Blockchain technology speaks to the fundamental requirement of transparency within government processes, but the question remains whether our legislation is receptive to these innovations, writes Professor Tshilidzi Marwala.
The Vice-Chancellor and Principal of the University of Johannesburg (UJ) and the author of the book, Closing the Gap: The Fourth Industrial Revolution in Africa, recently penned an opinion piece published by Voices360, an online platform that facilitates opinion sharing and knowledge exchange,
Blockchain and public infrastructure – Prof Tshilidzi Marwala
In 2018, the Kenyan government put together a Blockchain and Artificial Intelligence (AI) task force to come up with ‘recommendations about how to harness these emerging technologies over a five-year period’. In a report in July 2019, the task force recommended implementing blockchain technology in areas such as service delivery, agriculture and health. Blockchain is a digital security technology that has been used to create an electronic currency called bitcoin.
The task force also recommended curbing Kenya’s national debt through digital asset frameworks – where content that is stored digitally – and establishing a regulatory framework can be accomplished through blockchain. As we begin to strategise and implement our own fourth industrial revolution (4IR) blueprint, there is much we can learn from Kenya’s trajectory, particularly with regards to blockchain. In the opening words of the report, cabinet secretary Joe Mucheru writes “Corruption is perhaps the biggest obstacle to our nation-building endeavours, and technologies such as blockchain and AI are emerging as effective tools to deal with the scourge. There is every reason to believe that through the application of emerging technologies, including blockchain, corruption will be defeated.”
According to Deloitte, in 2016 alone, over $1 billion was invested in blockchain by financial services and technology firms globally, and such investments are predicted to increase exponentially over the next five years. In the words of Accenture CEO Julie Sweet, “Blockchain has the potential to fundamentally change how we share information, buy and sell things, interact with government, prove our identity, and even verify the authenticity of everything – from the food we eat to the medicine we take to who we say we are.” Blockchain – a decentralised and encrypted technology that secures stored information – is essentially a ledger or list of items that can be shared on a peer-to-peer network without the need for intermediaries.
Encryption on this ledger, however, prevents users from making alterations unless the majority of the users sign off on the change. All the transactions or information are stored in many different computers at once across the internet, and this makes it difficult for anyone to break into a single computer to steal or manipulate the data. Simply put, blockchain enables efficient, transparent and secure business transactions.
As a former executive at JPMorgan Chase, Blythe Masters, puts it, “If you think about any multiparty process where shared information is necessary to the completion of transactions, and the coordination of activity and the exchange of value, that’s where blockchain technology can be put to good use.”
There are various benefits to blockchain technology. For instance, no third party can monitor or breach your data. The timestamp also makes it easy to trace the time and corresponding reference of a specific transaction. The blockchain network stores data across multiple computers, ensuring that the chain will not collapse because a prospective hacker would have to attack the entire system, across many computers.
Blockchain was developed in the early 1990s by Stuart Haber and Scott Stornetta. Initially, the idea was to create a system where the timestamps on documents could not be tampered with.
This was improved on in 1992 when Dave Bayer, Stuart Haber and W. Scott Stornetta allowed several document certificates to be located into one block. An anonymous person under the pseudo name Satoshi Nakamoto then applied it to develop bitcoin currency. This saw the implementation of timestamp blocks that did not need to be signed by a trusted party.
So how do we begin to apply this in a localised context?
Blockchain speaks to the fundamental requirement of transparency within government processes. This is timely, given the concerns around corruption and procurement. There are two main streams where blockchain could be particularly effective for the Department of Public Works and Infrastructure: the state’s immovable assets and in supply chain management.
The size of the Department’s portfolio is around 105 000 properties. By the end of 2018, it was handling a significant property portfolio that included 29, 644 land parcels on which 89, 626 improvements were located across 52 client departments countrywide, to contribute towards the state’s service delivery objectives.
The benefit of blockchain here is that property transactions could be handled similarly as digital currency payments. This would be beneficial in keeping track of the entire transaction history of a property at any given time.
Indeed, in their study on the applications of blockchain to the public sector, Deloitte researchers suggest that since the technology provides all parties within a respective supply chain with access to the same information, it can help in reducing communication and transfer data errors and therefore concludes that “less time can be spent validating data and more can be spent on delivering goods and services.”
This coheres with the mandate of every government department tasked with service delivery and which is involved in extensive procurement processes. This can be done several ways.
Firstly, properties could be converted into digital currency – in a concept called ‘coloured coins’ or tokens which would represent the specific assets, and this could be exchanged like any other digital currency.
Secondly, ownership information can be ‘hashed’ or converted by mathematics into a unique and durable combination of text and numbers.
Thirdly, asset exchange could include several specific instructions using smart contracts.
The benefit of this is that it could increase the efficiency of transaction processing while preventing property fraud, enhancing transparency and ultimately reducing costs. Supply chains, particularly in organisations and governmental departments, are complex and involve a range of stakeholders and intermediaries. Blockchain could streamline much of the data within the supply chain ecosystem. The origins and touchpoints within the entire supply chain could be tracked to ease the process of shipments and orders while providing information about production, delivery and even maintenance.
Globally, there are already successful instances of blockchain in procurement, provenance and traceability, digital payments and contracts and logistics. There is room for greater transparency and reliability here, which will ease auditing processes.
While the benefits are apparent, there are some questions we have to ponder as we discuss the implementation of blockchain technology. Is our legislation receptive to these innovations? Do we have adequate electricity to support the enormous energy consumption it demands? Are our industries ready to absorb the technology, in particular, and all emerging technologies, in general? Do our institutions of higher education have adequate skills to understand and reproduce these emerging technologies? Are universities flexible enough to adapt to the rapid changes happening in the field? The answers to these questions are mixed given the diversity of stakeholders and potential applications, but we all have no option but to adapt; otherwise, we will be mere spectators and subjects of this revolution.
These, of course, are challenges we can respond to – particularly with the implementation of the recommendations made by the presidential 4IR commission. As Sweet puts it, “Blockchain should be used to address opportunities and problems that lack easier answers.”
- The views expressed in this article are that of the author/s and do not necessarily reflect that of the University of Johannesburg.