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How the Blockchain brings social benefits to emerging economies

Developing countries such as India, Kenya and others in eastern Africa are discovering a growing range of applications for blockchain, decentralized register technology that promises a secure, peer-to-peer mechanism for verification of information. Blockchain is finding innovative uses in banking and financial services, supply chains, agriculture and land ownership documents (land titles) in those countries, according to speakers who spoke at the Wharton India Economic Forum recently held in Philadelphia.

However, many laws in developing and developed countries have not kept pace with digital advances and continue to require paper documentation, preventing participants from fully exploiting the technology, they said. Although a decade has passed since the invention of the blockchain, its technology is still evolving and being tested.

Blockchain is essentially a growing list of so-called "blocks" (a record of transactions in a decentralized ledger), which form a "chain" in a peer-to-peer network. Network participants verify or validate the blocks, eliminating the need for a trusted entity such as a regulator or an accounting firm to authenticate the information they contain. According to experts, the blockchain is secure and tamper-proof since transactions can not be changed once the network has verified them. Technology promises to accelerate and reduce transaction costs and increase financial inclusion by offering more opportunities for farmers.

In particular, the Wynton India Economic Forum met around 10th anniversary of the introduction of the blockchain. It was October 31, 2008 that a certain Satoshi Nakamoto published a white paper that introduced the bitcoin cryptocurrency and the blockchain, its basic technology. It has been hypothesized that Satoshi Nakamoto is a fictitious name used by an unknown person or a group of people.

Wrong ideas Blockchain

Removing misconceptions about the potential of blockchain is important in managing expectations, the speakers said. "People take a case of use such as international remittances and expect that blockchain takes out all costs, like taxes and all overhead costs," said Kevin Werbach, professor of legal studies and Wharton's business ethics. "The challenge is not technology, it's the issues related to implementation, organization and trust".

Another misconception is that blockchain is "a scam" and that "it's dead, it's over," said Werbach, an expert on emerging technologies, the internet and communications law. "A surprisingly large audience still does not understand what is happening [with blockchain]", He recently wrote in a piece of opinion in Knowledge @ Wharton. He also wrote the book The Blockchain and the new architecture of trust.

"The challenge is not technology, it's the issues related to implementation, organization and trust". -Kevin Werbach

The speakers emphasized that bitcoin presents itself simply as one of the first and most important applications of blockchain and that the blockchain has a much wider potential in ambush. "Crypto is the first in scale application of a blockchain technology," said Jules Miller, a partner at IBM Blockchain Accelerator, where he leads companies interested in incorporating blockchains into their operations. "We are much more excited about the underlying blockchain technology and how it relates to transactions, above all, compared to cryptocurrencies".

"Blockchain is not magical, but has interesting skills," continued Miller. Although there is "a lot of enthusiasm and enthusiasm for the blockchain," he said, the technology is still in the early stages of implementation and tests are under way on its potential applications.

Adoption Blockchain in India

India is a favorite among emerging economies in embracing the blockchain, according to Kavita Gupta, a founding member of ConsenSys Ventures, the venture capital arm of ConsenSys, a blockchain software house. Gupta said his company is working on the implementation of blockchain in a land-tolling project with NITI Aayog, the Indian government's political think tank (NITI stands for the National Institution for Transforming India), and has signed a memorandum d 'understanding with the Andhra Pradesh state government for a number of uses, including land titles, supply chains, health records and blockchain education.

A ConsenSys blockchain project in the management of land records in the city of Chandigarh (the capital of the states of Punjab and Haryana) is offering advantages on two main fronts. First, it allows the tracking of all state-level financial services on a single platform and prevents corruption once the records are entered. "You can not bribe someone to change records, so it's tamper proof," Gupta said. "Secondly, people could change land-related data by corrupting someone, and the government has no jurisdiction to perform background checks – it was the buyer's responsibility to make those checks, but there was no method or system To do so, the project we are implementing allows you to track the history of land ownership over time and to register verified land titles with background checks on who has paid [the property] taxes."

