In the midst of the 2008 financial crisis, Satoshi Nakamoto released the bitcoin white paper, a peer-to-peer cash payments system. A dollar without the Federal Reserve System and a EURO without the European Central Bank. It had become clear that the public had lost trust for the financial system and was reaching out for an alternative.
One can argue that blockchain and distributed ledger technology are the unintended but inevitable secondary result of an amalgam between technology, libertarianism and a demand for transparency and decentralisation. Just as any other revolution, it stemmed from a lack of trust in the powers that be and from the need for a better system.
Distributed ledger technologies make it possible to send and store value digitally without the necessity to trust a central authority or a third party. Information is dispersed among all participants in the network, rather than controlled by an intermediary or an organisation. Providing the ledger with all the necessary tools to reduce corruption, increase transparency and secure data and transactions by establishing trust between the participants.
World Economic Forum recently released a paper stating that countries around the world spend an estimated of 9.4 trillion USD and 15% of the GDP every year on procuremen. For some countries, it can reach as far as 30%. Additionally, according to OECD, 10-25% of the value of public contracts are lost to corruption resulting in costs for corruption such as fraud, waste and abuse of up to 2.35 trillion USD globally annually.
What is the main reason that corruption can flourish? The reason is that countries lack transparency. According to the IMF in May 2016 report Corruption: Costs and Mitigating Strategies highlighted the importance and the value of transparency as a fundamental fraud preventive strategy:
“Although transparency is a general prerequisite for the proper functioning of the market, it is also a core component of an effective anti-corruption policy. Transparency plays a critical role in ensuring the efficient allocation of resources by allowing the market to evaluate and impose discipline on government policy, and by increasing the political risk of unsustainable policies. In addition to these important functions, transparency can play a key role in preventing corruption and promoting good governance. By providing the public with access to information relating to government decisions and financial transactions, transparency can effectively deter illicit behaviour. Indeed, a number of studies demonstrate a positive correlation between corruption and the lack of public budget transparency. The more transparent the budget in a given country, the less corrupt the country is perceived to be.”
Blockchain, or Distributed ledger technology, can be used in nearly every instance. It could, for example, be used to ensure that the minerals that are used to build your phone are not a product of child labor or or to ensure the impossibility of a voter fraud. Every transaction is recorded on a block and stored in multiple copies which are distributed to all nodes (computers) of the system, hence providing transparency on the ledger. Additionally, every block links to the former one and after, hence creating a secure chain which ultimately increases efficiency and impacts the link between warehousing and the delivery-to-payment in a positive way. The aforementioned chain-of-command is essential for a variety of matters and blockchain includes this as a built-in feature.
In present time, consumers have a hard time deciding the true value of products. It is also considered extremely difficult to investigate supply chains where suspicion of illegal or unethical practices has been used, all of this because of a lack of transparency. In the food industry, it is extremely important to have a solid track of records in order to trace each product to its source. Indeed, DLT and blockchain technologies can be used just about anywhere and to ensure consumer safety.
As a recent example about the possibilities provided by the blockchain technology, the European Commission recently named the technology to be part of its framework for combating the spread of false information online. Just like the technology can ensure consumers where the minerals in their phones come from, it can be used to ensure that the information provided is from the given source and by an authentic writer.
The EC identified blockchain as an important part of what will be called the Code of Practice on Disinformation. Recently, in a press release by the European Commission, blockchain technology is one of ’emerging technologies which are changing the way information is produced and disseminated, and have the potential to play a central role in tackling disinformation over the longer term.’ The EC also states that blockchain applications can help provide news on the internet with transparency, reliability, and traceability. Additionally, the Commission added that distributed ledger technologies can be combined with other identification processes:
“Innovative technologies, such as blockchain, can help preserve the integrity of content, validate the reliability of information and/or its sources, enable transparency and traceability, and promote trust in news displayed on the Internet. This could be combined with the use of trustworthy electronic identification, authentication and verified pseudonyms…”
The segments of this technological breakthrough are special but not new. The idea of decentralised systems; encryption, hash rates and peer-to-peer networks, have been around for years. However, when merged together, it formulates a new structure with exclusively contrasting properties and its significant potential for extensive fundamental change should not be miscalculated.
A marathon is in motion – a marathon leading to the massadoption and to be the protagonist in the revolution. We see new applications for blockchain and distributed ledger technologies envisioned and trialed every day, and it is now clear that no area will be left untouched.