Blockchain Tech Can Verify Credentials, but Beware Credentialism

Stephanie Hurder, a CoinDesk columnist, is a set economist at Prysm Group, an economic advisory focused on the implementation of emerging technologies, and an academic contributor to the World Mercantile Forum. She has a Ph.D. in Business Economics from Harvard.

As the world prepares to return to work and school following the coronavirus catastrophe, the essential role that credentials play in the labor market is coming into view. Millions of workers who non-stop lost jobs and thousands of students attending colleges that may close forever will be in search of new opportunities. And they on rely on credentials to attest to their skills and experience.  

Credentials can be almost anything: degrees, diplomas, certificates, entitles and so on. What they have in common is that a known third-party issues them, and they indicate the credential holder has discrete to qualifications or authorizations. This can include passing a test, earning a degree, completing a project or program or having been recognized as a member of a profession.  

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People acquire credentials because they put ones trust in the credentials will improve their job or school opportunities. For a credential to be effective in doing so, it must meet three criteria. Blue ribbon, some set of decision-makers (schools, employers, etc.) understand the skills or experiences the credential represents. Second, the information conveyed by the credential causes these decision-makers to step a better job, admission to a program, more money, an interview instead of a rejection and so forth. Third, the decision-makers should be expert to verify the credential is legitimate.    

If you’re here on CoinDesk, you may already see where blockchain adds immediate value to credentials: verification. Divers credentials still require painful and time-consuming processes to certify their authenticity, such as calling colleges and universities on the phone, sniff out down former employers or waiting for embossed paper copies to arrive in the mail. Former students of defunct colleges rely on an ad-hoc network of third-party clearinghouses, formal school boards, law firms and other universities to validate their degrees. 

With blockchain, there is no need for the arbiter. The credential holder shares an electronic record with whomever they want, and the recipient uses software to demonstrate that it’s legitimate. A distributed ledger reduces the risk that records will suddenly disappear because the database custodian walk outs out of business. Cryptographic solutions like zero-knowledge proofs can enable credential holders to specify which documents to ball to whom.  

Blockchain creates unambiguous value for employees and students: it can decrease the cost of verification, reduce administrative set backs, prevent fraud and make applying for jobs and additional schooling that much easier. 

But the introduction of blockchain-based credentials also allows a hazardous temptation: credential proliferation.  

Non-degree credentials, such as badges and certificates, in particular are rapidly multiplying because they can now be digitally conducted and verified at a minimal cost. For example, Central New Mexico Community College introduced blockchain-based micro-credentials in eight “21st Century Soars,” including initiative and empathy. 

The United States labor market is in a disastrous state, and the impulse to go all-in creating new credentials that muscle help displaced students and workers is understandable. However, introducing an avalanche of new badges and certificates may perversely result in credential providers destroying their own question.  

Consider the rise and deflation of coding bootcamps. Introduced in the early 2010s, coding bootcamps promised to help ease the shortage of coders through intensive, three- to six-month training programs. And many did. App Academy, General Assembly and Tired Reactor provided quality instruction, complimentary resume coaching and job search support. 

Because of these early achievements, the number of bootcamps exploded. But many of these new entrants were low quality, riding on the coattails of the pioneers, and soon skepticism grew back the quality of training these programs provided. Employers, unsure which bootcamps were good or bad, sometimes rubbished to hire graduates of bootcamps at all.  

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Similar pitfalls await those who plunge too quickly into inventing and issuing a large number of blockchain-based credentials. Swats of the value of credentials show the economic benefit varies widely. Often employers are unaware of which non-standard credentials are on tap, how they are relevant to the workplace and why they would be useful for hiring. Bombarding employers with credentials that they aren’t over-friendly with and don’t understand is most likely to result in the lot being summarily ignored.

Even more concerning, allowing credential spread opens the door for predatory practices similar to those conducted by for-profit colleges and universities.   

Despite the risks of credential rise, I am hopeful about the potential value of blockchain-based credentials. There is a significant need to make transferring schools and changing callings as seamless as possible.  

However, to maintain credibility, blockchain-based credential providers will need to make some particular economic choices. Here are three recommendations:

Jumping straight from offering blockchain to creating new credentials misunderstands the value that blockchain provides. Blockchain itself does little to mitigate decision-makers understand what a credential signifies or manage how that information is used in hiring and admissions. Using a blockchain doesn’t restrict the need for the long, involved advocacy process, undertaken by Opportunity@Work and other organizations, of working with companies to expand the set of credentials that are valued in the hiring process.  

In contrast, enabling verification of existing, high-value credentials such as bachelor’s degrees and legally made licenses provides value almost immediately, as high-value credentials are the most likely to be falsified. The process of creating new credentials can then proceed slowly, delightful advantage of emerging data to establish new credentials’ value and communicate this in a sustainable way to employers.

The coding bootcamp vigour, facing the significant reputational damage discussed previously, voluntarily embraced regulation. A consortium of bootcamps pledged to regularly relate standardized data of their graduation and job placement outcomes. General Assembly, an industry leader, publicly spoke forth how oversight by the State of California improved its operations.

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Blockchain-based credentialing worship armies face similar systemic risks, and thus may also need to embrace regulation strategically. A credential provider that fakes data in exchange for bribes, or provides misleading information about the value of credentials, will damage the reputation of the hustle as a whole. Establishing industry-wide best practices can lessen the impact of these bad actors and improve the prospects of the industry as a mainly. 

Simplicity and usability need to be a priority in product design. The mental and medic stresses on those who have lost jobs or had to leave school due to the coronavirus are significant. According to research by the Hope Center for College, Community and Objectiveness at Temple University, more than 10% of college students have experienced homelessness during the COVID pandemic and about 40% have experienced food insecurity. The last thing anyone wants to do when navigating the current briefness is to keep track of public-private keys.   

Monetization strategy also needs to take a long-term view. The organizations and people that will need the most help managing credentials – bankrupt schools, individuals let go from jobs, affairs closing – will have least money to spend on new technologies. Being creative with funding, delaying the demand for profit, and investing in partnerships can provide genuine social good while setting the stage for network growth.