How Blockchain Technology Reduces Corruption?

Introduction:

Every citizen has the right to get information (irrespective of whether it is minute or massive) about the working of the state. This is because every taxpayer pays taxes and plays an important role as a shareholder. Corruption is the abuse of public wealth for private gains. Bribery is still a barrier in many countries, which costs ＄1 trillion globally per year.^[1]

Worldwide, governments spend an estimated ＄9.5 trillion per year on public procurement which is equivalent to 15% of national GDP.^[2] We need to understand in the public procurement process, more corruption cases are encountered. Our Hon’ble PM of India in his various conferences and meetings focused to implement blockchain technology in India. Blockchain is regarded as the safest way for the flow of money. It keeps records and tracks every single penny. We know that whenever a public welfare scheme is announced, the distribution process of the funding is slow and in all of them corrupt people misuse it. Center to the state to the district to taluka to legit stakeholder, this chain is lengthy and in every stage, funds are mishandled.

What to do? We know that demonetization was announced on 8th November 2016. It was a step to curb down the height of corruption, but it led to an epic failure. India’s cash economy was badly hitten. Some died in the process of standing in km of line.^[3]

Introducing blockchain technology in the country is the best way to reduce corruption.

In this research article, we will explore What blockchain is., Why blockchain? and the analysis, importance of blockchain technology in the governance of our country which is known for the world’s largest democracy.

What is Blockchain?

Blockchain is the safest platform to keep a record of information and it makes it difficult to cheat, hack, and impossible to alter. Name itself defines it: a chain of blocks. These blocks are digital pieces of information. They have three parts – 1. It stores information like date, time, and dollar amount from goods and service providers. 2. It stores essential data about consumers of those goods and services. 3. Each data field is encrypted in the form of a hash. These hashes are cryptographic codes by algorithms. Every data of the transaction is saved in the blocks by using hashes. Each computer in the network of blockchain has its copy. Each copy is identical and difficult to manipulate. It is an open-source, publicly accessible mode of technology.

According to  Drescher (2017, p. 35) – definition is as follows :

“The blockchain technology is a purely peer to peer system of ledgers that utilizes a software unit that consists of an algorithm, which negotiates informational content of ordered and connected blocks with cryptographic and security technologies to achieve and maintain its integrity.” ^[4]

Why Blockchain?

In 2017, the world economic forum predicted that till 2025, 10 percent of the gross domestic product will be held on the blockchain.^[5] The classic example of blockchain technology in contemporary times is bitcoin, smart contracts, and ethereum. Hacking a blockchain is close to impossible. It has decentralized nature and cryptographic algorithms. Let’s take up an example – If the local government body decides to construct the road. Blockchain will ensure the money spent will be only for authentic use.  Blockchain has many advantages –

1. Protects data as it works on DLT and it is tamper-proof.
2. High data transparency and accountability.
3. Secure cross border payment.
4. Better Governance.
5. Smart Contracts.
6. Track on public welfare funds.
7. Protects Intellectual Property rights.

Because of these reasons, blockchains are receiving more hype these days.

Blockchain and Digital Voting

India has consequently witnessed the tampering of EVM. Such malpractices are harmful to sustain people’s voices. India’s chief election commissioner Sunil Arora stated that most people are unable to vote because of their residence located far away from the polling station. Although these are registered people, they couldn’t vote. Most of the eligible voters shifted from their hometown to other places in search of jobs, education, business, etc. ^[6]

He also stated that he will be implementing the blockchain technique in India before his tenure (April 2021).^[7]The election commission of India is collaborating with the Indian Institute of Technology to manufacture an online voting system that is based on blockchain technology. I think not only, it will benefit the spirit of democracy but also the expenditure cost will be decreased significantly. The government needs to understand, many rural areas don’t have access to smartphones and internet compatible devices. I think for those people, special arrangements should be considered.

Many countries are implementing the idea of e-voting. It prevents multiple voting and hackers cannot alter the votes.

