eBusiness Weekly
Clive Mphambela
The world has moved very fast and the new phenomenon of Blockchain has become an essential modern technology not only for the development of virtual currencies, but the technology has also demonstrated its very high potential for revolutionising the day to day operations of business as well as state entities across the world.
Zimbabweans should explore this potential of Blockchain technology in facilitating the smooth flow of business transactions. The technology represents a cryptographically-secured transaction record which is created without the intervention of a single or centralised authority. Due to this technological peculiarity, blockchain is now considered as a transformational mechanism with capabilities to transform society and creating opportunities of immense value.
What is a Blockchain?
The concept of the “Blockchain” was introduced to the world when a white paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published in 2008 by a pseudonymous person named Satoshi Nakamoto, whose identity is as of now, still unknown.
Also known as distributed ledger technology (“DLT”), Blockchain operates through a system of distributed digital ledgers using advanced cryptographic algorithms to verify the creation and transfer of digitally represented assets or value over a so called “peer-to-peer” network of computers on a decentralised basis. The technology was initially invented to support the development of virtual electronic currencies which could be used by groups of private individuals operating in a public network, with such issuance however avoiding the use intermediaries, such as banks or other financial institutions.
As the term suggest, the “Blockchain” consists of two components: a “block” and a “chain”. A block is a data set containing information which consists of a “hash”, which converts data (input of letters and numbers) into an encrypted output in order to verify that the data has not been tampered with or modified in any way.
Every successive block in a block chain contains a hash of its previous block, thus creating a chain. Thus, every blockchain-based transaction will depend on the previous one, so the ledgers are unalterable and easily traceable.
This property makes it impossible for any participant in the transaction chain to modify or erase any data that is synchronised on blockchain, since every single record is individually encrypted and time-stamped. Consequently, any attempt to alter the information contained in the previous block will trigger a data mismatch that invokes a break in the chain.
Another key security feature of the blockchain is that the data is synchronised and runs on thousands of computers distributed over a very wide network worldwide, which significantly reduces the risks of a synchronised hacking attack. It becomes physically impossible, or at least very difficult to alter every record of the chain.
Regulatory Challenges
Nowadays, the regulatory approach towards blockchain, as well as towards virtual currencies, is quite diverse around the globe. Despite the fact that the application of blockchain is expanding rapidly, the many countries including Zimbabwe, still have not developed frameworks for a consistent approach as to how the technology can be regulated. However, during the last decade following the invention of blockchain and its introduction to the wider public, a number of nations have begun to embrace this technological innovation. Several governments have initiated and are incentivising processes to support the expansion of blockchain technology applications, and aim to attract investors by offering them preferential regimes.
A number of countries, such as Australia, Canada, the UAE, Estonia, France, Switzerland and Japan have taken important steps towards supporting the industry through creation of friendly regulatory frameworks and supportive business environments.
Major advantages of blockchain and areas of potential application
While it has been a decade since blockchain appeared in the public spotlight, the real potential of this technology was only discovered quite recently.
In contrast to traditional operating systems, blockchain-based solutions can simplify and make business operations much more transparent and efficient, including operations of Government institutions.
In the last few years, it has been repeatedly demonstrated that blockchain can be applied not only to the financial sector, such as virtual currencies, but in any field that needs a fast, secure and accurate record keeping system. The major and most essential feature of this technology is that data “uploaded” on blockchain cannot be easily deteriorated regardless of the social, economic or political powers of the transaction participants.
Apart from efficiency and trustworthiness of blockchain, the technology can considerably reduce transaction and administrative costs. In addition to being of benefit largely to the financial sector, other business entities, including government bodies, should explore the potential of blockchain applications across different sectors, such as public sector administration, real estate registry, data maintenance, stock exchange, education, asset holding, contract management, identity data registry, insurance and healthcare. Blockchain-based elections are also a possibility. In July this year, the Swiss government made a ground-breaking announcement to hold a pilot municipal vote in one of their canton of Zug, with great success. The elections were conducted through a blockchain-based system that allowed the citizens of Zug to vote using their digital ID cards.
Some lessons from Georgia
Over recent years, international practice has demonstrated that the implementation of blockchain can significantly reduce transaction costs, as well as increase citizen access to public services. Georgia is one of the forerunners in the integration of blockchain in the public sector.
The Ministry of Justice in Georgia has commenced the use of blockchain based application in the maintenance of land titles.
In 2016, the National Agency of Public Registry (the “NAPR”) announced the plan to pilot the first blockchain land-titling registry in Georgia. The project aimed to integrate public records on real estate into the custom-designed blockchain digital records system of the NAPR.
The system is anchored to the Bitcoin blockchain through a distributed digital time-stamp system, which allows the NAPR to verify all documents related to ownership of any particular property.
The NAPR has since 2017, been extracting data that proves ownership or transactions related to real estate are being uploaded onto the blockchain-based platform.
This has became one of the first successful use cases of a national Government integrating use of a private blockchain in records authentication in a public service.
In light of such successes in the use of blockchain applications in different fields, there are is immense potential for its use in other sectors.
In particular, Government can integrate blockchain in the following areas such as documentation and records management; issuance of permits and licenses; the companies and national registries; managing capital markets; managing state procurement contracts; general tax administration including customs and excise. Another example that can be taken from Georgia is the use of blockcahin to support recent reforms related to the creation of an accumulative pension scheme. A special application will be created for administration and accumulation of the pension contributions made to the national Pension Agency, the equivalent of National Social Security Authority. Such use of blockchain can and should be explored.
The writer is an economist. The views expressed in this article are his personal opinions and should in no way be interpreted to represent the views of any organisations that the writer is associated with.
