Can Blockchain Bring An End To Corruption?

01/03/2018 07:00 pm ET

The Roman historian Tacitus once famously quipped “the more corrupt the state, the more numerous the laws”.

Every year, roughly 2 percent of global GDP is lost to public sector corruption alone – at a hefty $2 trillion this equals to Italy’s GDP.

The total cost of corruption stands even higher, at 4-5 percent of global GDP. Countries across all continents lose substantial parts of their budgets to corruption. Some African nations see up to a third of their budgets go down the corruption drain.

After thousands of years of fighting against corruption, blockchain might just be the answer everyone was searching for.

In Africa, where contract procedures are either non-existent or highly opaque (and can lead to the most unpredictable outcomes), Blockchain can streamline business deals by rendering the manifold middlemen obsolete.

In Latin America, where changes to public registries are impossible to track, hence by virtue of a hefty bribe land parcels might discreetly change hands in a matter of minutes, blockchain could sanitize whole clusters of corrupt public authorities.

But it’s not solely confined to developing countries – numerous Western conglomerates routinely hand out bribes to lock in deals, just as politicians regularly represent the interests not only of their constituents.

Blockchain seems to be on the verge of radically transforming the way we vote and our trust in the ballot: We would no longer need to stand in queues and be physically present at the ballot box—we could simply vote from home, or anywhere at all. More importantly, by creating immutable ledgers, blockchain would make it impossible to tamper with our votes – proxy voting, ballot destruction and ballot stuffing would become mere anachronisms. This would also alter people’s perception of political power. Now, around a third of voters in both developed and developing countries do not trust the outcome of elections. If voters were given a fully transparent voting process, trust in public authorities would rise.

Some countries are already taking their first steps in this direction. The city of Moscow intends to use blockchain in a city management platform where inhabitants could track voting on city projects in real time. From there, it takes only one step to implement it in nationwide voting mechanisms. And from there, just one step to implementing transparency across myriad political processes that are in everyone’s best interest.

Increased transparency in political processes reduces the risk of tax evasion, thanks to which the risk that short-received government revenues will be rerouted from investments in infrastructure or education towards to band-aiding state finances ought to be nullified.

“We understand that the assimilation of blockchain-based voting technology and disintermediated governance tools will take place at variable speed,” Rik Willard, CEO of Global Blockchain Technologies Corp. (TSX.V:BLOC), told Oilprice.com.

BLOC is hoping to radically confine the space for corruption by eliminating unnecessary intermediaries and rendering political processes as transparent as ever, and as Willard says: “We are ready for that and intend to spearhead this much-needed transformation.”

Blockchain-based voting mechanisms would ultimately lead to the demise of dictatorships which maintain the superficial appearance of a democracy – decentralized technology is the exact opposite of what repressive regimes can survive under.

Of course, military dictatorships would steer clear of blockchain: It is very difficult to imagine North Korea, for instance, having a go at it. Yet the manifold quasi-democratic countries which exteriorly hold regular elections, claim to follow market mechanisms and hold democratic ideals dear will be forced to become more transparent under the weight of blockchain technologies.

Documents will be no longer owned by one single party and stored on a single server; document forgery would not be validated due to consensus protocol. Russia is a pertinent case in point as applying blockchain in a society where corruption has pervaded all spheres of life will bring palpable results in the very near future, to the surprise of many.

Evidence shows that the implementation of blockchain mechanisms can not only cleanse a given country’s political system, but could also spur economic growth.

Should public land registries across Africa be made fully transparent, land might be used as collateral for loans, thereby allowing millions of entrepreneurial Africans to leverage their property. This is supported by academic evidence; namely, that any reduction in corruption levels bolsters domestic and foreign investment as the fears of economic actors that the allocation of resources is disproportionally skewed gradually subside.

International organizations might also put blockchain to good account.

The international football association, FIFA, has been bogged down in myriad scandals with regard to its decision-making mechanisms. With blockchain, voting procedures would be as transparent as crystal, massively narrowing down the potentiality of another bribery scandal.

