Hi..

Need help on Discussion and reasearch paper.

Discussion – 400 Words (PFA)

Research Paper – 800 Words (PFA) – Reference docs attached.

Let me know if you have any questions.

Week 2 Research Paper: Mastering Blockchain

Each student will write a short research paper for a peer-reviewed research paper that pertains to the week’s assigned reading.  This will be a detailed summary of the research paper and what you gained from the research.  Each week, you will find an article/peer-reviewed research paper that pertains to the week’s assignment.  If you have a difficult time, Google Scholar is a wonderful location to find these types of articles:

https://scholar.google.com/

Once you find the article, you will simply read it and then write a review of it.  Think of it as an article review where you submit a short overview of the article.

Your paper should meet the following requirements:

• Be approximately 2-3 pages in length, 800 Words minimum, not including the required cover page and reference page.

• Follow APA6 guidelines. Your paper should include an introduction, a body with fully developed content, and a conclusion.

• Support your answers with the readings from the course and at least two scholarly journal articles to support your positions, claims, and observations, in addition to your textbook. The UC Library is a great place to find resources.

• Be clearly and well-written, concise, and logical, using excellent grammar and style techniques. You are being graded in part on the quality of your writing.

*All outside sources must be referenced and cited in your paper.  All papers will be reviewed with a plagiarism software. Any references not properly referenced and cited will result in a 0 on your paper. Multiple violations will result in a failure for the course!

TextBooks

·

Chapter 1 & 11: Bashir, I. (2017). Mastering Blockchain. Birmingham, UK: Packt Publishing. (see also attached PDFs)

· Norberg, H. (2019). Unblocking the Bottlenecks and Making the Global Supply Chain Transparent: How Blockchain Technology Can Update Global Trade. The School of Public Policy Publications, (9), 1. https://doi.org/10.11575/sppp.v12i0.61839

· Kshetri, N. (2017). Will blockchain emerge as a tool to break the poverty chain in the Global South? Third World Quarterly, 38(8), 1710–1732. https://doi.org/10.1080/01436597.2017.1298438

· Varghese, J. J., Sharma, D., & Singh, N. K. (2019). Analysing the Impact of Blockchain Technology in India’s Digital Economy. Global Journal of Enterprise Information System, 10(3), 94–99. 

https://doi.org/10.18311/gjeis/2019

How do you feel blockchain will change the global economy or will it? Explain your answer.

Please make your initial post and two response posts substantive. A substantive post will do at least TWO of the following:

· Ask an interesting, thoughtful question pertaining to the topic

· Answer a question (in detail) posted by another student or the instructor

· Provide extensive additional information on the topic

· Explain, define, or analyze the topic in detail

·

Share an applicable personal experience

· Provide an outside source (for example, an article from the UC Library) that applies to the topic, along with additional information about the topic or the source (please cite properly in APA)

· Make an argument concerning the topic.

At least one scholarly source should be used in the initial discussion thread. Be sure to use information from your readings and other sources from the UC Library. Use proper citations and references in your post.

Analysing the Impact of Blockchain Technology
in India’s Digital Economy

– Jeevan John Varghese*
Student, G L BAJAJ Institute of Management and Research

jeevanjohnvarghese1@gmail.com https://orcid.org/0000-0002-5166-8890

– Devashish Sharma
Student, G L BAJAJ Institute of Management and Research

sdevashish8@gmail.com https://orcid.org/0000-0001-9354-7766

– Nishant Kumar Singh
Assistant Professor, G L BAJAJ Institute of Management and Research

nishant.singh@glbimr.org https://orcid.org/0000-0002-8636-8417

EDITorIAl BoArD ExcErpT At the initial Time of submission paper had a 4%
plagiarism which is an accepted level for publication. He editorial viewpoint is of an
observation that article had a successive close watch by the blind reviewer’s which at later
stages had rectified and amended by an authors in various phases as and when requisite to do
consequently. The reviewers had in a beginning stages mention with minor revision with a
following stamen which at a small duration streamlined by authors (Jeevan John, Devashish
Sharma, Nishant Kr. Singh). The comments related to this manuscript are tremendously
perceptible related to exponential organization both subject wise and research wise by
the reviewers during evaluation and further at blind review process too. The authors be
commendable of appreciation for writing this paper onimpact of blockchain technology in
india’s digital economy. The blockchain technology as highlighted by the authors in section
5. The objective of the paper is clear and discussion are well placed and open up avenues for
future studies. All the comments had been shared as a mixtures of dates by the authors in
due course of time and same had been incorporated by the author in computation. By and
large all the editorial and reviewer’s comments had been incorporated in a paper at the end
and further the manuscript had been earmarked and decided under “View point ”category
as its highlights and emphasize the work in relation to use blockchain technologyparticularly
on India’s digital economy.

paper Nomenclature: View Point (VP)

paper code: V11N1JM2019VP1

originality Test ratio: 4%

Submission online: 8-March-2019

Manuscript Acknowledged: 12-March-2019

originality check: 16-March-2019

peer reviewers comment: 1-April-2019

Blind reviewers remarks: 20-April-2019

Author revert: 21-April-2019

camera-ready-copy: 20-June-2019

Editorial Board citation: 25-June-2019

published online First: 5-July-2019

ArTIclE HISTory

ENTERPRISE INFORMATION SYSTEM

ABSTrAcT

purpose: In the backdrop of Digital India and the National E – Governance mission there has been an exceedingly high
reliance on the digital infrastructure which acts as an enabler in the process of decentralizing and scaling the Indian digital
economy. This paradigm shift entails a significant account of trust and security of data which is to be provided for the end user.
It is in this regard, a study is made so as to understand and analyses the assimilation of Block chain technology into India’s
digital infrastructure which is to provide robustness and scalability in the technological contours of growing Indian economy.

Design/Methodology/Approach: The research incorporates the application of exploratory method withstanding the
requirements of data, review and analysis.

Findings: Theanalysis comprehensively concurs that Blockchain technology acts as an enabler in bridging the gap between the
principles and practices of India’s digital economy. It further approves the hypothesis that a robust technological infrastructure
acts as an impetus towards the greater goal of financial inclusion.

originality / Value: The discourse of understanding the significance of digitally enabled financial services is of growing interest.
However this paper endeavours to pioneer a link between the social aspects of financial inclusion to that of technological one.

