Blockchain — an effective mechanism for stimulating economic cooperation for BRICS countries

What is the blockchain?

Blockchain is the technology for building a decentralized registry ( or ‘ledger’).

In the blockchain you can store records of bank transfers, documents, contracts, legal rights, patents, and so on.

There is no central trust authority in the blockchain, which would ensure the safety and correctness of this information. The trust in blockchain is ensured by the inherent properties of the blockchain network, based on mathematics, cryptography and game theory.

The primary blockchain properties, which extends the current internet experience, are:

1. Trust relationship between the parties transmitting data in the blockchain is formed on the basis of mathematics. Prior to the appearance of the blockchain, trust was secured by personal acquaintance, organization’s fame and other subjective indicators, which are often overlooked. Blockchain changed this paradigm, largely influencing the notion of “trust” in the digital world. Confidence in the blockchain is formed mathematically, with the participation of a large number of participants, reaching an agreement (consensus), that is, it is objective, not subjective.
2. Transparency of interaction and safety of information on computers distributed around the globe and, generally speaking, not trusting each other.
3. Possibility of fulfilling pre-determined agreements (smart contracts) between parties that do not trust each other or have diverse interests

Successful Blockchain Applications

The developed projects in the field of blockchain can be identified in several areas:

• Cryptocurrency is the very first and most successful application of the blockchain. The network of the first cryptocurrency — bitcoin — was the first confirmation of the applicability of the blockchain ideas, and is still the most significant application of it.

• Registries on the blockchain are being introduced in many areas of activity, where openness, reliability and the decentralized trust are needed. We can say that in such registers “data belong to the people”. They are organized at various levels — worldwide, the scale of the country, enterprise or community:

• Georgia introduced a register of storage of property rights (an analogue of the Russian regalata) on the basis of a blockchain;
• Diamond miners in Africa store data on more than 2 million diamonds in the blockchain and trace them from mining to cutting and selling;
• Estonia keeps data on citizens in a decentralized blockchan registry, on the way to a “digital passport”.
• Ensuring the fulfillment of obligations based on smart contracts. For example, lawyers are looking for ways to transfer legal relationships to smart contracts in the blockchain network. Outstanding feature of smart contracts is that they are executed even in the event of conflicting interests of the parties that originally participated in it.

• Cooperation and crowd-funding networks. Blockchain enables to involve the active community of participants in projects that need expert or financial support. This property is actively used by many startups, which issue their own cryptocurrency (tokens) and conduct their initial coin offering (ICO). In addition to purely monetary interest, the projects receive support from the community, valuable employees and publicity at the expense of the ICO.

It should be noted that successful block-projects exist at different levels of coverage of participants: world-wide, national, corporation and organisation.

Value for BRICS from the blockchain applications

BRICS, like the block, has a decentralized nature. For this reason, BRICS projects can easily use blockchain and at the same time benefit from its properties in the very near future.

The projects of BRICS participants can receive the following benefits from the introduction of blockchain into their processes:

1. effective economic interaction, fast, open, without barriers and borders, without intermediaries
2. financial instruments and services for direct support of projects that meet the needs of organizations and are independent of external factors
3. opportunities to expand the labor market and joint activities for organizations and their employees, overcoming the borders of countries, currencies, continents
4. protection of copyright, intellectual property for citizens and organizations working outside

Economic cooperation will become faster, more transparent, more efficient and more interesting for participants due to:

1. Elimination of intermediaries and superfluous hierarchy of management and central regulation. The direct relationship between peer-to-peer (peer-to-peer) in a decentralized system has proved itself in many examples as a more progressive, economical model;
2. Overcoming barriers between countries, political, economic and financial systems through openness, an objective degree of trust, security of data storage. Blockchain can serve as a unifying factor, the credibility of which is objective and does not require additional confirmation from individuals or organisations;
3. Introducing a suitable system of values for the interests of the participants in the cooperation. Tokens produced by companies in the conduct of ICO are a special case of such value. Within the BRICS, such values can be formed within consortium between participants, individual industries to ensure transactions of value transfer between them;
4. Rapid and effective achievement of an agreement (consensus) between participants in economic interactions. This applies to voting procedures, decision-making, conclusion of contracts, consideration of disputed issues;
5. Organization of a decentralized exchange of goods and services within the BRICS. The agreements on this exchange will be recorded in the network of blockchain in the form of smart contracts, and settlements in specialized crypto-currencies.

The following financial instruments and services on blockchain can be introduced in BRICS:

• Loans in the internal crypto currency, tied to the assets of participating organizations. This will make the economic model independent of external factors (such as the dollar rate), reduce the degree of risk and speed up the development of joint ventures credited in this crypto currency;
• Investment in the crypto currency, which will grow in value in proportion to the development of organizations or entire industries. This will open up opportunities for investors and significantly expand the range of fundraising and interest of foreign investors;
• Decentralization of the banking system for instant, transparent and secure exchange of funds between BRICS organizations;

The following blockchain solutions to employment, expertise sharing and cooperation can be introduced in BRICS:

• Decentralized labor exchange in the BRICS countries can be built with a specialized crypto-currency. It will inherit all the positive properties of technology and will be governed by agreements between the participants.

The following projects in the area of protection of copyrights, trademarks and objects of intellectual property will be valuable for BRICS countries:

• Decentralized register that keeps “casts” from objects of cultural, copyright and intellectual rights will help significantly simplify the procedure for registering rights and dispute settlement procedures;
• Blockchain record can serve as evidence on the basis of the fundamental properties of the block of data on the consistency and consistency of data;
• For BRICS countries, the introduction of such a registry will help to organize a common space of law in the field of intellectual property, which is now the main asset driving high-tech industries.

The combination of projects that benefit directly from the implementation of blockages and the world experience of its implementation is a key factor in stimulating economic cooperation in the BRICS countries.