Sierra Leone became the first country to use blockchain technology to verify votes.^[8] Russia also implemented. In Moscow, the blockchain technology is not considered as a replacement for regular voting but represents another form of voting. The Russian duma saved the results with the help of distributor ledger technology (DLT).^[9]

Blockchain and Land Records

The current land registry technique is filled with fraud, forgery, cheating, and corruption. In India, buying and selling a piece of land is not an easy task. It includes more paperwork and a time-consuming document verification process. 70% of landowners are vulnerable to manipulation by individuals who challenge the validity of ownership.^[10] The land registry is too slow and a long process. In which, there is risk associated with human errors. Sometimes, the officers take bribes to convert ownership. To keep a record of every process, the government is incapable. In all of this drama, common people or legal owners are most affected.

A natural disaster is an act of God, many times we can see these paper proofs are destroyed by these disasters. Who is responsible? Let’s take an example – A made a sale of land deed with B. The papers were handed to the government. Department for verification department. Later, due to the flood, all paperwork that was submitted got in vain. If blockchain technology replaces the traditional boring and time killing consuming, proof of work (PoW) and efficiency will be increased.

I think India should adopt the blockchain land registry method. In which, buyers, sellers, and land officers will be stakeholders. Buyers and sellers will create an account with user id and password. When buyer and seller consent will request the land officer. Then, the land officer initiates verification and a smart contract. Then, the land officer will schedule a meeting for both parties where they will sign the documents. The recording of meetings and documents will be stored on the blockchain platform and can be accessed but cannot be altered.

Blockchain and Cryptocurrency

Every reader here might be aware of the famous “Bitcoin” cryptocurrency. This is a perfect example of blockchain technology. Blockchain technology was first outlined by Stuart Haber and W. Scott Stornetta wanted to create a timestamped and untameable technology.^[11] If this technology was introduced along before, then at what point it started to get the limelight? The application of this technology was carried out by “Bitcoin” in 2009. I think that the name itself describes its character. The coin is stored on a virtual platform in the form of bits. An amazing fact is 1 bitcoin consists of 1,000,000 bits which is huge.^[12]

Cryptocurrencies run on ingenious technology. Crypto refers to cryptography, a method used in encryption and decryption to secure communication in the presence of third parties with ill intent. In this method, a public key is the digital identity of the user and private key which is a digital signature and it is hidden. Same way as we have user id and password.

Coming to the history of trade, human life has progressed from a barter system to traditional coin to paper currency and digital wallets. Every currency here is operated by banks, financial institutions, and the government. But, cryptocurrency has a decentralized structure and is more secure and fast compared to other digital currencies. Let us take an example, If person ‘A’  wants to send money to person ‘B’ using a digital wallet, and there is a possibility of technical issues with the bank, the account might get hacked, bank charges, or the transfer limit might be exceeded. Instead of this, that person ‘A’ should shift towards using cryptocurrency to avoid such interruptions in the process of transactions.

India’s Approach Towards Cryptocurrency

Initially, the RBI banned the use of cryptocurrencies within domestic territories. The draft rules given by RBI in July 2019 were too harsh and made it illegal to sell, buy, mine, issue, transfer, or use cryptocurrencies. If anyone is affiliated in such activities, he/she will be imprisoned for not less than a year, but may extend up to 10 years with fine. This draft was challenged in a court of law. The petitioner challenged based on Article 19(1)(g) and Article 14.

On 4th March, 2020, SC agreed and lifted this ban in its 104 pages judgment.^[13] Sumit Gupta, founder of CoinDCX said that “We saw a 10x spike in sign-ups post the SC judgment.”^[14]

Conclusion

Corruption especially in India doesn’t need any introduction. I think we cannot rely 100% on technology to uproot the evil corruption. I think instead of creating hurdles for cryptocurrencies, one should actively take part in it. Many countries are using blockchain technology in their governance. Why not us? Blockchains cannot harm the way of governance, instead, it will boost up things. There is no chance of leakages. Many income tax officers and auditor general can easily do their tasks with the help of this technology. I think NPCI (National Payment Corporation of India) should also encourage this platform.  Blockchain can help the original inventor/creator in IPR. During the research, we saw a few applications of blockchain in uprooting corruption. But, there are many more in the line. I believe in the future, we can ensure less corruption, if we move towards a digitalized world.