KEyworDS Blockchain | Digital India | Technology | Financial Inclusion | cyber Economic Espionage

www.gjeis.com

*corresponding Author

https://doi.org/10.18311/gjeis/2019
Volume-11 | Issue-1 | Jan-Mar, 2019 | Online ISSN : 0975-1432 | Print ISSN : 0975-153X
Frequency : Quarterly, Published Since : 2009

©2019-20 GJEIS Published by Scholastic Seed Inc. and Karam Society, New Delhi, India. This is an open
access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

GJEIS

ISSN (Online) : 0975-1432
ISSN (Print) : 0975-153X
DOI: 10.18311/gjeis

Volume 11 | Issue 1 | Jan-Mar 2019

Dr. Subodh Kesharwani
Editor-in-Chief

Published by

www.gjeis.com
ENTERPRISE INFORMATION SYSTEM

Since 2009 in Academic & Research

DOI: 10.18311/gjeis/2019 Vol 11 | Issue 1 | Jan-Mar 2019 95

www.gjeis.com
View Point

Jeevan John Varghese, Devashish Sharma and Nishant Kumar Singh

Introduction
A popular instance for the occurrence of an

event is often described with the help of classical

unities which are described as the unities of time,

place and action. This philosophical narrative can be

viewed as a cornerstone towards the understanding

of blockchain(Bashir, 2018) in Indian digital

economy. The socio-economic paradigm of our

country especially after the wake of liberalization

has been such that it has encountered various

challenges and moreover numerous possibilities.

One of the greatest possibilities which India has

embarked in the due course has been its transient

and high end infrastructural capabilities. Especially

in the wake of a robust infrastructure which would

help in the transition of our “medieval” economic

infrastructure to attain parity with that of developed

countries. It is at this pointof the narrative a modern

and state of the art infrastructure which essentially

provides high end data security was advanced,

known as the blockchain. The principledemand

for the advancement of this infrastructure was

due to the increasing instance of cyber fraud that

occurred between the 1990’s and early 2000(Swan,

2015). However in India with a rapidly increasing

population, the process of enumeration and

inclusion of people into the organized financial

system has been a cumbersome task. And the

accomplishment of such a hefty task cannot be

visualized in vacuum, as it essentially involves a

large amount of man, money and infrastructural

capabilities. It is in this backdrop we need to realize

as to how blockchain as an infrastructure could drive

as a juggernaut wave towards a robust and sound

digital economy providing parity and concurrency

to all the beneficiaries involved in the system.

literature review
The most fundamental and critical understanding

of the blockchain as a “distributed ledger”

(Bashir, 2018) has facilitated in understanding

its technological viability. However this nascent

technological tool has been a matter of much

contemplation in the technological circles (Zibin,

Xie, Dai, Chen, & Wang, 2017) such as Institute

of Electrical and Electronics Engineers especially

during its 6th International Congress on Big Data.

However the financial viability of using this tool

as a model of secure digital transaction has been

sought much later (Swan, 2015). Especially in

the backdrop of ambitious developments such as

digital India there exists an expected trillion dollar

economy in hand (Company, 2018)which can seek

benefit from this technological leap. Thus it becomes

an imperative to analyze and understand as to how

the dimensions of secure digital transaction can be

enhanced and developed to provide a stable and

scalable infrastructure(Blockchain Technology

Explained: The Ultimate Beginner’s Guide about

Blockchain Wallet, 2017) meeting the demands of a

developing economy.

objective
Based on the understanding developed from the

respective documented records, it has been noted

that there exists a lacuna in terms of contextual

analysis. This void is fundamentally created due to

an unsynchronized evaluation in terms of explaining

the blockchain technology and Indian digital

experience. Therefore it seems to be an imperative at

this juncture to critically evaluate the following:

A prelude towards understanding blockchain 1.

as a key technological instrument in financial

technology.

Recognising the impact of blockchain in India’s 2.

advancing digital economy.

research Methodology
The present studyendeavors the adoption of

anexploratory approach as it is principally based

on secondary sources of datacollected from various

reports of government and private organization. This

endeavor has been sought to enhance and develop

understanding so as to make a comprehensive

evaluation of the objective under consideration.

Global Journal of Enterprise Information System

Vol 11 | Issue 1 | Jan-Mar 2019 Online ISSN : 0975-1432 | Print ISSN : 0975-153X96

Analysing the Impact of Blockchain Technology in India’s Digital Economy

Evaluating Blockchain
Technology

Contrary to the traditional misconception

blockchain is often misunderstood with that of

Bitcoin. However it is noteworthy to understand

that Bitcoin is essentially a product that uses the

blockchain technology. One of the most cited phrase

for describing the blockchain technology has been

“distributed ledger”(Zibin, Xie, Dai, Chen, & Wang,

2017). However the technological foundation of

blockchain goes far beyond that. Originally the

development of blockchain occurred in 1991 by a

group of scientists who endeavored to timestamp

documents. The timestamp for document was

essentially done so that the documents cannot be

tempered or manipulated in any way. However the

gravity of this technology was only realized when

Satoshi Nakamoto(Swan, 2015) in 2009 developed

a Cryptographic currency known as Bitcoin. The

technical notion of the working of a blockchain can

be understood with the help of thought experiment.

Consider a person holding two Rubik’s Cube in

each of his hand, such that the Rubik’s Cubes are

joined together by a thread. Here each Rubik’s Cube

describes a block and that thread describes the hash

of the particular block. It would be noteworthy to

understand that each block contains a certain data

that is pertinent to a particular block and this data

is not subjected to manipulation or tampering.

And any tampering of data will have an effect on

the subsequent block attached to the tampered

block(Bashir, 2018). The analogy for the hash of a

particular block can be understood with that of the

fingerprint as it provides a unique identity for each

block in a blockchain. Initially when a block is null

a particular hash is calculated or assigned to a block.

However as data is encrypted into a particular block

the value of the hash changes. This triggering of

hash helps in detecting the change or tampering

of data within a block. As it has been mentioned

earlier, each block is attached to a previous block

with the help of the hash and any change within the

data of a particular block not only triggers a change

in the hash of a particular block but also create a

change in the hash of the subsequent blocks. This

degree of robustness of a blockchain provides an

ambient proof of work making it an efficient system

for secure data storage. The security of a blockchain

is derived from its innovative usage (Swan, 2015)of

proof of work and hashing. Moreover the centralized

mechanism of data distribution provides the ease of

scalability and accessibility of data among all the

users using the blockchain. Moreover it provides a

peer-to-peer which allows any of the users to join

a blockchain. Having a preliminary understanding

of the blockchain technology it would be an

imperative to understand and examine the backdrop

of Indian digital economy which would enable a

comprehensive evaluation of the existing digital

infrastructure.

