June 6, 2020

Food Stamps & Blockchain

Why should food stamps/SNAP be treated like blockchain?

Today, 1 in 9 people struggle with hunger in the United States. To address this food security problem, the government created numerous social welfare programs - from Child Nutrition Programs to Food Distribution Programs, to the Supplemental Nutrition Assistance Program (SNAP).

“More than 80% of all SNAP/food stamp benefits go to households with a child, senior, or disabled person”

JustHarvest.org

A major component of the SNAP program is food stamps, which are also referred to as SNAP benefits. Today, more than 80% of all SNAP/food stamp benefits go to households with a child, senior, or disabled person.

These benefits are distributed each month on a plastic card called an electronic benefits transfer (EBT) card, which works like a debit card, and participants can only purchase specific types of food for their household. This means participants cannot purchase vitamins, medicines, hot or prepared foods or any non food items.

The following issues still exist within SNAP:

Eligibility and Program access states determine their own qualifications for SNAP, meaning that eligibility wavers across borders
Limiting the types of foods consumers can purchase - SNAP benefit users can only purchase specific kinds of foods, which restricts these consumers' choices and often leads them to use their own money to buy nonSNAP approved items

Store eligibility requirements - Stores must meet specific requirements to be authorized for SNAP consumers, which limits the number of stores that these consumers can shop at
Adequacy of SNAP benefits - SNAP benefits do not take into account geographic prices of foods or cost variations associated with the age and nutrient requirements of household members.

Now looking at these issues through an artificial intelligence focused lens, it’s interesting to brainstorm solutions using Blockchain.

Blockchain is a decentralized record keeping technology, monitored by a network of computers, specifically transactions with cryptocurrencies such as Bitcoin.

The “blocks” are made up of three pieces of digital information:

Information about the transactions such as date, time and dollar amount
Information about who is participating in these transactions
Information that separates each block from the other blocks (this is stored as a unique code called a “hash,” but we won’t get into the technical jargon here).

While there are many advantages to blockchain, the most important is the increase in security and efficiency of transactions. Because a network of computers monitors and approves transactions, it is very difficult to hack or tamper with this information. Other advantages include the transparency of this technology, decreased costs, and improved accuracy by removing human involvement in verification.

Going back to the issues surrounding food stamps, many of these issues stem from a lack of a connected system to monitor who qualifies for food stamps - where they can use these stamps and what they can use them to purchase. All of these issues could theoretically be addressed by introducing a blockchain monitoring system.

“In 2019, about 36 million people received SNAP benefits, and they received, on average, $129.83 a month. The total benefits distributed totaled to around $56 million, and the costs of federal expenses and other costs associated with the program totaled to about $5 million.”

FNS.USDA.gov

Introducing blockchain technology could redistribute some of the $4 million of administrative costs back to the beneficiaries.

Decentralizing states, tethered to the US dollar, why not?

Why should and how would food stamps operate like blockchain:

Let’s say blockchain magically replaced the current SNAP benefit monitoring system. Now, a network of computers would monitor all purchases made using EBT cards across the United States. This would centralize who qualifies for SNAP to a federal level and the threshold for participating becomes much more clear...

Why this would beneficial to both sides:

Government
Decreases time and costs of funding SNAP
Money originally spent on humans to monitor SNAP could go back into the program
Increased data tracking of what consumers are buying
Citizens
Could increase the kinds of foods that can be bought
Streamlines access to the program across all states
More benefits would be available as the government would no longer be paying as many people to monitor/approve participation

Research

About Blockchain

Blockchain is the record keeping technology behind the cryptocurrency Bitcoin
The “Blocks” are made up of digital pieces of information, and they have 3 parts
(1) Information about transactions such as date, time and dollar amount of recent purchases
(2) Information about who is participating in transactions; however, the purchase is recorded without any identifying information and a “digital signature” (like a username) is used instead
(3) Information that separates each block from the other blocks; the unique code used to identify each block is called a “hash”
Hash codes are created by a math function that turns digital information into a string of numbers and letters
Blocks can store up to 1 MB of information - so depending on the size of the transactions, each block can store a few thousand transactions
To add a block to the blockchain, four things must happen:
(1) A transaction must occur (and the first two pieces of information addressed above will be recorded)
(2) The transaction must be verified - rather than a person approve the purchase, a network of computers checks to make sure the transaction occurred the way you said it did (i.e. confirm the two pieces of information)
(3) The transaction must be stored in a block (the two pieces of information are officially stored in the block)
(4) The block is given a hash and the hash of the previous block - the third piece of information is added to the block, and the block is added to the blockchain
When a new block is added to the blockchain, it becomes publicly available for anyone to view - the when is referred to as “Time,” the where is “Height,” and the who is “Relayed by”
Every computer in the blockchain network has its own copy of the blockchain, which means there are many copies of the same blockchain - this makes it very difficult to manipulate the information stored in a blockchain. A hacker would need to manipulate every copy of the blockchain in the network
Blockchain accounts for issues of security and trust in several ways
New blocks are always stored linearly and chronologically
After a block has been added, it’s very difficult to go back and alter the contents of the block - if the information in the block is changed at all, its hash changes as well
If a hacker changes a hash, they would need to change every hash following as each block stores its own hash as well as the hash of the block before it
Computers must “prove” they have done “work” by solving a complex computational math problem; if the computer solves the problem, they can add a block to the blockchain
BUT adding blocks to blockchain, called “mining” in cryptocurrency, is very difficult and the odds of solving one of these problems is about one in 15.5 trillion in January 2020
Computers must run programs the cost a lot of power and energy to solve these problems
Blockchain can store data about other types of transactions (such as property exchanges, stops in a supply chain and even votes for a candidate)
Pros of Blockchain
Improved accuracy by removing human involvement in verification
Cost reductions by eliminating third-party verification
Decentralization makes it harder to tamper with
Transactions are secure, private and efficient
Transparent technology
Cons of Blockchain
Significant technology cost associated with mining bitcoin
Low transactions per second
History of use in illicit activities
Susceptibility to being hacked

