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How blockchain establishes trust and combats corruption How blockchain establishes trust and combats corruption
Trust and transparency go hand in hand; blockchain technology enables both. How blockchain establishes trust and combats corruption

Blockchain. For some, this is still a foreign concept, while for others it’s synonymous with cryptocurrencies like bitcoin.

In this article, we’re going to help you understand that blockchain is about more than just cryptocurrencies, how it can be used in other aspects of society, and how it can help combat corruption in any transaction-based economy through the establishment of trust and transparency.

“Blockchain is much broader than just cryptocurrency. The challenge we are facing at present is to find the right use cases to show what the blockchain can do for companies when adopting the technology,” says Anton Herbst, group strategy director for the Tarsus Technology Group.

What exactly is the blockchain and how does it work?

In very basic terms, the blockchain is a record of transactions that cannot be forged, like a diary written in special ink that cannot be erased or added to.

In digital terms, a blockchain is a series of interconnected data blocks, all transparently stored in a public database in such a way that it is impossible to change their contents once they are part of the chain. The resulting structure is similar to that of a real-world chain.

Data blocks in this ‘chain’ must be verified by the entire blockchain network before they can be added to the database. This is a complicated process involving intensive calculations by each node on the network to solve mathematical puzzles; once the puzzle is solved, the data is added to the blockchain and given a unique identifier called a ‘hash’.

The verification process is the reason people trust the blockchain, and also why the blockchain forms the foundation of the very concept of digital money (bitcoin, Ethereum etc.).

And in the business world, blockchain’s bulletproof integrity is used in the creation of ‘smart contracts’, which allow “the performance of credible transactions without any third parties”. By cutting out middle-men with smart contracts, businesses stand to save a lot of money.

Now that we’ve covered the basics, we can start looking at how this technology can be applied.

The current state of corruption in South Africa

The Corruption Perceptions Index (CPI), published by Transparency International, ranks countries and territories based on how corrupt their public sector is perceived to be. South Africa is currently the 70th least corrupt on the list of 180 countries listed.

Corruption seems to be most prevalent in “tenderpreneurism”, BEE-fronting and petty corruption in the South African service sphere. Blockchain-based solutions can help to curb those, as they are all about creating transparency and ensuring the correct process are followed.

“Blockchain will enable businesses to get out of the mindset of setting up contracts for everything. It’s a massive enabler to help open up transparency when doing business and building trust between all parties in the ecosystem,” says Herbst.

He adds that: “Currently, the more complex processes are, the bigger the chance for something to break in the system. With blockchain’s transparency, there will be no more room for breaks in the system because processes will be simpler. The supply chain process will be more visible, where everyone can see every detail of a transaction.”

Increased Transparency

With increased transparency and simplified processes combined with public access and transaction logs, there will be no room for any person to take part in corrupt activities in any sector of business or government. Transactions will be logged, verified and available for anyone to view if they want to, in a secure environment.

A practical way to view this, especially in light of contracts:

  1. Transaction – this could be tender documents, quotations, work orders or any other documentation.
  2. Verification – an automated process with no human involvement.
  3. Storage – stored in a public database where there is no interference.
  4. Hash – unique identifiers help people locate and identify suppliers, collaborators and even projects.

Once added to the chain, this transaction becomes public, and anyone can view it.  With transparency will come trust, and this is exactly what the public sector and government needs.

Rebuild trust with blockchain

Think about a traditional drop safe. Staff can add money to the drop safe, but only a manager has the key to unlock it and cash up, and there are no duplicate keys. If you lose the key, you lose access to everything in the drop safe. If everyone is aware of the risk, they reach consensus and trust each other to keep the key safe at all costs.

The drop safe analogy is how data enters and is protected in the blockchain. You have one password, and if you lose it, you lose all access to the information in your account. Like in this case.

Gaining consumer trust with blockchain

“Sellers have no risk at present. Consumers are getting tired of just being sold to without knowing how the products are sourced. Companies need to engender trust in consumers and only expect payment when consumers have found utility in the product they purchased,” says Herbst.

Blockchain has already been used to track and verify the authenticity of products in the food industry to help re-establish trust between suppliers, distributors, retailers and customers.

Now, imagine a world where consumers can implicitly trust retailers in any industry because the entire supply chain will be verified in the blockchain. Imagine not having to worry about where government contracts come from or how they were assigned, because the whole process will be in the blockchain and visible to anyone.

“Adoption of new technology comes with use cases because they need to see what worked and what didn’t work in order to trust and adopt the tech,” adds Herbst.

“Take, for example, cloud computing.” It took a while for consumers to trust “the cloud” and adopt this way of working and storing data. Herbst iterates that the supplier carries the risk with this kind of product because if it doesn’t live up to the consumer’s expectations, they can simply cancel the service and find a better solution.

Working towards the future

Herbst concludes, “At Tarsus Technology Group, we are investigating the feasibility of using blockchain to regulate relationships where there are multiple partners in the ecosystem, to collaborate, and regulate intellectual property from the different parties. It takes a huge amount of trust to make this work and make the ecosystem more valuable.”

“By utilising blockchain technology, we can move away from broad-based business solutions to much more granular solutions for businesses and consumers alike,” he concludes.

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