India’s Journey Towards a
Digital Economy

Before the introduction of ambitious projects

like digital India and National E – Governance

mission the Government of India with financial

assistance of United Nation in 1975 developed the

National Informatics Center(Technology, 2017).

The primary aim of which was the computerization

of government offices. This initiative was followed

by the development of major insurance repository

of India such as Central Depository Services and

National Securities Depository Limited in 1999

and 1996 respectively. However this development

was abysmally low to cater the demand of a fast

and growing economy. Owing to the development

of digital infrastructure, the Government of India

sought it to be an imperative to introduce further

development in due course of time. One of the

eminent developments in terms of revival of our

digital economy was laid in the (India, 2008). Here

the ambitious project of National E – Governance

Mission was introduced which primarily focused

on enabling digital services for a citizen centered

participation in the governance. This model of

(Company, 2018)National E – Governance Mission

was primarily adopted from the implementation

strategies developed by Singapore. As a forerunner

DOI: 10.18311/gjeis/2019 Vol 11 | Issue 1 | Jan-Mar 2019 97

www.gjeis.com

to these initiatives the Government of India under

the aegis of Ministry of Electronics and Information

Technology and Ministry of Finance introduced

several other schemes such as Digital India.

There exists a wide ranging impact on the social,

political and economic front with respect to the

execution and development of India’s robust digital

infrastructure. However the requirement of an

advanced infrastructure such as Blockchain is only

understood with help of some vital statistics which

has been dealt in the following section.

The requirement of a robust
Digital Infrastructure

One might pose a pertinent question as to why

a sophisticated and complex technology such

as Blockchain is required in the Indian context.

However to ascertain such dilemma we need a

factual evaluation of data. For the sake of reducing

parametric abnormality we have ascertained certain

vital statistics which would help in the evaluation and

understanding the need for Blockchain technology

in India.

country Indonesia India Germany Japan China France

percentage 61% 56% 38% 37% 37% 32%

Index Scores 36 29 55 61 42 53

Source: McKinsey Global Institute

Table 1: Growth of Digital Economy for the

financial year 2016-2017

According to the report by the McKinsey Global

Institute for the financial year 2016-2017, India has

seen a rapid growth in terms of digital economy

with a staggering 56% and an index score of 36.

However this index is followed by another data on

the dynamic inclusion (Company, 2018)of Pradhan

Mantri Jan Dhan Yojana which was principally

aimed at financial inclusion has witnessed a 2.4 times

increase i.e. from 105 million in 2014 to 308 million

in 2017. The growth of financial inclusion has a

complimentary nature with that of technological

accessibility as it enhances the efficiency of usage

of resources.

However this aspect of our digital economy

circumvented a new horizon in the post

demonetization years with the meticulous

development of “Digital Wallets” thus enhancing

the operability of cashless transactions. This can be

understood from the following analysis.

year country
Number of cash-
less transactions

per person

2014 India 1.9

2017 India 8.0

Source: RBI, Euro monitor International

Table 2:Number of cashless transactions per

person (excl. cheques)

This table stipulates that there has been a 321%

increase in the number of cashless transaction from

the financial year of 2014 to 2017. The fundamental

prerogative behind this analysis is based on the

fact that with rise in the demand of digitally

enabled financial services, there exists an equitable

requirement to scale up the digital infrastructure.

This need for scalability is not restricted to the

financial services, but perhaps needs to be viewed as

a holistic concept which encompasses all the services

requiring a robust technological infrastructure.

View Point
Jeevan John Varghese, Devashish Sharma and Nishant Kumar Singh

Global Journal of Enterprise Information System

Vol 11 | Issue 1 | Jan-Mar 2019 Online ISSN : 0975-1432 | Print ISSN : 0975-153X98

countering cyber Economic
Espionage with Blockchain

Apart from making a utilitarian perspective the

aspect of blockchain as tool to counter act cyber

economic espionage is fundamental to understand

as it involves financial security which in turn

translates to national security. In the modern era

the mechanism of warfare is not merely restricted

to the inhospitable warfront but perhaps involves the

requirement of providing a transient technological

infrastructure which enables in providing reliability,

scalability and accessibility.

According to a report by NITI Ayog in 2017

more than 50 percent of the organizations are

reportedly affected by major cyber disruption. A

detailed account entails that of the total attacks 57%

attacks are caused due to phishing and a whopping

20% of the same by denial of service. Earlier the

acts of cyber economic espionage were considered

essentially as “first world problem”, however with the

increasing reliance on computational infrastructure,

the need for an efficient and robust technology is at

anall-time hike. Perhaps it is this lacuna which needs

to be addressed with the help of efficient technology

such as blockchain.

conclusion
On a concluding note it can be observed that

even though the government is skeptical about the

implementation of accepting Bitcoin as a legal

tender. The acceptance of blockchain technology in

the future essentially looms around the practical and

the legal challenges it faces especially in terms of

statutory incorporation and technological upheaval

which has an unsettling impact in the due course.

However the observational understanding dictates

that with more countries adopting and implementing

blockchain infrastructure, it would the imperative of

“digital India” to accept and adopt innovation and

technology into its contours of economy.

references
Bashir, I. (2018). • Mastering Blockchain: Distributed
Ledger Technology, Decentralization, and Smart Contracts
Explained. Birmingham, United Kingdom : Packt
Publishing Limited .

Blockchain Technology Explained: The Ultimate •
Beginner’s Guide about Blockchain Wallet, M. B.
(2017). Alan T. Norman. California : CreateSpace
Independent Publishing Platform.

Company, M. a. (2018). • India’s Trillion Dollar Digital.
New Delhi: Ministry of Electronics and Information
Technology, Government of India.

India, G. o. (2008). • ELEVENTH REPORT. New
Delhi: Government of India .

Swan, M. (2015). • Blockchain: Blueprint for a New
Economy. (T. McGovern, Ed.) Sebastopol, United
States of America (usa) : O’Reilly Media Inc USA.

Technology, M. o. (2017). • Annual Report 2016-2017.
New Delhi: Government of India.

Z. Z., Xie, S., Dai, H., Chen, X., & Wang, H. (2017). •
An Overview of Blockchain Technology:Architecture,
Consensus, and Future Trends. In J. Zhang (Ed.),
IEEE 6th International Congress on Big Data (pp. 557-
564). Hawaii: Conference Publishing Services, IEEE
Computer Society.

Analysing the Impact of Blockchain Technology in India’s Digital Economy

Blind Reviewers Comment

The topic of the research is very relevant and focus towards societal and financial security issue.•

In the review it is find that the objectives of the research are clearly achieved through analysis.•

Also research design, data collection and sample size were well designed and meeting the ample reliability and •
validity in all aspect.

