Why Blockchain Could Be The End To Fraud And Corruption
Before we begin delving into fraud and corruption, the main topic of this article — let’s recap what Blockchain is.
- Blockchain is a distributed information system, or digital ledger, that is designed with transparency, openness and security at its core.
- It achieves this by way of decentralization — by dispersing data across multiple nodes, or computers on a network. This is contrasted to centralized systems, whereby data is recorded and stored on a singular location.
- Transactions and data are recorded into a tamper-proof, distributed database using cryptography, or digital encryption, to augment security. Through peer-to-peer verification, high standards of data integrity and authenticity are ensured.
Essentially, the ‘ledger’, or the blockchain, is a growing list of records, called blocks, which are linked and secured using cryptography. The system is designed to use node agreements to order transactions and could effectively be used to prevent fraud.
In short, the 3 key features of blockchain are transparency, immutability (tamper-proof), and security. These 3 qualities Blockchain possesses make the technology a prime candidate to tackle fraud and corruption.
So with that in mind, let’s explore how Blockchain can attempt to prevent fraud and corruption...
Removing Fraud From Finance
If there was any ‘low hanging fruit’ that Blockchain could potentially solve, it would most likely be somehow related to financial products.
In traditional centralized systems, financial transactions require time for settlements, differences in currency denominations, and third-party intervention.
Processes are often convoluted and are subject to a reliance on human trust. These processes that require human participation are often the prime targets for fraudsters.
So why is Blockchain important here? Well, via distributed ledger technology, information can be shared in real-time, and data is verified via peer-to-peer mechanics — meaning that no one participant can ever have a different version of the ledger. This removes any chance of collusion or fraudulent activity.
On top of that, these processes that were once manually controlled by human labour can now be automated, which not only saves time and cost (no more middlemen!) but also removes the possibility of human errors (whether deliberate or malicious).
Removing Fraud From Supply Chains
A common problem inherent within supply chain industries of today is that processes are convoluted, tracking is a complex situation due to many intermediaries all acting with one another. As a result, the supply chain industry is rife with holes and highly susceptible to fraudulent activity in its weakest links.
Though fraud related to financial institutions tends to get more media attention, fraud in supply chains is just as much of an issue, if not a greater one. Because supply chains are complex and usually involve many people and moving parts, there are a lot of holes in which fraud can be committed and go undetected.
Blockchain is ideal to combat all of these situations for the features mentioned above, particularly in regards to real-time tracking, heightened transparency and automated verification systems. Late last year, the major retailer Walmart partnered with IBM to work on the Hyperledger Fabric blockchain, which could practically track food items from supplier to shelf.
Circumventing Political Corruption
In theory, blockchain’s very nature of being immutable and transparent makes it a prime candidate to tackle an issue like corruption. From an accountability standpoint, fraud and censorship are incredibly hard to get away with via the blockchain due to its transparent audit trail.
Distributed Ledger Technology also prevents anyone from ‘cooking the books’, so to speak. No party would be able to wipe their servers to cover their tracks, nor would they be able to lie about where transactions originated from.
Electoral fraud is rife around the world, particularly in developing nations, and some projects have already set out to tackle this serious issue head-on. Blockchain technology can render your vote anonymous while also providing better security.
A project known as Agora have built a digital voting platform for governments and organizations that leverage blockchain technology. It has already been successfully deployed in Sierra Leone’s March 2018 presidential elections, where votes from the West Districts were recorded on an immutable blockchain ledger.
Is Blockchain The Silver Bullet We Need?
While in theory, blockchain appears to hold many of the answers to solving these problems. Though as with all new technologies, the best approach is with that of cautious optimism. Above all, the efficacy of these projects will largely depend on how they are deployed, as corruption can happen outside of the audit trail as well, i.e. deviant public servants, corrupt politicians etc. Only time will tell whether Blockchain is the answer we seek for these problems, though it does look promising.
With a raft of respected blockchain thought-leaders from Malaysia and around the world set to feature, Blocfest’s focus will be on blockchain’s immense potential in the Southeast Asian region, where the technology has already made great headway.
Blocfest is set to launch 26–27 September, and guests are invited to also join us for KL Blockchain Week.
Find out more about our speakers by clicking here.
Originally published at www.blocfest.asia on September 4, 2018.
