BLOCKCHAIN VS. CORRUPTION

NEW TECHNOLOGIES FOR SOLVING OLD PROBLEMS

Today, the issue of corruption still remains a serious social and political problem. Taking roots since the formation of statehood, this phenomenon has an extremely complicated evolving nature. The issue of corruption is still important, largely due to the fact that the entire generations perceived corruption as something normal. Despite numerous attempts to develop effective ways of fighting corruption, we constantly come across its various manifestations. These can include both symbolic financial incentives for providing services in the public sector and major corruption schemes at the top of the political elite. One way or another, such an “allocation of resources” creates a completely unlawful basis for the economic and social development of countries and becomes the number one problem in many parts of the world.

The most vulnerable to corruption are such industries as medicine, education, cadaster, road traffic, internal affairs authorities, housing and utilities and the judicial system — these are the fields that citizens of any country most frequently have experience with because their services are in the highest demand among the population. Many experts in the field of anti-corruption policy believe that this problem should be solved by addressing the causes of corruption and not by bringing to justice those people who are responsible for the committed illegal actions. Such an approach is more effective but requires plenty of time and economic resources to change the environment and transform the collective thinking of entire generations.

Blockchain as anti-corruptional technology

Experience shows that existing anti-corruption measures do not give satisfactory results. But this issue is more and more being discussed in terms of innovative technologies, namely, in terms of the crypto industry, which quickly grows in popularity. In this regard, application of the Blockchain technology can ensure a really effective anti-corruption mechanism. So, what are the advantages of Blockchain technology and how can it contribute to reducing the level of corruption?

The blockchain is a continuous chain of blocks, which can contain information about completed transactions. Since each subsequent block includes the data of the previous ones, the information contained in blocks can be verified, but it cannot be changed or deleted. Moreover, the principle of decentralization and distributed databases suggests the absence of a single storage and management center — all transactions are registered in encrypted form on computers of all System participants. This ensures openness, transparency, and immutability of data. In addition, the technology applies smart contracts — a computer algorithm designed to conclude and maintain transfer of digital currencies or assets between parties using Blockchain technology. The operating principle of smart contracts lies in complete automation and reliability of performing obligations specified by the parties. Thus, the participants clarify and specify the terms and conditions based on which these algorithms draw up a smart contract. It is stored in a distributed environment and is encrypted by means of cryptography methods. As soon as all specified terms and conditions are met — the transaction is carried out automatically.

The universality of Blockchain also consists in the possibility of its application in various fields: state administration, international economic relations, private enterprise, production, trade, the judicial system, medicine, education, science etc. It is not surprising that this technology is gaining the attention of many enthusiasts and even representatives of the state apparatus in attempts to reform the most vulnerable fields to corruption. Thus, the idea of a Blockchain-based electronic voting system attracted great public interest due to the transparency of the process and, therefore, increased the level of confidence in the results of such elections. In June 2017, the government of Ukraine, which is one of the leaders in implementing this technology, and the global anti-corruption organization “Transparency International” converted a property register to the Blockchain technology. According to the representatives of the Ministry of Agrarian Policy and Food of Ukraine, the implementation of Blockchain will ensure reliable data synchronization, prevent its replacement due to external interference as well as give an opportunity to exercise public control over the system.

As you can see, application of Blockchain in different fields has just started to gain pace. However, it should be mentioned that this digital Blockchain network has its own measurement unit of value (payment instrument) — cryptocurrency. The essential disadvantage of the network functioning lies in the impossibility of monitoring participants of transactions and guarantees a favorable environment for illegal activities: transfer of funds received by criminal means, purchase of illegal goods in unlimited quantities, extortion, blackmail, and corruption.

The infamous Petya virus, which simultaneously blocked access to thousands of computers and shut down the operation of hundreds of companies, is a good example of fraud relating to the application of cryptocurrencies. The attacker demanded to transfer 300 USD in bitcoins to his digital wallet in order to unlock computers.

Thus, the contradictory nature of cryptocurrencies doesn’t allow them to fully meet the requirements necessary to efficiently eliminate different forms of corruption.

New blockchain features

Now we are all witnessing how quickly the crypto industry is developing. More and more cryptocurrencies are created every day. New blockchain projects emerge, which are aimed at addressing unresolved problems in various fields. The Bitbon System based on the Blockchain technology is one of such projects. It is a platform for investments, where Bitbon crypto value is used as a payment unit. The thing is that Bitbon is backed by real assets; this means that its price is formed on the basis of the value of such assets. It gives Bitbon special features, which surpass the features of a usual cryptocurrency. One of the main advantages of this System is a multilevel verification, which gives an opportunity to monitor transactions and, if necessary, to identify each user: if Bitbons have been lost or stolen, they can be returned to the owner.

Let us consider an example: a certain amount of funds in Bitbons was allocated from the state budget in order to build schools. Due to the Blockchain technology, the information on this operation (amount of funds, date, time and purpose the funds were provided for etc.) is recorded in the Bitbon System. Then, the funds are distributed according to the previously specified amount and transferred to the digital wallets of the relevant authorities; these operations, as well as all the details of transactions, are stored in the chain of blocks. Subsequent blocks will contain information on the transmission of funds for various purposes through different channels, for example, funds for project planning, purchase of construction materials, payment for work etc. At each stage of the project implementation (school construction), all operations with Bitbons will be recorded in the System ensuring the ability to identify the sender and the recipient of funds. If during this process all or part of the funds is illegally transferred from one wallet to another, a new block containing the data on this operation will be created in the distributed ledger. Thanks to these Blockchain features, such data cannot be changed or deleted, and the absence of anonymity will allow identifying fraudsters.

Conclusion

So, the abovementioned examples shows that the basic operating principle of innovative investment platfoms excludes the possibility of illegal activities and makes them an effective tool to fight corruption.