DOI: 10.18311/gjeis/2019 Vol 11 | Issue 1 | Jan-Mar 2019 99

www.gjeis.com
View Point
Jeevan John Varghese, Devashish Sharma and Nishant Kumar Singh

GJEIS prevent plagiarism in publication
The Editorial Board had used the turnitin plagiarism [http://www.turnitin.com] tool to check the originality and
further affixed the similarity index which is 4% in this case (See Annexure-I). Thus the reviewers and editors are of
view to find it suitable to publish in this Volume-11, Issue-1, Jan-Mar, 2019

citation
Jeevan John Varghese, Devashish Sharma and Nishant Kumar Singh

“Analysing the Impact of Blockchain Technology in India’s Digital Economy”
Volume-11, Issue-1, Jan-Mar, 2019. (www.gjeis.com)

https://doi.org/10.18311/gjeis/2019
Volume-11, Issue-1, Jan-Mar, 2019

online ISSN : 0975-1432, print ISSN : 0975-153X
Frequency : Quarterly, Published Since : 2009

Google citations: Since 2009
H-Index = 96

i10-Index: 964

Source: https://scholar.google.co.in/citations?user=S47TtNkAAAAJ&hl=en

conflict of Interest: Author of a Paper had no conflict neither financially nor academically.

Annexure 1

Copyright of Global Journal of Enterprise Information System is the property of Kedar Amar
Research & Academic Management Society (KARAMS) and its content may not be copied or
emailed to multiple sites or posted to a listserv without the copyright holder’s express written
permission. However, users may print, download, or email articles for individual use.

w w w. p o lic ysch oo l .c a

PUBLICATIONSPUBLICATIONS
SPP Briefing PaperSPP Briefing Paper

Volume 12:9 March 201

9

http://dx.doi.org/10.11575/sppp.v12i0.61839

UNBLOCKING THE BOTTLENECKS AND MAKING
THE GLOBAL SUPPLY CHAIN TRANSPARENT:
HOW BLOCKCHAIN TECHNOLOGY CAN UPDATE
GLOBAL TRADE

Hanna C. Norberg

SUMMARY

Blockchain technology is still in its infancy, but already it has begun to revolutionize
global trade. Its lure is irresistible because of the simplicity with which it can
replace the standard methods of documentation, smooth out logistics, increase
transparency, speed up transactions, and ameliorate the planning and tracking
of trade.

Blockchain essentially provides the supply chain with an unalterable ledger
of verified transactions, and thus enables trust every step of the way through
the trade process. Every stakeholder involved in that process – from producer
to warehouse worker to shipper to financial institution to recipient at the final
destination – can trust that the information contained in that indelible ledger is
accurate. Fraud will no longer be an issue, middlemen can be eliminated, shipments
tracked, quality control maintained to highest standards and consumers can
make decisions based on more than the price. Blockchain dramatically reduces
the amount of paperwork involved, along with the myriad of agents typically
involved in the process, all of this resulting in soaring efficiencies.

Making the most of this new technology, however, requires solid policy. Most
people have only a vague idea of what blockchain is. There needs to be a basic
understanding of what blockchain can and can’t do, and how it works in the
economy and in trade. Once they become familiar with the technology, policy-

1

makers must move on to thinking about what technological issues could be mitigated,
solved or improved.

Governments need to explore blockchain’s potential through its use in public-sector
projects that demonstrate its workings, its potential and its inevitable limitations. Although
blockchain is not nearly as evolved now as the internet was in 2005, co-operation among
all stakeholders on issues like taxonomy or policy guides on basic principles is crucial.
Those stakeholders include government, industry, academia and civil society. All this
must be done while keeping in mind the global nature of blockchain and that blockchain
regulations need to be made in synch with regulations on other issues are adjacent to the
technology, such as electronic signatures. However, work can be done in the global arena
through international initiatives and organizations such as the ISO.

Canada has an important role to play in developing international blockchain policy
and furthering use of the technology. Estimates are that Canada will be among the top
investors in blockchain, with a projected annual growth rate of nearly 90 per cent in just
the next three years alone. Canadian policy-makers can take on a significant role in these
early days by providing a hub for stakeholders and resources.

Already, industry has begun experimenting on a wide scale with Blockchain. Walmart, for
example, has created a blockchain food safety alliance that tracks, traces and monitors
product safety from farm to grocery aisle.

Blockchain has tremendous potential for relieving the pressure points and bottlenecks in
trade supply chains. Its low investment costs are another asset that will help contribute
to its widespread use in the next decade. Trade isn’t the only place for blockchain; health
care, data protection and voting security are all areas where blockchain can prove useful.
With proper cooperation, governance and policies in place to regulate it, blockchain will
soon become an accepted (unnoticed) part of many aspects of everyday life.

2

INTRODUCTION
When you think about all the steps that must take place, and all the co-operation required to bring a
kiwi fruit to your local supermarket, it’s hard not to marvel. The same goes for all the transactions
needed globally, tying together more than 800 suppliers across more than 30 countries needed to
produce the iPhone.1 We take all this for granted, but the scope and complexity of the planning,
processes, logistics and transactions needed to get the trading chain to work from farm to fork are
simply staggering.

Blockchain technology was designed to permit two parties to conduct an online transaction without
having to rely on a middleman to act as a third-party intermediary (Gabinson 2016).

International trade is a long chain of transactions, all requiring trust in order to enable execution.
Often, the players don’t know each other, have no physical interaction and the process has built-in
lag times between delivery and payment. Currently, middlemen bridge these gaps, but this means
interacting with numerous agents specialized in enabling different parts of the trade chain (e.g.,
having 10 parties covering the process of trade financing alone). While these proxies manage to
build sufficient bridges where needed, they are not the perfect solution to the problem. Having to
deal with various intermediaries is costly, inefficient and keeps information about the product in
silos with each middleman.

In addition to its costliness, the lack of oversight in the current system gives rise to significant
amounts of fraud and theft. The American National Cargo Security Council estimates that the
global financial impact of cargo loss exceeds $50 billion annually (Hayes 2004), which highlights
the positive effects of having more transparency and accountability built into the system.