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References:

^[1] Adebajo, A. (2018, July 12). Blockchain Technology and the End of Corruption. Retrieved June 29, 2020, https://medium.com/coinmonks/blockchain-technology-and-the-end-of-corruption-9d631b56d72c

^[2] Rachel Davidson Raycraft, R. (n.d.). How governments can leverage policy and blockchain technology to stunt public corruption. Retrieved June 29, 2020, from https://www.weforum.org/agenda/2020/06/governments-leverage-blockchain-public-procurement-corruption/

^[3] Viewpoint: Why Modi’s currency gamble was ‘epic failure’. (2017, August 30). Retrieved June 29, 2020, from https://www.bbc.com/news/world-asia-india-41100610

^[4]https://www.oecd.org/corruption/integrity-forum/academic-papers/Z-Aliyev-I-Safarov-Blockchain-anti-corruption.pdf

^[5] Why Can’t Blockchain Be Hacked? (n.d.). Retrieved June 29, 2020, from https://www.bitrates.com/guides/blockchain/why-cannot-blockchain-be-hacked

^[6] India to develop a blockchain voting system. (n.d.). Retrieved June 29, 2020, from https://www.globalgovernmentforum.com/india-to-develop-blockchain-voting-system/

^[7] Zmudzinski, A. (2020, February 17). India’s Citizens Will Vote With Blockchain, Election Commissioner Says. Retrieved June 29, 2020, from https://cointelegraph.com/news/indias-citizens-will-vote-with-blockchain-election-commissioner-says

^[8] Perper, R. (2018, March 14). Sierra Leone just became the first country in the world to let its citizens vote using blockchain. Retrieved June 29, 2020, from https://www.businessinsider.in/politics/sierra-leone-just-became-the-first-country-in-the-world-to-let-its-citizens-vote-using-blockchain/articleshow/63292836.cms

^[9] Sharma, T. (1970, October 15). Top Countries That Conducted Elections On The Blockchain. Retrieved June 29, 2020, from https://www.blockchain-council.org/blockchain/top-countries-that-conducted-elections-on-the-blockchain/

^[10] Says, K., Says, Z., Says, S., Says, T., Says, J., Says, A., . . . Says, J. (2019, November 26). Why Blockchain Technology is the need of the hour for Land Management. Retrieved June 29, 2020, from https://www.expresscomputer.in/blockchain/why-blockchain-technology-is-the-need-of-the-hour-for-land-management/43907/

^[11] Reiff, N. (2020, February 05). Blockchain Explained. Retrieved June 29, 2020, from https://www.investopedia.com/terms/b/blockchain.asp

^[12] Frequently Asked Questions. (n.d.). Retrieved June 29, 2020, from https://bitcoin.org/en/faq

^[13] CFTC Chairman: US Must Lead the World in Crypto With Less Restrictive Rules REGULATION | Jun 17. (2020, March 06). Bitcoin Legal in India: Exchanges Resume INR Banking Service After Supreme Court Verdict Allows Cryptocurrency: Regulation Bitcoin News. Retrieved June 29, 2020, from https://news.bitcoin.com/bitcoin-legal-india-supreme-court-verdict-cryptocurrency/

^[14] Borate, N. (2020, April 21). Crypto trading rises in India after SC overturns RBI payments ban. Retrieved June 29, 2020, from https://www.livemint.com/money/personal-finance/crypto-trading-rises-in-india-after-sc-overturns-rbi-payments-ban-11587466139986.html