A Blockchain Based Global Immigration System
Introduction
The current immigration policies across the world have been strict and inefficient because of such policies are managed by the centralized bureaucratic agencies that are tasked with the impossible mission: balancing the political interests while predicting the economic growth and the needs of the labor markets. The costs of these centralized immigration policies include arbitrary treatments of different groups of immigrants, high financial and human costs of waiting and getting denied in the process, and less free international movements in goods, services, capital and labor.
I. Background
Immigration law is complex. It has become a controversial subject in the U.S. and beyond because of the unresolved tension between the pressure to welcome people from other countries and the opposition to limit migration. As economist Gary Becker pointed out, the present immigration policies are a “mixture of interest-group-based limitations” that were based on the outcomes of elections. [1]
The current immigration system is a complex bureaucracy that sets arbitrary fees, quotas, and restrictions that prevent most immigrants from attempting legal immigration. For example, in the U.S., the Immigration and Nationality Act (INA) grants up to 675,000 immigrant visas each year across different categories.[2] Within that limit, the employment-based immigrants are capped at 140,000 and each country cannot exceed seven percent of the total number.[3] Wait times for green cards are sometimes over 20 years. Thanks to decades of partisanship and polarizing politics, it has been over three decades since Congress passed a major piece of immigration legislation to update this quota system.
Outside the U.S., all countries have restrictive immigration law, but each uses different criteria.[4] Countries that use point-based systems, such as Canada and Australia, allow in more immigrant workers and entrepreneurs of different types relative to the U.S.[5] Facing a rapid decline in population, Japan is considering changing its anti-immigration policies that favors racially unique and homogenous society.[6] Some countries even adopted controversial policies—Denmark has the infamous 24-year rule that forbids any spouse under 24 years old to qualify for citizenship, which sparked a debate on possible human rights violations.[7]
The immigration policies are supposed to be based on the principles of the family reunification, admitting skilled immigrant works, protecting refuges and promoting diversity.[8] However, the allocation of the scarce resource of immigration visas is an inefficient centralized political process that is constantly subject to interruption by the local political calculations and public emotions.[9] What we need is a decentralized global immigration system that can safely and efficiently decide the migration flow using free market empowered by the blockchain technology.
We identify global immigration law firms such as Fragomen and PwC Legal as the potential clients who will be particularly interested in any potential solution. They will be interested in KRC’s solution because this is a huge untapped market—for example, a conservative goal of narrowing the wage gap to just 5 to 10 percent by having more effective immigration policy could generate an additional boost of $800 billion to $1 trillion to worldwide economic output annually.[10]
II. Related Work
In 2010, Nobel laureate Gary Becker, among others, proposed a system of letting government to set a price and sell the rights to immigrate to the highest bidders.[11] In his Hayek Memorial lecture speech, Becker suggested a price tag of $50,000 for the right to the U.S. citizenship, and argued that his market approach would help boost the economy through innovation, business creation, higher employment and wages.[12] No country has yet adopted this think-outside-the-box idea.
Becker’s approach was meant to be market driven. However, a significant part of it relies on the government to set the price right in order to control or change the number of immigrants. In order to reach a price of $50,000 (the exact number doesn’t matter here), the policy makers will inevitably be tasked with the impossible mission of finding the right quota and right price. Even though the price might be discovered by trial and error over the time, Becker’s approach still leaves the quota to be decided by the central government. Furthermore, since the government will be the auctioneer, the system, despite its market component, lacks the transparency, security, and the protection against collusion or corruption.
Cato Institute proposed a similar idea, substituting the price with “tariff.” Instead of charging a flat fee for the immigration rights, it will instead be based on a schedule tiered by education and age.[13] It’s true that differentiated pricing could be preferred to uniform entry price. Stark showed that individuals in an occupation that generates higher positive externality but low wage (think of scientists and artists) will be charged a lower fee than those who in an occupation that generates less externalities (think of managers) but higher wage.[14] This approach is centralized and unsecured as Becker’s.
There are tremendous international efforts to tackle the migration problem on a global level. International Organization for Migration (IOM), the de facto UN migration agency, with 173 member states and over 11,500 staff on an annual budget of close to 2 billion dollars, has become the leading international agency working with governments with migration issues.[15]
International agencies like IOM seem to have taken the local government out of the equation. However, their staff and executive team are appointed by member states and thus influenced by member government to various degrees.
III. A Blockchain Based Solution
Blockchain is a trustless technology, which means exchange of values can be verified without a trusted third party or central institution. It’s programmable so it can build self-executing contracts that terms of agreements are written into lines of code. Because it’s decentralized and borderless, it can perform without using centralized authorities and provide a cheaper and safer way for exchanging units of value.[16]
We propose a blockchain approach because of its decentralized public ledger, secure transactions by cryptography, and its ability to execute smart contract properties.[17] In this system, our goal is to let the free market discover the price, run a decentralized system that is trusted and secure, and leave the politics out of it. There will be three major components: the token, the blockchain, and the auction smart contact.
a. The Token
The token will be a self-destructible token built on the Ethereum blockchain (choice of platform is explained below). When citizen Alice is born to country C, one token will be created with Alice’s biometric information as part of a transaction. Alice can use her token to immigrate to country D as long as both countries have agreed to join the blockchain solution.