A thriving community of trading firms is especially important for open economies like Canada.
In value-added terms, exports accounted for a quarter of Canadian GDP2 in 2014 (OECD 2017).
This number is lower than the OECD average (31 per cent), and highlights the scope for improved
growth through increased trade. The prospect of lowering the costs of trade will not only increase
the volume of trade, but also level the playing field for small and medium-sized enterprises
(SMEs). By enabling consumers to make more informed decisions, blockchain can empower the
value-based trade that Canada aims to achieve with its more progressive trade agenda, such as
the Comprehensive Economic and Trade Agreement (CETA) recently concluded with the EU.
The agreement contains provisions on labour rights, environmental protection and sustainable
development. The official communication regarding CETA states that it “upholds and promotes the
values that Canada shares with the EU.”

3

“Trade is in Canada’s DNA and it’s vital to our economic prosperity.”
The Hon. François-Philippe Champagne, Minister of International Trade, 2018

4

Much like the advent of containerization or the information and communications technology (ICT)
revolution, the development of blockchain is a private-sector initiative offering huge potential for
trade, growth and jobs. Realizing blockchain’s potential, however, hinges on involvement by all
stakeholders, including policy-makers.

1 According to Comparecamp.com (2014).
2 This corresponds to a gross export share of 34 per cent of GDP.
3 https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/index.

aspx?lang=eng
4 Minister’s Message on the State of Trade Report (2018).

3

WHAT IS BLOCKCHAIN TECHNOLOGY AND HOW DOES IT STAND
TO IMPACT TRADE?

What is blockchain technology?

Blockchain technology describes a novel digital concept for storing data. The main idea is to
simultaneously decentralize and secure trust between parties wishing to perform a transaction. The
conceptual ledger system holds information about transactions in a register that is transparent and
accessible. Once the information has been entered into a “block”, it cannot be altered, only added
to. Currently, many transactions involve middlemen who keep ledgers (e.g., pre-internet banks
holding the actual paper deeds to stocks and using digital ledgers for bank balances) and/or acting
as proxies for trust and information (such as a realtor in a real estate transaction).

In technical terms, blockchain – or in its more generic denomination, distributed ledger technology
– is a distributed consensus mechanism with an underlying security protocol.

The original information is distributed and held by more than one party. These holders of
information are called nodes (computers connected to the network). As soon as new information
is available, it is time-stamped and sent out simultaneously to all nodes in the system. Each node
then automatically replies to confirm that the new information has been received; hence the term
“consensus mechanism”. All transactions are handled according to a security protocol, which
means they are added through cryptography. This ensures that they are meddle-proof once all
nodes have reported that they have handled the information that was set up chronologically as one
block in the process. Once the block is closed it is immutable and cannot be deleted. A new block is
then generated to keep records of the next part of the transaction in the ledger.

The system also contains actors who add information along the process. The actors could be
inspectors verifying that the shipment has been inspected and adheres to regulation. An actor could
also be the importer’s bank setting up a letter of credit, the carrier issuing a bill of lading (receipt
of cargo for shipment) or even Internet of Things (IoT) sensors (e.g., measuring temperature
or humidity inside shipping containers transporting perishables, or GPS co-ordinates tracking
movement). Some actors have the authority to add information, others have viewing privilege.
Blockchain is set up so that all have access only to the part of the process that pertains to them.

Although originally developed for transactions of the cryptocurrency bitcoin, blockchain can be
used wherever people want to keep track of records. This includes everything from protecting
endangered species to national security, waste management and tracking fine art and diamonds
(Zago 2018).

HOW CAN BLOCKCHAIN TECHNOLOGY BE INCORPORATED IN
TRADE TRANSACTIONS?

Trade is driven by economic incentives to reap the benefits of comparative advantage.

Trust, transparency and accountability are friends and the costs of distance and uncertainty are
foes (Chaney 2013).

The trade chain is a long and complicated series of transactions, many of which take place without
physical interaction between the transacting parties. Traded goods travel long geographical
distances and across language and cultural barriers. Time is crucial for trade. First, there is an

4

inherent cash flow issue in these transactions. For example, a line of credit needs to cover the
long time between harvest and consumption of fruits and vegetables. The longer it takes, the
more expensive the credit. Second, once the agricultural products have been harvested, they are
perishable and any delays risk ruining the goods and the revenue. This is increasingly true also
for producers of fashion items, where a delivery delay can render the clothing passé, and thus not
viable to sell.

Blockchain will decrease the costs of trade, which will empower globalization, trade, and optimize
the global value chains that the ICT revolution has made possible. Moreover, through a number of
channels, such as the way documentation can be handled and the trading process can be monitored,
the technology also enables a new layer of trust, transparency and accountability (McDaniel and
Norberg 2019).

Blockchain technology has the potential to revolutionize, reinvent or disrupt international trade.
This is occurring just as we have begun to understand the impact that internet-led digitalization
has had on trade and the economy. By lowering communications costs, ICT has brought about
digitalization, global value chains, electronic platforms, 3D printing and much more. It has created
many new opportunities for firms that previously were unable to enter the global market. The
internet lowered the threshold for entering that market, shortened geographical distances and
decreased the costs of participating in trade. As a result, smaller actors, such as consumers and
SMEs, can now trade in markets that previously were inaccessible.

To enable this trade, new institutions emerged, improving trust through the use of ICT payment
systems (such as PayPal, Alipay and Klarna). Blockchain technology can substitute for many
of these systems, automating the roles of many parts of the administrative chain and making
transactions smoother, more efficient, secure and transparent. Combining blockchain with other
types of new technology such as the IoT, artificial intelligence (AI) and smart contracts, opens up
enormous possibilities for allowing other applications to work in the same direction.

“The Holy Trinity”: Blockchain, AI, IoT
and Their Super Power Application: Smart Contracts

Artificial intelligence (AI) denotes machine-simulated intelligence. Based on the assumption
that human intelligence can be defined in such exact terms that a machine can mimic it, AI
is applied to learning, reasoning and perceiving information. Using information based on
mathematics, computer science, linguistics, psychology and other sciences, AI can perform
many tasks, ranging from playing chess and driving cars to running search engines and targeting
advertising. AI describes machines, systems or applications that are capable of performing tasks
which previously only humans could perform (Aaronson 2018). Recently, there have been quite a
few cases where AI has out-performed human intelligence, such as doing legal work (WEF 2018)
and detecting cancer (Tucker 2018). Although founded as an academic discipline in 1956, AI has
become central to IT only since recent advances in the availability of computing power and the
ability to process large amounts of data.

5

Internet of Things (IoT) is the connection of standard items, like computers or smartphones
to the internet. This also includes other everyday traditionally non-smart objects such as home
appliances. A modified Coke machine at Carnegie Mellon University* in 1982, which enabled
reports on inventory and whether drinks were cold, was the first internet-connected device. As
costs, size and power requirements for computing power have fallen, it became viable to embed
network connections into other physical devices, e.g., vehicles, refrigerators and watches. These
objects can then connect and exchange data, making it possible to control and monitor them
remotely.