In supply chains, Mumbai and Visakhapatnam ports use the blockchain to create tamper-proof methods that track incoming shipments and shippers, Gupta said. These systems are also able to ensure that shipping payments reach the right parts. The identities of these parties are verified through the Know-Your-Customer government program, launched a few years ago to combat fictitious accounts and money laundering. Gupta said the Mumbai Port Trust predicted savings of $ 18.2 billion in two years from the use of blockchain technology in supply chains.

Blockchain is also demonstrating a visible social impact in several cases. For example, the north-eastern states of Assam and Sikkim are using it to help their tribal peoples protect the land titles that the government promised them in the time of the independence of the country. India in 1947, said Gupta. "The tribals want to prevent mining and other industries from taking over those lands," he added.

"You want to free the way for innovation, but to prevent people from being exploited in an unethical way." -Jules Miller

The artificial intelligence and blockchain projects led by IBM in India are helping to improve crop yields for farms and to help others move to the unified tax and service (GST) system launched last year. The IBM research lab has completed three pilot projects with Indian companies with use cases such as pest and disease prediction, yield improvement and yield prediction on specific crops of India such as potatoes and cane from sugar, Miller said, indicating a relationship Quartz India. The company is also working closely with the central bank of India, the Reserve Bank of India, for banking applications and with the Mahindra Group in a supply chain project. The IBM Lab of India is the largest research arm outside North America and focuses on those technologies.

Anything around the food supply chain – from farm to grocery – would be interesting for emerging economies, "said Miller." Farmers insurance is another application because they face obstacles like inclement weather. With the IoT sensors in their fields, they could make sure they are buying the right crop insurance. "

Africa and the Blockchain

In Nairobi, Kenya, IBM has partnered with Twiga Foods, a business-to-business logistics platform for kiosks and food stalls across Africa to extend microfinance loans to sellers, who in turn would help them buy more stocks. IBM built a blockchain-enabled loan platform to overcome the obstacle of ascertaining the creditworthiness of food vendors, Miller said.

IBM analyzed purchase records from mobile devices and then applied machine learning algorithms to predict credit worthiness. Once the credit scores have been determined, a blockchain has been used to manage the entire loan process from the application to the receiving offers, to the acceptance of the terms, to the reimbursement, based on an IBM post. Miller said that those applications also have potential in India.

In fact, the loan is a good use for blockchain applications. "It's about the identity of the person who wants a loan and, if you can verify the personal or financial history of the person or if it has a profitable business that has to be funded, you can cut out a lot of the process" He said Miller. "It is particularly useful for small businesses that do not have a solid reputation for owning and managing a business, or conventionally required credit scores." Nairobi microfinance project providers, for example, are able to build their credit by repaying their loans and becoming eligible for larger loans, he noted.

When it comes to pharmaceutical products, sensors could ensure that the medicines are stored at the right temperature in air-conditioned trucks, Miller said. "You can ensure that they are registered in the blockchain supply chain and paid if they are delivered on time and at the right temperatures or conditions, which prevents damaged products from going to market".

Gupta also cited a project in Nigeria that provides for the cleaning of a river belt along the river Niger, where blockchain and IoT technologies are used to monitor toxin levels. The results are considered quantifiable results in reporting to NGOs and other international organizations that are funding that project, he added.

In another example, Miller cited an insurance company that processes workers' compensation claims. Use wearable devices to verify that the workers were actually on the construction site rather than elsewhere. Linking this data to the blockchain allows the insurer to check the information relating to a complaint and decide whether to process it or not.

Confidence in the gaps and challenges of adoption

Werbach has seen a common thread in these examples of blockchain applications. "Those are a class of use cases that address the overcoming of loopholes of trust, where there is not enough trust in existing institutions or in governments and existing government bodies," he said. "Once the information is recorded on a shared ledger, blockchain provides a bridge to overcome some of these trust gaps."