The token will self-destroy after the successful immigration of its owner. An immigration transaction is that once Alice wins her auction bid to buy the rights of immigrating to country D, the token will create a visa from C to D for Alice on the blockchain, notify the target country of Alice’s biometric information, and then self-destroy. All the immigration transactions will be anonymous to other bidders and the authorities of both countries, and only the auction smart contract will be able to see and verify bids.
In addition to self-destroy after a successful immigration, the token will also self-destroy after changing hands more than 10 times. Trading tokens should only serve the purpose of individuals’ immigration rights. This trading limit will be adjusted upwards slowly according to a preset function as the system matures.
b. The Blockchain
All the participating countries agree to let the blockchain take over the immigration systems of their own. For the U.S., it means the government essentially outsources the U.S. Citizenship and Immigration services (USCIS) office to the blockchain.
For building our minimum viable product (MVP) for initial client engagement, we propose to build it on the Ethereum because Ethereum provides one of the best supports for smart contracts creation.[18] Ethereum has recently successfully completed the Istanbul hard fork, which increased bandwidth by lowering transaction costs (gas) and foster zero-knowledge privacy technologies such as zk-SNARKs.[19]
The blockchain runs on Proof of Work (PoW) consensus mechanism, which is necessary for our purpose to take politics out of the system. The major two drawbacks of a PoW blockchain, waste of energy and security, are mitigated.
The tokens are tied to citizens biometric information (essentially functionable as an ID, which will be discussed in Part IV), arbitrage and investment opportunities of the tokens are very limited (as mentioned in part a). The estimated transactions are capped by the total immigration slots and the expected acquisition to get to that required token number. Second, the Ethereum together with the network of iMigrate will overcome the 51% attack threat.[20]
c. The Auction Smart Contract
Here, we incorporate an auction smart contract that will act as an auctioneer. A smart contract is autonomous that it locates at a specific address in the Ethereum blockchain and contains function to execute codes that even the creator cannot modify that.[21]
The bidding and auction process will be based on the sealed-bid auction system where the bidders submit their bidding with encryption and the initial funding attached sending to an escrow account. Each bidder can only bid once. Once the auction time is over, the smart contract will decide the top bidders make immigration transactions with them (the successful bidders will pay the difference between the lowest winning bid and their initial funding). If immigration transactions are confirmed, the smart contract will refund the unsuccessful but truthful bidders their funds.
An individual’s immigration status should be private. Such transactions should not be revealed to the public. In order to protect the privacy of the bidders, we utilize secure multiparty computation protocols[22] and interactive zero-knowledge proof protocols.[23] Ethereum enables us to efficiently perform ellipse curve point operations at low gas cost. Under the zero-knowledge protocol, the public can verify the correctness as claimed by the contract to determine the winner.[24] Once bidding starts, each bidder submits a bid commitment using Pederson commitment scheme[25] along with the necessary funding in ethers. The smart contract then orders the bids to determine the winning bid, the associated account address and commitment. After the successful verification of correctness, the state of the contract will be changed so that the winner can pay the winning bid.[26]
d. Quota by Country
The number of tokens required to move to other countries permanently depends on the market supply and demand. Each country publishes the quota on the maximum number of immigrants allowed every year. Different countries will have different market for immigration. The developed states with high welfare will require more tokens than those countries with authoritarian or dictatorship in place. One can sell his token or buy from others.
The quota is necessary, because (1) this is not a proposal for open borders policy; (2) the supply demand mechanism won’t properly work in an unlimited supply auction where bidders has no incentive to pay more than 0; and (3) there could be some upper bound of immigrant number for any given country. An obvious upper bound could be the total population of that country. One reason is that a majority of immigrants could essentially overwrite existing laws in the target country by voting assuming democratic process.
We propose using a lower upper bound of such immigration quota: the average difference in the popular votes over the last three presidential election of the target country (adjusted by presidential term length and turn out). The rational is that if the difference between the power of top two political parties is small, we don’t want one party to buy votes by paying for the required tokens in return for their votes.
For example, the last three U.S. presidential (or equivalent in significance) elections had popular votes difference of: 2.8 m (2016), 5m (2012), and 9.5m (2008). The average will be 5.8m. Based on a term of 4 years and voter turnout rate around 60%, the proposed quota for the U.S. will be 5.8/4/0.6= 2.4 million, comparing to the current U.S. system issuing about 1 million immigration visas annually.[27]
For a target country with dictatorship or authoritarian, the difference for its popular votes will be close to 70% or more. Countries like North Korea could have a virtually 100% turnout and 100% vote difference. The immigration quota will equal to its population, low bids ensured.
We can also design other quota structure, as long as such schemes create a negative feedback loop and only involve objective measurements (think of GDP per capita, or unemployment rate).