According to Wikipedia, a smart contract is “a computer protocol intended to digitally facilitate,
verify, or enforce the negotiation or performance of a contract. Smart contracts allow the
performance of credible transactions without third parties. These transactions are trackable and
irreversible.”

Smart contracts tie together the underlying technologies in blockchain, AI and IoT. In practice,
a smart contract is a protocol that does not require human interaction to track and verify the
process along the way. The contract itself is set up with an if/then algorithm for the criteria that
need to be met in order to execute the next phase. Thus, the current phase of the production is
evidence that the criteria for all prior phases have been upheld. The contract can be set up so
that the whole process is transparent and trackable, making it a prerequisite for subcontractors to
fulfil not only the parts of the delivery per se, but ensuring it has the necessary paperwork and
inspections that need to be met and displayed before executing the contract.

For trade-related purposes, a smart contract can verify, for example, that a product meets
prerequisites for regulations and standards, such as being environmentally friendly, sustainable,
and adhering to labour standards, rules of origin, etc.

* https://www.cs.cmu.edu/~coke/history_long.txt

Trade’s administrative costs are significant. According to shipping giant Maersk (The Economist
2018), a shipment of avocados from Mombasa to Rotterdam in 2014 entailed more than 200
communications involving 30 parties. Until the ICT revolution, all documentation of trade goods in
transit was done on paper. The advent of ICT and the digitalization of documents greatly facilitated
the process. Papers no longer went missing and documents could be duplicated. The lowering of
communication costs unleashed and empowered the concept of global value chains. Parts of the
trade chain have taken it further, working to introduce digital supply chains (DSCs)5 (Patnayakuni
2002) to increase co-operation and productivity to gain competitiveness.

Despite these advances, other parts of the trade chain are stubbornly stuck in their old ways and
have yet to reap the technology’s benefits. The shipping industry is the most notorious example
of this. Maersk and IBM – who previously co-operated around a number of blockchain projects
on shipping and logistics – have teamed up to initiate TradeLens,6 an open platform for wider

5 Digital supply chains are, as suggested by the term, extension of global supply chains, with greater levels of co-operation
on a digital level. Here, MNEs take on the role as hub organizations for leading the digital integration and work along with
their main suppliers to optimize operations all along the chain, rather than just sourcing from suppliers and optimizing
within their own domain.

6 www.tradelens.com

6

blockchain co-operation along the global supply chains. TradeLens aims to serves as a catalyst
to digitizing documentation as well as connecting actors (such as port and terminal operators,
customs authorities, freight forwarders, transportation and logistics companies, etc.) to form
“a more efficient, predictable and secure exchange of information in order to foster greater
collaboration and trust across the global supply chain.”

Another issue is that documents along the trade chain are still highly compartmentalized, with each
actor focusing on a specific part of the process. Hence, the importer needs to communicate directly
with each one and make sure each has access to the necessary documentation.7 With blockchain,
the documentation can follow the product, ensuring that one part of the protocol is followed before
it is sent on to the next part.

Time is money – especially for perishables. As an example, the Food and Agriculture Organization
of the United Nations (FAO) estimates that between 30 and 40 per cent of food is lost or perishes
before it reaches the market. In an attempt to make the border crossing procedure more efficient,
the World Trade Organization (WTO) negotiated the trade facilitation agreement (TFA) which
entered into force in 2017. The agreement contains provisions to expedite the movement, release
and clearance of goods in trade by “cutting red tape at the borders”. The full implementation of
the agreement is estimated to be significant, reducing global trade costs by 14 per cent (WTO
215b). According to the estimates produced by the Organisation for Economic Co-operation and
Development (OECD), the lower trade costs would lead to an increase of global exports by around
US$1 trillion yearly (OECD 2015).

While the implementation of the TFA is useful for increasing the productivity of border crossing
procedures, blockchain can take goods along the whole chain, from producer to consumer. The
TFA initiative includes measures such as digitizing paperwork and streamlining procedures. These
are commendable first initiatives, of which blockchain can be seen as an extension, albeit with more
potential, where information can follow the good from initial production to the final consumer.

Trade financing is a cumbersome and complex process. There is a fundamental time lapse built
into the process of international trade, which makes it less suitable for paying cash in advance.
While exporters prefer to get paid as they are shipping off the goods, importers want to receive
the merchandise before paying, in order to inspect the goods first. Transporting takes time and the
quality of the goods may be compromised in the process. Trade financing, which is often described
as “the lubricant of trade” has developed as a solution to these issues. Here, a finance or insurance
agent (often both) provides credit, payment guarantees or insurance to facilitate the process and
acts as a bridge for the time and risks involved in the transaction. According to the WTO (2016),
up to 80 per cent of world trade is currently financed by credit or credit insurance; yet the WTO
defines the lack of trade finance as a “significant non-tariff barrier to trade”. This barrier hits
smaller firms harder than larger ones, since on a global scale, over half of trade finance requests by
SMEs are rejected (compared to a rejection rate of seven per cent for larger multinational firms).

Using blockchain technology, the importer’s bank can set up a smart contract and create a letter
of credit to guarantee exporters a payment before they produce or harvest. The producer will then
know that the money has been deposited. The local bank can issue a credit to the producer with
the guarantee from the exporter as collateral. Not only will lowering the risks and costs this way

7 As examples of the red tape targeted in the TFA, the WTO points to the documentation requirements for goods which often
lack transparency, leading to required paperwork being duplicated in many places along the way. Moreover, WTO identifies
the lack of co-operation between traders and official agencies, and low usage of information technology to empower
automatic data submission as issues that the implementation of the TFA can target.

7

benefit those firms currently using the services, but the increased transparency lowers the risks and
costs for the issuing agents, making it more lucrative for new firms wishing to enter the financing
market and increasing available liquidity for trading firms (Global Trade Review, 2016).

The other part of the trade financing process is trade insurance, which is used to manage the risk
of any part of the goods getting ruined along the way. Traditionally, middlemen specializing in
mitigating risk along the chain have handled this insurance. Some actors insure against risks during
transportation from farm to warehouse, while others do so from warehouse to container. Still
another actor focuses on risks while the goods are on board the ship, and so on. Thus, covering the
risks requires quite a few actors and proxies. To minimize the risk of theft and fraud, containers
were sealed upon exit and not opened until arrival; this is known as being transported in “black
boxes”. The shipping process can incorporate more transparency by using blockchain technology
for inspection documentation, having IoT monitors send automated updates on the temperature and
humidity within the container, and using GPS co-ordinates, cameras and alerts if the containers
have been opened.

