeholders are recorded and verifiable by all parties, which can help build trust over time. For example, a smart contract could automatically log all security incidents and responses, creating a transparent record that can be audited by any party. Another application could be in the monitoring of ceasefire agreements, where violations are automatically recorded and reported to all stakeholders. This feature is particularly relevant given the backdrop of recent accusations by Israel that UNRWA (United Nations Relief and Works Agency for Palestine Refugees in the Near East) employees were directly involved in the October 7 attacks. Though the organization has denied the allegations, many countries, including the United States, Germany and Japan, have pulled their financial support of UNRWA citing insurmountable evidence. But even in the absence of a multinational security force, it will be in Israel’s best interest to utilize this technology to minimize any baseless claims of impropriety.

Challenge: Financial Efficiency and Transparency

Smart contracts can streamline financial transactions, ensuring that funds are released automatically upon the completion of agreed-upon milestones, thus reducing the need for financial intermediaries and increasing efficiency. In the case of a multinational Arab-led coalition, funding for the security force could be held in a smart contract and automatically disbursed as certain operational benchmarks are met. Another example involves the procurement of equipment and supplies. Typically, purchasing supplies such as uniforms, weapons, and vehicles involves multiple steps of verification, approval, and payment processing, which can be time-consuming and prone to errors or fraud. With smart contracts, funds for these procurements can be pre-allocated and held within the contract itself, to be released only after the supplier meets specific criteria, such as delivery of goods to a verified location or successful passing of quality control checks. This not only speeds up the procurement process but also ensures transparency and accountability, as the release of funds is contingent upon the fulfillment of clearly defined conditions, reducing the likelihood of misallocation or misuse of funds.

Challenge: Interoperability

Blockchain platforms can be designed to be interoperable, allowing different systems and organizations to work together seamlessly. Smart contracts can be used to manage joint operations between different Arab states' forces, ensuring that each state's contributions and actions are automatically coordinated and recorded. For example, a smart contract could synchronize patrols or intelligence-sharing efforts, ensuring that all parties are working together effectively. Similarly, a smart contract can be used to streamline operations within the different elements of the same state.

Continuous Improvement and Adaptability

Beyond the major benefits cited here, blockchain platforms can employ machine learning algorithms to analyze performance data and engagement metrics continuously. This iterative process enables the platform to refine and improve its functionality over time, ensuring that the smart contracts evolve to meet the changing needs of the security environment and maintain respect for territorial integrity and national security.

Conclusion

While immediate trust cannot replace decades of mistrust between actors, blockchain-based smart contracts offer a way to circumvent this issue. By automating the execution of agreements and ensuring transparency and immutability, the blockchain can provide a technological foundation for trust where human efforts have fallen short. The specific examples provided for each challenge demonstrate the potential for blockchain to address the complex security dynamics in the Gaza Strip, offering hope for a more stable and cooperative future in the region. But whether the area is secured by using a multinational Arab force, by Israel itself or another solution, we believe the outcome will be exponentially better if the solution utilizes blockchain technology to the fullest extent possible. At the end of the day, we may not be able to force stakeholders to trust each other, but for the first time in history, we just might not have to.

Sphynx Brand helps companies and institutions utilize blockchain technology to increase efficiency, cut costs and become more profitable. You can follow Sphynx on X at @sphynxbtc.