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Fighting corruption with the help of blockchain technology

September 20, 2020

Some of the main functions of government institutions are the reallocation of resources and the keeping of official records. These are exactly the areas in which Blockchain technology, with an emphasis on enabling secure, traceable transactions and keeping immutable records to build trust, is well positioned to make a strong impact.

A recent report from The Danish Ministry of Foreign Affairs is the latest to highlight the potential of blockchain technology as an effective tool in the fight against government corruption. However, this proposal is only the latest in a long line of policy proposals and analytical reports that the document the immense promise that distributed ledger technology holds for advocates of government transparency, as well as the many constraints that the implementation will inevitably face.

Technological solutions to the constant problem

Each government is a giant knot of procedures, records, transactions, and human bureaucrats who make formal rules within their jurisdiction. These extensive and complicated organizational structures are often not transparent and difficult and expensive for an outsider to understand, let alone monitor.

Fighting corruption with the help of blockchain technology
Fighting corruption with the help of blockchain technology

Officials who manage resource flows directly or who have authority to sign can be incentivized to abuse their powers for monetary gain if they realize that the risk of getting caught is minimal. According to one estimate, corruption in the public sector consumes between $ 1.5 trillion and $ 2 trillion worldwide each year, which is roughly 2% of global gross domestic product.

Many experts in the fight against corruption dThey put their hopes on various digital technologies to make a breakthrough. The Danish Foreign Ministry’s report provides an overview of several possible avenues in the fight against administrative and political corruption. One such way is to make all public sector data accessible to all, thereby increasing transparency. Activists and surveillance organizations can conduct independent audits and identify suspicious behavior in public spending.

The second approach proposed is to reduce the scope for corruption by expanding the scope of e-governance and bringing most government services online. In this context, the authors plan to use blockchains to enable transparent and tamper-proof data and value transactions. Another suggestion is to use crowdsourcing platforms to facilitate reports and complaints about small corruption cases.

To the last, The report’s authors suggest deploying blockchain-based solutions to ensure the integrity of public records and digitally secured rights to property and state aid. They emphasize how this can not only improve the integrity of public records, but also empower groups that do not have enough banks or have limited access to government services, such as the lack of a government-issued ID card. the State.

Restore trust

The craze for this and other anti-corruption applications of blockchain is not new. In a 2018 article for the Stanford Social Innovation Review, Carlos Santiso, an expert at the Inter-American Development Bank, deserves special mention this has already been created “Bubble of Expectations” about the potential of technology to reduce corruption in government, both in public and in the tech community.

Santiso argues that in the digital age, technology serving the government invariably increases the transparency of the public sector. In his view, blockchain technology is particularly well suited to achieving this effect because of its unique ability to ensure the authenticity of records and to eliminate inefficient data management practices inherent in traditional bureaucracies. There Blockchain-based systems could help restore deteriorating trust in government.

Other observers claim that Instead of decreasing trust in government agencies, the blockchain can offer an entirely new mechanism for building trust. A team of analysts representing the non-profit anti-corruption organization Transparency International suggests in a research report that technology can be particularly useful in countries where there is corruption and where trust in institutions is very low.

Members of another group of anti-corruption experts, the Norwegian U4 research institute, repeat this assessment in a report for 2020, It states: “Blockchain was developed to operate in environments where there is greater trust in data / code than trust in individuals or institutions.”

use cases

Three main uses of blockchain technology in the fight against corruption in government appear regularly in all expert reports: Authentication of transactions, registration of official records such as property rights and identity verification.

The transfer of state transactions, For example, public procurement contracts to an open ledger in which they can be traced could deal a decisive blow to the type of corruption that arguably costs taxpayers the most: major projects in which unscrupulous officials manipulate the process in favor of certain contractors. Taking this step further and coding the procurement operations in smart contracts in a distributed ledger can greatly reduce the space for dodgy activity.

While the sheer size of industries that depend on contact with the public sector would make such a transition extremely difficult in the short term, development-oriented organizations such as The World Economic Forum is devoting much-needed attention to the idea of ​​blockchain-enabled acquisitions.

The uses related to reviewing records appear closer to realizing them. Examples from Kenya and Rwanda, where government documents on education and land rights migrate into distributed ledgers, are given in the report from the Danish Ministry of Foreign Affairs.. In these and other countries, corrupt officials find it increasingly difficult to take advantage of their positions in public recording systems for personal benefit.

In the area of ​​identity management Blockchain-based IDs can be particularly useful for vulnerable groups such as refugees or those who have never had a government-issued ID. Securing their identities in an open ledger helps ensure fair distribution of aid and access to other essential services.

It’s not a panacea

According to U4 analysts the fact that the blockchain is becoming a valuable tool in the fight against corruption in a particular national setting It depends heavily on contextual factors such as “infrastructures, legal systems and (and) social or political environments”.

For example, Rebuilding entire government data management systems to run on blockchain may not fit well with existing data protection regulations. The immutability of the records entered in the ledger contradicts one of the principles of the General European Data Protection Act: the right to be forgotten.

Another important consideration to consider is the “garbage in, garbage out” nature of blockchain systems: the data stored in them is as good as the input. This means that There will continue to be human guardians in charge of data entry. and the need for embedded data audits. Hence, it would be inherently impossible to completely remove human involvement from such a system, leaving room for corruption.

To the chagrin of the absolutists of decentralization It is also unlikely that public sector blockchains will be open and without permission. Although it would make sense to make most of the data available for the external audit, It is naive to expect governments to hand over control of their databases to a distributed network of nodes that may be in external jurisdictions.

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