BLOCKCHAIN AND TRADE POLICY

Blockchain improves the agreements that are already in place

While governments negotiate, sign and implement preferential trade agreements, the economic
gains are not automatically delivered once that work is done. Governments don’t trade; firms do.
The benefits of the trade agreements are not realized until firms make good use of the opportunities
available from the preferential deals. Until recently, surprisingly little was known about the extent
to which firms traded under the preferential, more liberalized rules, such as lower tariffs, resulting
from Free Trade Agreement (FTA) negotiations. This is measured by preferential utilization rates
(PURs) which are defined as the share of trade that takes place under preferences as a share of the
total value of trade that is preference-eligible (Swedish Board of Trade 2018).

Customs data on tariff usage have only recently been made available on a wider scale. Early
research shows that the use of EU preferential rates is relatively high, on average 75 per cent.
Research also shows that PURs are positively correlated to the value of the shipment (Keck and
Lendle 2012) and trading firm size – the bigger the firm or shipment, the higher the PURs (Nilsson
2016). However, trading firms are not automatically eligible for an FTA’s preferential rates.
Substantial administrative requirements are needed to qualify for those rates. To restrict trade
deflection, firms need to prove that the goods adhere to the rules-of-origin (RoO) regulations.8

Providing proof for the RoO is often difficult and time-consuming. Evidence of the national origin
of the product being shipped must be provided and firms also need to provide evidence of the
production of inputs. The costs incurred are significant. Moreover, the negotiated rules differ across
FTAs (e.g., RoO for NAFTA are different from those in CETA (Georges 2017)). In NAFTA’s case,
Anson et al. (2005) estimated the average costs for proving adherence to the RoO to an ad valorem
equivalent of around six per cent. This cost is harder for smaller firms to bear. Putting RoO-related
information on the blockchain would significantly lower the costs and administrative burden, as
well as generally help increase the accessibility of information. The increased traceability that the

8 Rules of origin are the criteria needed to determine a product’s national source.
https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm

8

technology creates can make the process faster, cheaper and easier, thus levelling the playing field
for smaller firms entering the international market.

SMEs are the backbone of the economy and essential to growth and jobs. According to the
government of Canada’s key small business statistics, Canadian SMEs employed 10 million people,
or 90 per cent of private-sector workers, in 2015. Meanwhile, SMEs account for just 25 per cent
of exports. This matters, since much empirical research (Bradford and Jensen 1999) shows that
the increased competition that exporting firms face causes them to out-perform non-exporters in
employment, productivity and capital intensity, thus providing better, more secure jobs with higher
wages. Levelling the playing field and increasing the participation of SMEs in the international
arena are key to unlocking growth.

As tariffs have decreased, non-tariff barriers (NTBs) have become an increasingly important
impediment to trade. As a result, trade negotiators have added these issues to the agenda.
Technical barriers to trade, often referred to as regulations, were included in the CETA negotiated
between Canada and the EU (CETA Text Article 21), where discussions focused on ways to
increase regulatory co-operation, coherence and so forth. Gathering information on the regulatory
requirements and voluntary standards needed to sell a product in an international market can be
costly, especially for SMEs. Blockchain can make it cheaper and less cumbersome for firms to both
adhere to, and document that, the traded good/service is up to standards and regulations. Currently,
there are some promising initiatives set out to make the information more readily accessible, such
as the digitalization program Xalgo4Trade here in Canada, which is an open-source initiative for
the “internet of rules” (Atkinson 2018).

A QR code sticker can also make more information about a product accessible, thus making it
easier for producers to profile themselves to consumers and stand out from the competition. The
French supermarket Carrefour has initiated a project in which all information on its house brand of
chicken will be available via a QR code sticker on the container. In an effort to make the process
totally transparent, the blockchain is set up so that every actor in the supply chain (breeder,
processor, butcher, etc.) enters their own information independently on the blockchain. Since the
data are decentralized, Carrefour cannot intervene in the flow of information. In just a few seconds
with the help of a smartphone, a consumer can see whether a particular animal has received
antibiotics and what it has been fed. Initiatives such as this will help consumers make more
informed choices and empower producers who wish to compete by means other than price.

Supply chain scandals mean consumers are increasingly demanding to know more about the
provenance of the things they buy (Francisco and Swanson 2018). Some of these recent scandals
included the horsemeat found in Findus’ lasagne, or the fact that manufacturing for Zara, Walmart
and Sears took place in Bangladesh factories that workers later burned down. In the longer run, this
will empower smaller or more diverse firms to enter the market and give consumers more variety to
choose from with regard to ethical considerations, environmental impacts, etc.

Blockchain also works very well to support the underlying characteristics of
modern trade agreements

Blockchain technology is particularly suited for the criteria of modern, progressive trade policy.
Traditionally, trade negotiations focused on lowering tariff barriers. Newer types of trade
agreements not only focus on non-tariff barriers to trade such as regulatory issues, but also
include more qualitative aims. Forward-looking trade agreements (such as CETA, applied on

9

Sept. 21, 2017), also aim to take responsibility for value-based trade, with language on
transparency, accountability, sustainability, human rights, labour rights and so on.

“Progressive trade means doing everything possible to ensure that all segments of society,
both in Canada and abroad, can take advantage of the economic opportunities flowing from
trade and investment – with a particular focus on women, Indigenous peoples, youth, and small
and medium-sized businesses”

The Hon. François-Philippe Champagne, Minister of International Trade9

Blockchain makes it easier to monitor and trace to what extent both the product and the production
process adhere to the progressive values set out in the agreement. Instead of the information being
held as a certificate with the individual actor along the supply chain, it can be made accessible
through the product itself with the QR code on, say, a sticker on a fruit.

BLOCKCHAIN AND POLICY GOING FORWARD
The vision of how far along blockchain has come differs widely, depending on whom you ask and
what measure you use to determine progress. In the past two years, much effort and resources
have been directed to advancing the use of blockchain. Key inception points have been identified
and pilot projects have been successfully deployed to the trade chain. In medical terms, we’re
at the point where you could confidently say that the lab results are looking good. Perhaps even
more importantly, these efforts have also clarified which user cases do not stand to benefit from
blockchain.10 As often happens with technological advancements, expectations tend to gather at
the extremes, divided between hype (e.g., the solution to frictionless EU-U.K. trade post-Brexit11)
and hostility (the most over-hyped and least useful technology in human history (Roubini 2018)).
Figuring out where blockchain can and should be applied is a valuable part of advancing the
adoption and development of the technology.

