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New Kid on the Blockchain. The Distributed Ledger and the Fight against Corruption

Written by Guest on Thursday, 2 March 2017
Jane Smith is a management consultant at EY based in London. Jane is endlessly fascinated with emerging technology, frequently crossing that fine line into obsessive. The views expressed here are the author’s personal views.

In the dystopian reality of many people’s lives, where kleptocrats gleefully pounce upon myriad opportunities to syphon funds, steal elections and strangle free speech, opacity is key. The lack of transparency enabling these quotidian wrongdoings may now be under attack from an exciting technology which is about to spur a digital revolution.

If you’re new to blockchain, it’s a distributed ledger that lets people transact without a third party, like a bank. Records are stored publicly across a network of personal computers and can be seen by any user. Each transaction lays down a ‘block’ in the ‘chain’ for all to see. Blocks cannot be counterfeited or changed. This is very different to how we transact today. Payments are made, not between individuals but intermediaries, centrally held records can be hacked or altered by administrators and visibility is limited – you can see money leaving your bank account but not the recipient receiving it. Blockchain is essentially a platform of transparency and we’ll look at three ways it could help fight corruption.

Ban Ki-Moon estimated that 30% of foreign aid money is lost to corruption.[1] Blockchain enabled peer to peer payments cut out the middlemen acting as conduits of aid transfers where misappropriation is likely. Hypothetically, an organization like UNICEF could transfer funding directly to women and children without going through local power structures. Aid:Tech have moved beyond the hypothetical to the use case having developed a system to digitally distribute aid to refugees. In 2015 Aid:Tech ran a pilot distributing ten thousand pounds to one hundred refugee families in Lebanon via vouchers. The vouchers were scanned onto smart phones and spent in a local supermarket. Following the success, Aid:tech has projects in France, Serbia, Pakistan and Haiti.

Where institutions are needed, for example the construction of a hospital, the blockchain can help by tracking every dollar showing donors whether their money had been spent on medicines or bricks and mortar. It could clearly show if funds went missing and hold all parties from the NGO to contractors accountable. The technology of course is not a panacea; transparency does not necessarily lead to accountability. The blockchain would not curtail a corrupt official awarding a contract to a friend for example who may be a supplier of sub-standard goods.

Voter fraud, the perennial favourite of the kleptocrat faces a worthy opponent in the blockchain. Anachronistic paper voting mechanisms are vulnerable to corrupt officials and voting machines proved terrifyingly hackable.[2] Both require people waiting in line, often exposed to local strongmen. Voting via a blockchain system would protect each ballot from tampering. Voters could use a private key to preserve anonymity.  No government could alter the results of an election without leaving evidence on the blockchain. Estonia has introduced a blockchain-based system allowing Estonians to vote securely in company shareholder meetings. Boston start-up Voatz uses the blockchain to keep transactions secure and anonymous via smartphone voting. Voatz tested their solution in the Massachusetts Democratic Primary State Convention in June 2016, easily passing their independent audit. Voatz are running pilots across the world envisaging a future of safe, convenient and confident voting.

Sarah Chayes, author of Thieves of State[3], former special advisor to the Chairman of the Joint Chiefs of Staff and senior associate at the Carnegie Endowment for International Peace[4] was kind enough to speak with me. Agreeing the technology is promising, Sarah cautioned that a transparent vote was no guarantee it would be accepted. Sarah felt the technology would work well in conjunction with pressure from the international community, such as the 2015 Nigerian election of where a combination of technology (voters took photographs at polling stations) and international pressure ensured a free, fair election.

The career kleptocrat will invariably strangle free speech and harshly punish transgressors. Many countries censor search terms or information critical of the government. Data blackouts are common and dissidents themselves risk their freedom or lives to speak out, the blockchain would allow citizens access to encryption to protect their identities. Governments would not be able to alter information once on the blockchain frustrating censorship activities.

In conclusion, blockchain is a cause for optimism bringing transparency not experienced before. However transparency is not enough in a true kleptocracy. That unrigged election or foreign aid audit trail still needs an independent judiciary to uphold it and clean law enforcement to administer. Perhaps the greatest promise is in countries with working democratic institutions who benefit from corruption. The transparency could be used to curb proceeds and organise boycotts.

Anti-corruption benefits should not be predicted but achieved and there is much to do. Blockchain is in its infancy; there is no standardisation, without which, many benefits will be unachievable. The potential to be exploited by individuals, companies and governments for gain is high in these early days of blockchain. As the world sets about writing the rules, the anti-corruption community need to part of the journey and ensure we have a seat at the table.

[1] 9 July 2012 Secretary-General’s closing remarks at High-Level Panel on Accountability, Transparency and Sustainable Development

[2] Investigation carried out in Virginia, USA into electronic voting machines; Security Assessment of Winvote Equipment for Departmental Elections, April 14th 2015, Michael Watson, Chief Information Security Officer, Commonwealth Security and Risk Management

[3] Norton, 2015

[4] Democracy and Rule of Law Program


Read 1278 times Last modified on Thursday, 02 March 2017 15:15


The TI-UK blog features thought and opinion from guest writers as well as TI staff. Any opinions expressed by external contributors do not necessarily reflect the views of Transparency International UK.

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