5 Ways Blockchain Can Help Government Tackle Corruption

5 Ways Blockchain Can Help Government Tackle Corruption

Blockchain
August 3, 2022 by Diana Ambolis
226
Blockchain technology has a special place in the fight against public corruption. Its system provides a unique blend of automated intelligent contract capabilities, real-time transaction transparency, and tamper-evident record keeping. Indeed, blockchain technology cannot wholly stop crimes or foil evil actors. While blockchain can improve and supplement current legal systems and social structures, its effectiveness
5 Ways Blockchain Can Help Government Tackle Corruption

Blockchain technology has a special place in the fight against public corruption. Its system provides a unique blend of automated intelligent contract capabilities, real-time transaction transparency, and tamper-evident record keeping.

Indeed, blockchain technology cannot wholly stop crimes or foil evil actors. While blockchain can improve and supplement current legal systems and social structures, its effectiveness is only as good as the system it is a part of. Blockchain-based governance may not deter corruption more than current laws and regulations without consistent law enforcement, reliable informational inputs, enough technological know-how, collaborating political elites, and societal goodwill.

Governments must carefully consider the advantages and disadvantages of blockchain-based governance systems even though these restrictions might disappear due to technology improvements. However, essential application cases show how the technology could remedy existing systems’ flaws. These application cases further emphasize the value of a thorough and all-encompassing strategy for blockchain-based governance. They frequently also list necessary restrictions and drawbacks to using this unique technology.

1) Public Contracting

The single largest source of government expenditure and official corruption worldwide is public procurement, often known as government contracting. Due to several variables, this government process is rife with corruption in high-income and low-income countries. Methods used to choose vendors are intricate, opaque, and heavily reliant on human judgment. These flaws frequently result in defective goods, ineffective services, significant financial waste, pricing distortion, and less healthy competition.

Blockchain can aid By facilitating third-party oversight of tamper-evident transactions and enabling greater objectivity and uniformity through automated smart contracts. A blockchain-based process can directly address the corruption-risk factors in procurement. This improves the transparency and accountability of transactions and actors.

Significant drawbacks: A variety of obstacles may make deployment tricky. For instance, blockchain technology is more prone to abuse the easier it is to access and use. Attacks that involve “spraying” or “draining” might undermine a system’s ability to fight corruption by overburdening it with harmful or pointless data or depriving it of the resources required to finish each operation. Blockchain technology may record not all significant human contacts. The anti-corruption potential of blockchain-based procurement will be severely limited if collaboration, bribery, or even regular vendor selection continues to take place offline.

2)Registries of Land Titles

Several governments have started testing land title registers based on blockchain technology. Some projects, like those in Sweden, are driven by a desire to boost productivity in a sector that relies heavily on transactions. Others, like those in India and Honduras, want to strengthen property rights and increase transparency in a system that is prone to corruption.

 

What blockchain can do to aid A secure, decentralized, publicly verifiable, and immutable record system may be offered by blockchain-based land registries so that anyone can unambiguously demonstrate their land ownership. These characteristics generally strengthen the robustness of land ownership and lessen the possibility of self-interested manipulation of land rights.

The main drawbacks of blockchain technology include its inability to formalize property ownership or address inefficient governance. Before a blockchain-based land title registry to operate, nations with nonexistent, imperfect, or inaccurate land registers must go through the challenging task of collecting, cleansing, and digitizing this data. Furthermore, the viability of a blockchain-based land register may depend on how connected and tech-savvy a populace is.

3) Voting electronically

Governments are now considering blockchain-based voting platforms to boost trust and participation in crucial democratic processes due to growing concerns over election security, voter registration integrity, poll accessibility, and voter turnout. Blockchain’s decentralized, transparent, immutable, and encrypted features may be able to reduce election manipulation and increase voter accessibility.

Significant hazards are associated with electronic voting on blockchains because of the high stakes of elections. Any new technology system is susceptible to cyberattacks and other security flaws, including blockchain-based systems. These might result in election instability, vote tampering, or paper trail deletion. Additionally, a biometric software-based voter verification method, like facial recognition, could result in false positives or negatives in voter identification, encouraging fraud or depriving persons of their right to vote. Voting systems built on blockchains can also provide privacy threats and concerns. Therefore, any such service must be offered by a system and technology provider that has undergone extensive scrutiny.

4) Registries of Beneficial Corporate Ownership

Recent corruption scandals have sparked worldwide worries over ambiguous or undeclared beneficial business ownership. Secretly run businesses can be used to pay bribes, launder money, or influence government investment for personal gain.

How blockchain can help: To better track conflicts of interest and criminal conduct, many nations are starting to create a central registry for beneficial corporation ownership. Blockchain-based registries that are widely accessible and tamper-evident could offer much-needed disclosure and transparency.

Significant limitations: Corporate ownership registries are still a rarity, and those that do exist frequently lack sufficient verification methods. The novelty of blockchain technology coupled with the recent advent of beneficial business ownership registers may present some practical issues. For instance, most nations still do not mandate that businesses keep track of their beneficial ownership. Additionally, implementing a thorough and verifiable blockchain-based register would necessitate support from politicians, attorneys, banks, and large companies, many of whom would feel that the system’s openness and suitability would not be in their best interests.

(5) Grant Payments

Numerous countries distribute millions of dollars annually to promote various causes, including social assistance, humanitarian help, and the arts. Due to this procedure’s frequent complexity, opacity, and inefficiency, money is regularly lost to banking fees and intermediaries, creating the possibility of dishonest financial diversions.

Blockchain has the potential to be utilized to increase public confidence in such systems. Disintermediation and a decrease in the number of parties engaged in grant awards, disbursements, and management may be able to simplify the procedure, cut expenses, and lessen the potential for illegal money siphoning.

Necessary restrictions: The degree of transparency may be constrained or made difficult by recipients’ inability to efficiently manage grant disbursements made possible by blockchain technology. If they cannot use the system, less technologically skilled or financially resourced individuals and organizations may experience discrimination or exclusion from grant disbursement processes. Furthermore, a blockchain-based disbursement system fails to address the problem of corrupt grant usage practices, which regularly occur in humanitarian relief.

Also, read – PayPal’s Financial Crime Division Is Hunting for a Blockchain Expert.

Weighing the advantages and difficulties

General technological obstacles and application-specific issues may hamper the effectiveness of blockchain-based governance. These obstacles may include the expense and scalability of implementation, unknowable negative externalities, and uninformed policymakers.

Blockchain has beneficial properties, especially in tamper-evident and permanent databases and record-keeping, which could improve transparency, accountability, and citizen involvement.

Recently, a paper by the World Economic Forum was published to examine blockchain’s potential for effectively reducing public corruption. The study, Exploring Blockchain Technology for Government Transparency: A Blockchain-Based Public Procurement System, is centered on a project that the Forum is currently working on with the Inter-American Development Bank and the Colombian Inspector General’s Office. This project has looked into, designed, and tested a use case for blockchain-based procurement. The proof-of-concept, built on a public permissionless Ethereum blockchain-based procurement auction, demonstrated how this technology might be used in several other areas of corruption-prone public governance.

To combat malicious actors, more blockchain use cases will continue to develop. As they do, officials shouldn’t let blockchain-based solutions’ novelty and unrealized anti-corruption potential blind them to the drawbacks and trade-offs of implementing the technology in the public realm. However, the blockchain offers valuable properties, particularly tamper-evident and permanent databases and record-keeping, which could improve transparency, accountability, and citizen engagement in areas that significantly affect democratic governance and sustainable development globally.