Even greater gains could be attained in international aid, the sphere where misappropriation reached its full zenith. Blockchain would allow to track down all financial transactions which followed the assignment of humanitarian or development aid – this is sorely needed as the history of World Bank development loans is replete with stories when the allocated funds were misused by a third-world country tribe chief to build a football stadium even though the declared objective was to build a school or hospital.

Some might perceive blockchain as a direct threat to the way governments exist nowadays, yet one could hardly find a better tool to dramatically increase the efficiency of public authorities with little to no transition roadblocks.

Big banks and major corporations are already taking advantage of this technology.

At the center of the blockchain boom in banking is the R3 Consortium. Since its inception in 2014, the consortium has been joined by a number of the world’s top banks, including Goldman Sachs, JP Morgan, and Citi. In addition to its impressive list of members, the consortium is also partnered with the likes of Microsoft, Intel, HP and InfoSys.

Immutability of data and process transparency will become key concepts of the 21st century and blockchain will prove that our past understanding of transparency was just a pale version of what can be achieved. As demonstrated by Global Blockchain Technologies, moving towards blockchain is not a question of ‘if’--rather of ‘when’ – and that ‘when’ will happen very soon.

Here is a list of companies to watch closely in the space:

Pure Storage Inc (NYSE:PSTG) knows that data platforms are also a key asset in protecting companies against cyber-attacks. Pure Storage, Inc is a data platform focused on delivering fast, optimized and cloud-capable solutions for its customers while keeping data security as a top priority.

As the cybersecurity world becomes increasingly competitive, Pure Storage stands out because of its innovative and forward-thinking business model.

Microsoft (NASDAQ:MSFT) is one of the most innovative and well-known companies within the tech sector, but its Windows platform is the most widely used operating system on the planet. First launched in 1985, Windows has shaped what is expected from a personal home computer.

But Microsoft is appealing to investors for more just its Windows platform. Like Intel, Microsoft is diving head first into an entirely new market. With key partnerships utilizing and implementing blockchain technology, the company’s upside could have huge potential as the tech takes off.

Nvidia Corporation (NYSE:NVDA): Nvidia is one of the hottest stocks on the market right now, and the top performer across the entire S&P 500. This stock has gone in only one direction—up. NVDA designs graphics processing units for the gaming and professional markets, as well as system on a chip unit for the mobile computing and automotive market. Nvidia’s chips are the best out there—at least the fastest.

Nvidia’s GPUs are second to none, and the company is definitely looking to take advantage on the bitcoin race.

Cisco Sytems (NASDAQ: CSCO) is a major player in telecommunications hardware. With a market cap of more than $185 billion, the company earned $49 billion in 2015 and $48 billion in 2016. For years Cisco was a stable stock, though one that showed very little growth. But in 2018 the company plans on pivoting away from its old staples towards new products.

Cisco is about to make the transition from hardware to software. For years, Cisco sold the hardware needed to build and maintain telecommunications networks: internet routers, switchers and cables connecting thousands of offices and households.

Much of the U.S. national network is in dire need of an upgrade, but Cisco is diversifying to meet a range of new challenges as networking moves to the cloud.

Advanced Micro Devices Inc (NASDAQ:AMD) is Nvidia’s biggest competitor. The company has developed a cult following among gamers, leading to many a Reddit debate. AMD’s groundbreaking technology not only rivals that of Nvidia, some even argue that it outperforms it. As the two square off, one of the key areas to keep an eye on is in the GPU race. Widely purchased across the world as Bitcoin frenzy heats up, AMD is making a particularly hard push toward conquering that emerging demand.

While Nvidia has a significantly higher market cap (and stock price), AMD provides investors a much cheaper entrance into the gaming market. Those looking to get into tech industry stocks, mine Bitcoin, or play their favorite game on the highest quality are definitely not ignoring AMD.

By Viktor Katona for Oilprice.com

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