Blockchain for policy and development

Blockchain is a highly advanced digital database of economic transactions, spread throughout a vast network of computers and updated regularly. It is completely decentralised, and therefore virtually incorruptible.
First, someone requests a transaction, which is then sent to a network consisting of various computers, also known as nodes. The specific type of network is called a peer-to-peer network. This network is the reason why blockchain is decentralised. There is no intermediary or middleman through which all transactions are processed. The transaction occurs directly between the two parties or peers, hence the name ‘peer-to-peer network’. Once the transaction has been sent to the network, the nodes use existing algorithms to validate the transaction and ensure the user’s identity. After this validation has occurred, the transaction is then added onto the ledger to create a new block of data. This block contains a reference to the previous block, known as a hash, the information on the transaction and the timestamp of the transaction. These factors make it virtually impossible to alter the information. The transaction has now been completed and this process repeats itself for all blocks.

Applications of blockchain technologies

Identification and privacy

Blockchain has the ability to spur much advancement in the process of identification in both the developed and the developing world. In many first world countries, people have various online accounts to provide them access to various services. Each of these accounts has a different username and password, which merely serve to make sure the person who has paid for the service is the one using it. Instead of having multiple usernames and passwords, blockchain allows a person to have one user profile and then to use that user profile as a means of confirming their identity and accessing the various services they have availed themselves of. This process increases the security of the data and prevents hackers from getting access to a person’s login information on various sites. The owner is also able to choose who has access to this data, so the data is not bought and sold by big corporations that use it for their own personal gain.

Blockchain has the ability to spur much advancement in the process of identification in both the developed and the developing world.

A US-based company called LifeID is a blockchain-based open-source platform for self-sovereign identity. The company is working towards developing a platform in which the user has one profile that can be shared and accessed by a variety of vendors to whom the user has given permission (Zyskind et al., 2015). Armed with a self-sovereign digital identity, the users on the platform can securely and easily manage all online and real-world transactions where the requirement is for authenticating identification, without the need to depend on third-party oversight or control of a large social network, corporation or government agency.
Similarly, a New York-based blockchain company called HYPR provides enterprises with decentralised authentication solutions. The company uses a biometric security suite that provides enterprises with a fully interoperable solution to secure users across mobile, desktop and the so-called Internet of Things (IoT) systems. HYPR enhances the user experience by allowing them to choose from voice, face, touch and eye recognition. HYPR’s decentralised authentication platform allows enterprises to leverage biometrics without worrying about hackers attacking a biometric server or centralised password database. Moreover, such platforms allow users to control their data sharing with third parties and hence could be General Data Protection Regulation (GDPR)-compliant. (The new GDPR is a sweeping and stringent EU-wide legal framework for personal data privacy, which became effective on 25 May 2018. It grants EU citizens the ‘right of access’, which requires companies to detail upon request what personal data is being processed and how. Moreover, it grants EU citizens the ‘right to be forgotten’ and the ‘right to data erasure’ from the company’s database.)
Blockchain technology can also provide easier identification of people. For example, at birth, a person is given a birth certificate that can now be stored on a blockchain ledger after it has been approved by the doctor, the hospital and the government. There is now proof that that person is real. Once the person dies, their death certificate can be added to the ledger. As a result, it is much easier for the government and corporations to make sure they are hiring a legitimate candidate. The same goes for visa and refugee applications. If everything is stored in a secure ledger, a government can look up a person and their background and use that information to decide whether or not they want to approve the visa or refugee application of that person. This measure increases national security across the globe. Another application of this technology is voting. Instead of having to go through a cumbersome voter registration process, people can simply be looked up on the ledger for identification. This system reduces the risk of voter fraud as well.
Consider the example of Aadhaar, the world’s largest unique identification system, which holds over 1.19 billion Indian residents’ records—their name, date of birth, gender, address, mobile/email—and stores them against the corresponding biometric data. The data is centralised and is thus prone to cyber attacks. A blockchain-based Aadhaar would comply with the data protection and privacy stipulations outlined in the Right to Privacy judgement. It would allow information to be collected, held and utilised transparently with the consent of the individual whose information it is. There would be similar such examples in the context of Bangladesh and other developing countries with lessons on how they can leverage big time on blockchain technology in order to protect the rights of the citizens of the country.