About Food Stamps in The United States

Facts about SNAP Spending

In 2019, about 35,703,000 people received SNAP benefits, and they received, on average, $129.83 a month. The total benefits distributed totaled to around $55,621,880 and the costs of

the Federal share of State administrative expenses, Nutrition Education, and Employment and Training programs totaled to $4,737,730.

Problems with SNAP

Block granting SNAP - Block grants give the States flexibility to tailor the program’s policies to their specific needs and circumstances; however, there are tradeoffs. First, if funding is fixed, the program may no longer respond to increased need—for example, during an economic downturn. Second, in the absence of national eligibility standards, it’s possible that two people with identical circumstances may receive different treatment simply because they reside in different States.
Limiting the types of foods consumers can purchase
Store eligibility requirements
Adequacy of SNAP benefits - Several recent reports have raised concern that SNAP benefits are too low because they do not take into account (1) geographic variation in food prices; (2) cost varia- tions associated with the age and nutrient requirements of household members; and (3) the costs of time spent in food preparation. A clear tradeoff exists between the goals of benefit adequacy and cost containment: raising benefit levels also raises program costs.
Program access - Since 2000, States can choose to implement SNAP broad-based categorical eligibility (BBCE), which allows them to align the SNAP asset test or gross income eligibility thresholds with certain other non-cash means-tested programs. BBCE promotes participant access and reduces administrative costs. On the other hand, some argue that BBCE has allowed higher income people to participate in SNAP and raised overall program costs.
Work requirements

About SNAP

Food stamps are now referred to as (are a part of) the Supplemental Nutrition Assistance Program, a federal program that provides nutrition benefits to low-income individuals and families that are used at stores to purchase food
The program is administered by the USDA Food and Nutrition Service (FNS) through its nationwide network of FNS field offices
SNAP can buy any food for a household but cannot buy alcohol, cigarettes, vitamins, medicines, supplements, hot/prepared foods or any nonfood items (including pet foods)

“SNAP benefits are given to you each month on a plastic card called an EBT (electronic benefits transfer) card, which works like a debit card. Paper coupons are no longer used.
SNAP is a nutrition program. It is not a welfare cash assistance program (which is called TAFDC). You do not have to be receiving TAFDC to get SNAP — these are separate programs.
SNAP is a federal entitlement program. This means anyone who is eligible will receive benefits. You will not be taking away benefits from someone else if you apply.
SNAP eligibility is determined by a calculation that takes into consideration your family size, citizenship status, household income, and certain expenses.”

Critics on SNAP

Critics often base their opposition to the program on a belief that SNAP itself is riddled with fraud. They claim groups of welfare recipients are ripping off the American taxpayer by claiming benefits for which they aren’t eligible, claiming more benefits than those to which they are legally entitled, and by selling off food stamps to buy other non-food items, such as guns or drugs.
The first formal food stamp program in the United States was implemented in 1939 as a means to help the United States at last pull itself out of the Great Depression. By 1943, some 20 million people had used the program in some form or another.
In 1964, the Food Stamp Act was passed by President Lyndon B. Johnson
The program, which Congress initially estimated would only serve at maximum 4 million people, grew beyond anyone’s expectations. By 1970, already some 5 million Americans were buying stamps through the initiative, a number that doubled to 10 million by the end of the next year.
By 1979, roughly 20 million low-income Americans depended on the program, the vast majority of whom were using food stamps properly to feed themselves.
Between 1981 and 1983, a federal task force of 900 employees uncovered evidence leading to 1,390 indictments of food stamp fraud nationally and one study in the 1970s found a fraud rate in certain cities as high as 55.4%.
For most of the history of the food stamp program, benefits had been distributed via physical paper stamps on a small scale by local municipalities, which meant the coupons themselves were easy to counterfeit and often difficult to track. But in the late 1980s, states began introducing the now-common Electronic Benefits Transfer (EBT) card. These cards are how SNAP participants continue to receive their benefits today. They are tied directly to government identification records, require a PIN to authorize payments, and don’t involve an exchange of cash during transactions, all modifications that eliminate a host of potential sources of fraud as the stamps pass from families to store-owners.
While critics still like to use old arguments of rampant abuse to lambast a program that feeds millions of Americans, the fraud rate has decreased from “about 4 cents on the dollar in 1993 to about 1 cent” by 2006.
And this decline has only continued, with the 3.5% rate of fraud in 2012 reducing to less than 1.5% today.”