IV. Conclusion and Future Work
We presented a blockchain based global immigration solution that is decentralized, secured, and trusted. Utilizing Pedersen commitment scheme along with zero knowledge protocol, the bidders do not learn any information about the other bidders throughout the process. Under the free market model, most immigrants are expected to be younger and more skilled so that they would maximize the benefit of the paying the premium of entry. As a result, such immigrants will minimize the use of welfare of the target countries.
There are many exciting features that can be added to our blockchain based system depending on the potential needs. For interested government agencies, such as the USCIS office, we can suggest implementing the current diversity lottery system in the U.S. globally using a smart contract. If needed, we can also exam the possibility of creating a blockchain based lending program to help those who are unable to pay for their immigration bids.
For future work, we will investigate whether the proposed system is more suitable for employment-based immigration, family-based immigration, and what effect it will have on illegal immigration. We are also interested in investigating the possible ways of including stateless refugees in our system. The technology could give those individuals the power to store their personal information and digital identity wherever they go.
[1] Becker, Gary S. and Coyle, Diane, The Challenge of Immigration: A Radical Solution (April 13, 2011). Institute of Economic Affairs Monographs Occasional Paper No. 145, p. 26.
[2] See 8 U.S.C. 1151–52 (1986); the annual admission of U.S. citizens’ spouses, parents and children (under 21) has no limit.
[3] Kandel, William A. Kandel, Permanent Legal Migration to the United States, Washington, DC: Congressional Research Service R42866 (October 29, 2014).
[4] Becker, supra note 3, p.24; American Immigration Council, How the United States Immigration System Works, American Immigration Council (October 10, 2019), https://www.americanimmigrationcouncil.org/research/how-united-states-immigration-system-works.
[5] Alexander Panetta, Canada’s Immigration Policy Inspired Donald Trump’s New Plan: White House, Global News, August 2, 2017, https://globalnews.ca/news/3643835/trump-immigration-canada/.
[6] Brett Line, How Other Countries Handle Immigration, National Geographic (June 30, 2013), https://www.nationalgeographic.com/news/2013/6/130630-immigration-reform-world-refugees-asylum-canada-japan-australia-sweden-denmark-united-kingdom-undocumented-immigrants/.
[7] Id.
[8] American Immigration Council, supra note 6.
[9] See Michael J. Trebicock, The Law and Economics of Immigration Policies, American Law and Economics Review, vol. 5, no.2, 271-317 (2003) Retrieved from www.jstor.org/stable/42705433.
[10] See Woetzel, et al., Global Migration’s Impact and Opportunity (November 2016) https://www.mckinsey.com/featured-insights/employment-and-growth/global-migrations-impact-and-opportunity.
[11] Becker, supra note 3, p.27.
[12] Id. at 28–29.
[13] See Alex Nowrasteh, The Case for an Immigration Tariff: How to Create a Price-Based Visa Category, Cato Institute (January 8, 2019), https://www.cato.org/publications/policy-analysis/case-immigration-tariff-how-create-price-based-visa-category.
[14] See Stark, et al., A critical comparison of migration policies: Entry fee versus quota, ZEF-Discussion Papers on Development Policy, No. 238 (2017) http://hdl.handle.net/10419/180187.
[15] Wikipedia contributors. International Organization for Migration, Wikipedia (November 24, 2019) https://en.wikipedia.org/w/index.php?title=International_Organization_for_Migration&oldid=927742095.
[16] Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System (2009), https://bitcoin.org/bitcoin.pdf.
[17] Id.
[18] Gavin Wood, Ethereum: A Secure Decentralised Generalised Transaction Ledger EIP-150 Revision (2014). https://gavwood.com/paper.pdf.
[19] William Foxley, Ethereum’s Istanbul Hard Fork Is Now Live, Coindesk (Dec 8, 2019) https://www.coindesk.com/ethereums-istanbul-hard-fork-is-now-live.
[20] Michael J. Casey and Paul Vigna, BitBeat: Mining Pool Rejects Short-Term Fix to Avert “51% Attack”, WSJ (June 16, 2014), https://blogs.wsj.com/moneybeat/2014/06/16/bitbeat-a-51-attack-what-is-it-and-could-it-happen/.
[21] Solidity, Introduction to Smart Contracts (2019) https://solidity.readthedocs.io/en/v0.4.24/introduction-to-smart-contracts.html
[22] Marcin Andrychowicz, et al., Secure Multiparty Computations on Bitcoin, In 2014 IEEE Symposium on Security and Privacy (SP) (2014).
[23] Goldwasser, Micali, and Rackoff, The Knowledge Complexity of Interactive Proof Systems, SIAM Journal on Computing, 18 (1): 186–208 (1989).
[24] Id.
[25] Torben Pedersen and Bent Petersen, Explaining Gradually Increasing resource Commitment to a Foreign Market International Business Review, Vol 7, Issue 5 (1998).
[26] Hisham Galal, Verifiable Sealed-bid Auction on the Ethereum Blockchain, Financial Cryptography Conference (March 2, 2018)
[27] National Conference of State Legislatures, Snapshot of U.S. Immigration 2019, NCSL (March 29, 2019) http://www.ncsl.org/research/immigration/snapshot-of-u-s-immigration-2017.aspx.