Food and agriculture

One of the key benefits blockchain provides is increased supply chain management. On a blockchain-distributed ledger, exporters and importers can track the progress of a shipment of goods from its country of origin through each port and city until it reaches its final destination. This supply chain management is especially critical with regard to food. Using a blockchain-based ledger, suppliers can track how much food is at each location and deliver food to where it is needed most. Consumers now know where their food is coming from and can ensure its safety for themselves and their families. The ability to track food and other agricultural products allows regulatory agencies, such as the US Food and Drug Administration, to ensure that food and products meet their safety requirements
Many companies have delved into this market and are expanding the use of blockchain. One such company is BlockGrain, which specialises in the management of agricultural stock. BlockGrain provides farmers with the necessary supplies and then connects them with consumers and others who want to buy their products. It allows for the proper allocation of food and delivers food to where it is most needed. This redistribution lessens food insecurity and malnutrition—two major problems in the developing world. Akshaya Patra, a non-profit organisation headquartered in India, uses the benefits of blockchain supply management to deliver thousands of meals every year to rural and underserved areas in India. The system allows it to find out where meals are needed most, to track their progress and to ensure their safe and timely delivery to the necessary locations. Organisations such as Akshaya Patra are making a real difference in the lives of people and illuminate blockchain’s ability to help those in need.

Water management

Blockchain in conjunction with IoT devices can also be used to manage the water supply and avert crises similar to the one that occurred in Flint, Michigan, in the US. First, sensors can be placed in the water supply to monitor it for various dangerous chemical substances. The US state of California has provided each of its residents with smart sensors to control water usage, so this step will be easy to take there. Current sensors will have to be modified so they can detect the various chemical compounds. The devices can then send their data over a secure blockchain network. The advantage of using blockchain over a cloud network is the increased security that blockchain provides. Blockchain makes it much more difficult for outside entities to manipulate the data. If chemical levels reach a certain threshold, a smart contract can then be executed to alert the proper authorities and deploy any countermeasures to prevent the problem from getting out of hand. Filament is currently working on a system to seamlessly integrate IoT devices across a blockchain network so these solutions can be implemented.

Land ownership

Blockchain provides an easy way of quickly identifying a land’s provenance or ownership. The blockchain-based system is much better than the current land registration system. With all information stored on a secure, shared ledger, it is much simpler to settle land disputes, which are especially prevalent in developing economies. A company called BitLand is currently working on such a solution— designing a blockchain-based ledger system that can keep track of the ownership of land so that disputes can be settled much more quickly. This system is currently in its trial phase in Ghana.

Intellectual property

Blockchain also has applications in the world of intellectual property. In a similar vein as land ownership, a blockchain system can be used to register patents, trademarks and copyrights. The system will be able to clearly identify the true owner of a patent or trademark, which makes the dispute settlement process much quicker and easier. It also prevents the emergence of patent trolls, since everybody has access to everything that has been patented. Disputes can be settled much more cheaply, so trolls cannot simply strong-arm smaller businesses and companies into settling. Having a patent tracking system on a blockchain ledger disincentivises this kind of behaviour as there is less money to be made since there is a lack of information asymmetry. This practice can also be applied to works of art, literature and music.

Social welfare programmes

An important application of blockchain is providing welfare payments. The government can use a blockchain network to ensure people’s identity and then easily send money to those who qualify for its programmes. This entire process can be triggered via the use of smart contracts that automatically issue payments if certain conditions are met. Many companies have engaged in developing a blockchain system through which people can send money to others. Aid:Tech has developed a system to securely provide entitlements to people across the globe, working specifically with Syrian refugees. Ripple provides a blockchain network for people who have emigrated from their home country to Europe or the US to send money back to their family at home. All transactions are secure and can be trusted. The only problem with this system lies in providing everyone with access to internet so they can connect to and use the blockchain network. Meanwhile, HyperGive is pushing the boundaries of charitable donations. its system allows people to securely provide donations to the homeless without needing to use cash. People can then track their money to check it is being used for proper purposes. This system is especially helpful for governments, as they can track where their payments are going, prevent the money from being used on frivolous items and reduce fraud.

Energy markets

Blockchain also has a vast array of applications in energy markets, especially when combined with the IoT and artificial intelligence (AI) devices. Blockchain can be used to create lower prices and greater efficiency in energy markets as energy can be bought and sold without the need for intermediaries. People can buy and sell their electricity via the blockchain network directly to others. The energy will then be automatically redistributed via the smart grid. The AI system can learn when a household’s energy consumption is the highest and sell the excess electricity in its off-peak time. This process allows for the redistribution of energy to places where it is most needed and prevents wastage. Being able to implement a smart grid with blockchain technology also allows for increased usage of renewable energy sources. Since renewable energy is not a consistent power source, energy can be stored during the production process and then be automatically redistributed later when it is not being produced (Deatherage, 2017).