The trust factor in blockchain has its limits, however. "If someone checks the information incorrectly, the blockchain will report it immutably and verify that everything has been verified, but in itself does not automatically verify the accuracy of the information," Werbach said. "It's an infrastructure for trust, not intrinsically a" truth infrastructure. "There are ways to build systems and processes around the implementation to ensure that the information is accurate and truthful, but the blockchain itself. it does not do it automatically. "

Although blockchain technology has been a hit in developing countries such as India, an inadequate digital infrastructure and relatively low financial expertise could be obstacles. However, even more than that, obsolete laws and rules are proving to be the biggest obstacles to achieving the full potential of the blockchain.

Gupta noted that in Chandigarh, for example, although the state government did "an excellent job of digitizing land registers", some of which are traced until 17th century, federal rules do not allow you to record those records online. "You still have to personally visit the title registration office and meet three different people, show the documents and get a signature after the other," he said. "It does not offer blockchain space to be very efficient. You can not use a self-sufficient identity (an innovation of the blockchain for online identification verification), an online payment system or an online payment system. digital signatures for reference checks. "

According to Gupta, such shortcomings also exist in developed countries like the United States, and they cited a case in Ohio where there were similar disconnections between a county government and the state government. In some places like Dubai or Singapore, governments "work actively with you to change the rules according to your needs," he added.

"Do not use blockchain when you do not need it." -Kavita Gupta

Miller noted that often, many pieces of a process, for example with a supply chain, for example, are not fully digitized. Blockchain allows users to identify where they need to work on the "non blockchain digitization" of specific aspects of the process, he said. For example, IBM is helping Walmart use the blockchain with its suppliers to meet food safety requirements. IBM created a simple app where farmers could scan and send information about products shipped to Wal-Mart. "The app we created is not complicated and it was not a blockchain app, but it was a single piece of digitization that made the blockchain app work," he said.

Often, the rate at which users adopt the blockchain depends on the quality of the user interface (UI) and UX (user experience), said Gupta. He shared the experience of an online payment system in East Africa where his fund had invested. "They literally had to go to the tribals and understood that a text-based system was the only thing they could understand," he said. "If you give them a simple form that has a" yes "and a" no "that they can read in Swahili, they could do it." He noted that such text-based systems have been popular all over the world in the last decade. India could easily use such text-based systems because "everyone has a cell phone, even in villages," he added.

Keep people safe & # 39;

According to Miller, the government's role is to "keep people safe" and this maxim also applies to India. "You want to clarify the path to innovation, but to prevent people from being exploited in an unethical way, avoiding that bad actors cause harm, this is the philosophical role of the government in the blockchain." In the United States, the Securities and The Exchange Commission has issued a series of investor notices on initial coin offerings, or ICOs, which issue tokens or cryptocurrencies.

Werbach noted that in the case of India, its legal system "is incredibly convoluted, and there are much bigger problems in that area [relating to] blockchain. "His advice:" Do not start with what you need to edit for blockchain. Start with what you need to enable entrepreneurs to innovate. "At the same time, he said, most of the legal changes required for the blockchain are still ongoing in the US Many of the changes needed are those that make way for technology, where existing rules could require paper documentation, he explained.

Gupta had some advice for aspiring entrepreneurs and users in the blockchain space. "Do not use blockchain when you do not need it," he said, noting that many entrepreneurs use it to attract investors. "About a year and a half ago, blockchain was the new word of order in Silicon Valley, and a promoter who inserted the word" blockchain "somewhere in the field could increase the [enterprise] valuation of $ 10 million. Those times are gone and people are smarter now. "

Companies that consider the use of blockchain must recognize that the technology is still in its early stages. Gupta advised users to keep open technology platforms to allow faster adaptation of new applications. Miller added that agility is important to ensure that the company keeps pace with regulations. This approach also ensures that society is less likely to be targeted by regulators for fines and taxes, he said.

Although a decade has passed since the release of Nakamoto's white paper on the blockchain, Werbach said that technology has not developed since then. Many of the advances have occurred in recent years, he said. "There are still very basic questions about the scalability of these networks that will need time to explain themselves," he said. "So there may not be a huge killer app that's a multi-billion dollar company for five or ten years, but during that time there might be powerful use cases."

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