Supply chain management

Blockchain would simplify transactions in the supply chain by providing everyone with the same ledger, serving as a public record for each party to reference. Because of the decentralised and unalterable nature of blockchain, it would be impossible for one single party in the supply chain to prevent others from accessing the ledger and manipulating the data in any way. Currently, companies such as Walmart and Nestlé are using blockchain to keep track of food and where it is coming from, when it needs to be sold by, etc. Blockchain is very helpful in the food industry as it allows companies to trace each product to its original source, which is important for record-keeping. Blockchain is also being used by BHP Billiton, the largest mining firm in the world, to keep better track of data throughout the mining process and more effectively communicate with its partners. In what seems like a very promising development in the diamond industry, De Beers now uses blockchain to track where its diamonds are mined from, helping avoid situations of ‘blood diamonds’ being garnered from conflict in third world countries.

Trade financing

The use of blockchain in trade finance has the potential to substantially increase the efficiency of trade processes, eliminate fraud, improve asset liquidity and provide better visibility in the trade supply chain. By automating payment methods, blockchain provides payment certainty and also expedites payments through the early discovery of discrepancies. Additionally, because trade documents move separately from the flow of goods, there is often a risk of document fraud for trading parties. With blockchain, the trade asset can be digitised through crypto-tokens to denote custody or ownership of the bearer and link its transfer between trade transaction participants on blockchain with the movement of the physical asset, establishing a clear chain of provenance. The trade-related documents can also be directly issued and verified on the blockchain by relevant parties. This provides delivery assurance and better risk management for buyers, as well as preventing losses from document manipulation and errors. Finally, since payment instruments are essentially credit instruments created by the trade transaction, they can be directly issued on a blockchain network as native assets. Payment instruments such as bills of exchange or promissory notes can be digitally created as financial contracts between the issuing and redeeming parties. Direct issuance of payment instruments on blockchain prevents fraudulent invoicing practices, improves small and medium enterprise financing options through increased liquidity of receivables and enables process efficiencies in managing receivables (Coppola, 2018).

The use of blockchain in trade finance has the potential to substantially increase the efficiency of trade processes, eliminate fraud, improve asset liquidity and provide better visibility in the trade supply chain.

Health and medicine

Blockchain could assist the electronic medical record process immensely by providing an easily accessible and complete version of patients’ health records so health care providers can better coordinate and personalise care. It also would allow patients to access and control their entire medical history. Perhaps most importantly, blockchain technology would ensure the security of sensitive health data in order to prevent manipulation or loss. Current applications of blockchain in the health care industry include Medibloc, Medicalchain and Patientory, all of which aim to revolutionise health care through increased efficiency and accessibility.

Moving forward

Problems

While blockchain can provide solutions to a variety of problems, it also poses problems of its own that need to be overcome before its benefits can be fully realised. The first problem is scalability. On the current bitcoin network, only 10 transactions are approved per minute. In order to increase the prevalence of blockchain, this number must go up. Thousands of transactions happen every minute and, in order for blockchain to become applicable in a large network, the number of transactions approved per unit of time must increase.
Another problem that blockchain poses relates to the size of each individual block. Currently, each block can store about 1 MB of data. Since many transactions happen over a minute, increasing the amount of storage space that each block can contain will be beneficial when creating a ledger that many can use.
A third problem with blockchain is its high energy usage and its environmental impacts. Many of the proof-of-work algorithms used to approve transactions require lots of computing power, which increases the system’s energy usage, thereby having a negative impact on the environment. Therefore, the amount of computing power necessary to execute these algorithms must be reduced, which would also allow any person to approve the transaction, thus increasing trust among network participants.
The high bandwidth requirement necessary to access the blockchain network presents another problem, especially in developing countries. Many residents will not have access to the proper bandwidth and will not be able to realise the full potential of blockchain. Either the bandwidth in developing countries needs to be improved or the bandwidth necessary for blockchain to operate must be reduced.
Another problem that arises with blockchain relates to its usability. People need to understand how it works and to know what to do to access the ledger. Less skilled and poorer people will find it hard to properly manage the public and private keys that give them access to the various blockchain networks. If these keys fall into the wrong hands, they can wreak havoc on the various networks. The complexity and cryptography associated with blockchain are also delaying its implementation. All parties must understand the code that is going into the network to ensure that one party is not using the information asymmetry present to manipulate the system. With blockchain, instead of having lawyers examine paper contracts, technical experts will examine the system and any smart contracts to ensure their accuracy. However, given the recent nature of the emergence of such technologies, the necessary technical expertise has not yet been developed and is not as widespread.
The final problem with blockchain lies in its immutability, which can turn into a liability. If there is a bug or software glitch, huge problems could arise across the network, which it may be difficult to fix, given the cryptographic measures in place. Accenture is currently working on a system to overcome these obstacles, to allow records to be changed if all parties are in agreement.
Many new projects are providing solutions to the above-mentioned limitations. One such project is the RAYS Network. RAYS aims to address issues ranging from usability to how decentralised systems operate. Features such as Delegated Proof of Stake and the Bulletproof Protocol for privacy are being modified by the developers to enhance the blockchain experience for users. Through the RAYS Network, speed per transaction will reduce to 1 second, the transaction cost will be free and more than 10,000 transactions can be performed per second on the platform. Moreover, the platform is GDPR-compliant.

Regulation

As with any technological advance, there is always regulation, to make sure the new technology is being put to proper use. Blockchain is constantly evolving, and the policy and regulatory framework needs to keep up with innovation. Whereas many view regulation as stifling growth, in this arena it can be used to fuel growth in certain areas and to ensure blockchain is being put to proper use for the common good. In fact, government participation is necessary to legitimise these technologies. Many of the above applications will not work unless governments get involved. Regulation also prevents criminals using technology for nefarious purposes. Criminals used blockchain technology on the Dark Web to run the illegal black market known as Silk Road—which was eventually shut down by the authorities. However, regulatory and legal frameworks can prevent the emergence of such markets (Peters et al., 2015).

Dubai

Dubai has launched an initiative to try and become the first city entirely run on various blockchain-based systems by 2020. In this effort, Dubai has partnered with IBM and Consenys in order to fully realise blockchain’s potential. The partnership is currently implementing a blockchain system for real estate transactions similar to the one being developed by BitLand. In fact, Dubai wants all document transactions to occur over a blockchain network so there is no need for cumbersome paper files and so the documents can be trusted. It is also developing a blockchain-based tourism marketplace, providing tourists with complete transparency on price and level of quality in real time. Tourists can simply look up hotel and dining options on the network and then book whatever is cheapest. Dubai has created a blockchain registry for start-ups and businesses so that consumers know what is available and where. Having a registry also allows transactions to happen over the secure blockchain network. Finally, Dubai has even launched its own blockchain-based crypto-currency, which its residents can use for transactions throughout the city. All in all, Dubai is well on its way to completely embracing blockchain and stands out as a model that others can follow (D’Cunha, 2017).

Without government involvement and regulation, blockchain will never be able to fulfil its potential or gain legitimacy among the public.

Conclusion

To conclude, as blockchain moves forward in its development, its applications can start to become fully actualised. While blockchain has much potential, more research and testing are still needed if we are to implement these systems on a global scale. Without government involvement and regulation, blockchain will never be able to fulfil its potential or gain legitimacy among the public. Government involvement is also necessary to gain access to a variety of the benefits that blockchain provides, ranging from privacy protection to water management to social welfare programmes. For this reason, Dubai’s blockchain initiative stands out as an example of what other governments can do in order to fully embrace the technological revolution at hand.
There is much potential here for low-income developing countries in Southeast Asia to take advantage of this emerging technology. Being proactive in blockchain initiatives will be key to the competitiveness of their industry in the future. Blockchain technology will allow farmers to increase their grain production and prove to the end consumer that their product is safe and secure. Filing paperwork will be more efficient so businesses can focus on improving their product and services. Banking transactions will be more secure. Blockchain has the ability to break down barriers and improve efficiency and productivity for a wide variety of businesses, which will be key to the future growth and development of these developing economies.

References

Coppola, F. (2018) ‘The Fast Changing World of Blockchain Solutions for Trade Finance’. American Express. Accessed 4 June 2018.

D’Cunha, S.D. (2017) ‘Dubai Sets Its Sights on Becoming the World’s First Blockchain-Powered Government’. Forbes, 18 December. Accessed 10 June 2018 .

Deatherage, S. (2017) ‘Blockchain Coming to Energy Markets, Faster Than You Think’. LinkedIn, 31 October. Accessed 4 June 2018.

Peters, G.W., Panayi, E. and Chapelle, A. (2015) ‘Trends in Cryptocurrencies and Blockchain Technologies: A Monetary Theory and Regulation Perspective’. Journal of Financial Perspectives 3(3): 1–43.

Zyskind, G., Nathan, O. and Pentland, A. (2015) ‘Decentralizing Privacy: Using Blockchain to Protect Personal Data’. IEEE CS Security and Privacy Workshops 180–184.