To continue the medical metaphor, the next step for developers would be to use blockchain on a
larger scale of patients and assess the effects in a clinical trial. The following step will be to assess
the pressure points and see how it works within a more diverse ecosystem. To reach the next level
of development, blockchain will need to evolve with regard to both supply (e.g., user friendliness)
and demand, (willingness to adopt the technology). There is much talk about the interoperability
needed to really get the technology off the ground; developers must figure out how to get it to scale
up and work across different platforms, industries and borders. Independent initiatives such as the
Blockchain Interoperability Alliance (BIA)12 and the International Organization for Standardization
(ISO)13 are important venues for discussing and developing such co-operation.

9 Speech made July 7, 2017, at the release of Canada’s State of Play: Trade and Investment Update, 2017 report.
http://www.international.gc.ca/economist-economiste/performance/state-point/state_2017_ point/index.aspx?lang=eng

10 Gartner predicted that 90 per cent of enterprise blockchain projects launched in 2015 would fail within 18 to 24 months
(Panetta 2017). Misunderstanding blockchain or ignoring its purpose ranked number one on their list of top 10 mistakes in
enterprise blockchain projects.

11 As argued by British Chancellor Philip Hammond, The Irish Times, Oct. 1, 2018. https://www.irishtimes.com/news/world/
europe/hammond-technology-may-be-solution-to-frictionless-border-trade-1.3647599

12 https://icon.foundation/contents/icon/bia?lang=en
13 The ISO is working on developing 10 standards for blockchain and distributed ledger technologies, covering issues

such as taxonomy and ontology, architecture, privacy and personally identifiable information. https://www.iso.org/
committee/6266604/x/catalogue/p/0/u/1/w/0/d/0

10

A crucial point for policy-makers is to get regulation to work across other issues that are
fundamental to executing the blockchain process. While some issues, such as e-signatures, are
being recognized and dealt with on a policy level, they have yet to be fully implemented in practice.
Pilot programs (such as the Swedish initiative to put land ownership on block chain) EU Blockchain
Observatory and Forum 2018a), which cannot go live because “a contract to sell property in
Sweden needs by law to be on paper” highlights the importance of thinking and working on the
broader issues involved with updating the new technology and realizing its potential.

WHAT CAN/SHOULD POLICY-MAKERS DO?
Since the technological process so far has been taking place in the private, rather than the public,
arena it would be easy to conclude there is not much of a specific to-do list for policy-makers.
As with the advent of containerization, blockchain is a private-sector development that poses
huge implications for trade. In terms of its nature, however, blockchain is much more similar to
the internet, as a global resource technology which crucially depends on the engagement of all
stakeholders to reach its full potential. The issues the technology needs to solve to reach the next
level of development, such as scaling up, interoperability and adoption, could all benefit from
public support and input.

A careful eye should be cast on the need for regulating the application and how
blockchain works with other types of regulations

Blockchain is a global resource, an underlying infrastructure on which endless applications can
be built. Blockchain per se doesn’t need to be regulated and the technology’s universal reach
suggests that governance should be confined neither to national borders nor to certain sectors of
society. Rather, blockchain should be governed the way the internet is governed –through global
governance networks based on a multi-stakeholder approach.

We cannot leave governance of such complex global innovations solely either to governments or
to the private sector: political and commercial interests have proven insufficient to ensure that this
new resource serves society. Rather, and more than ever, we need multi-stakeholders to collaborate
as equals and provide global leadership. We need all three pillars of modern civilization – the
private sector, the public sector and civil society – to participate in stewardship of this new global
resource (Tapscott and Tapscott 2018).

Nevertheless, policy-makers need to keep an eye on whether and how to regulate the applications of
this technology. This was made apparent by the risks of the rapid, unregulated expansion of crypto
assets and the reported incidents of thefts, hacking and scams. The regulatory afterthought has
given rise to divergent regulatory approaches across the globe. On one end of the spectrum, Estonia
has introduced digital citizenship on blockchain, while on the other end, Algeria has moved toward
a total ban on cryptocurrencies. Across the U.S., state regulations vary. For example, Arizona
wants to pass legislation regarding citizens paying their tax bills in bitcoin, and New York requires
a bit-licence to conduct virtual currency business activity. 14 Meanwhile, China has extended the
Great Firewall to include cryptocurrencies, banning some cryptocurrency-focused accounts from
chat as well as initial coin offerings (ICOs)15 and has restricted cryptocurrency transactions. In an

14 https://www.dfs.ny.gov/legal/regulations/adoptions/dfsp200t
15 https://www.loc.gov/law/help/cryptocurrency/china.php

11

effort to keep track of the regulatory issues surrounding blockchains and digital cash, Bitlegal.io
was recently set up.

Regulating an emerging technology is complicated, because of timing and the level of regulation to
apply. Too much regulation risks stifling development, and too little risks inhibiting the willingness
to adopt. Like the fairy tale of Goldilocks and the three bears, this is about getting things just right.

Moreover, since technological development outpaces policy-making, proposed regulation might
be coming in too late, spurring policy-makers to try to retrofit the new adaptations to the new
regulation as it is developed. Learning from the implementation of the internet, many countries
have opted for the less-is-more approach, which early research demonstrates to be beneficial.

“The smart regulatory hands-off approach adopted in the EU and the U.S. to a large extent bodes
well for future innovative contributions of blockchains in the financial services and related sectors
and toward enhanced financial inclusiveness” (Yeoh 2017). Trying to strike the right balance,
while learning and minimizing the risks, some governments have turned to the use of regulatory
sandboxes in which, for a limited time, authorized businesses can test their products and services in
the real market on a trial basis, while keeping communication open among developers, regulators
and firms. Recently, the British Financial Conduct Authority (FCA) concluded a new version of its
sandbox experiment to promote competition in the interest of consumers, tying together regulators
worldwide with firms operating in financial services.

16

As the technology makes its way into more diverse systems, it is imperative to ensure that it is
interoperable with current national regulations. The authors of the EU Parliament (2017a) refer to
this as “anticipatory policy-making”, which implies comparing and contrasting the use and effect
of blockchain to the current regulations. Their report (EU Parliament 2017b) points out that the
European directive on non-financial reporting could have consequences for blockchain applications
for supply chains, and needs to be examined.

In the case of international trade, it is not merely important that the technology be interoperable
across different types of blockchains and national regulations. For the chain to work from farm to
fork, the incorporated systems also need to be cohesive with regulations across all the countries
the product passes through. Thus, there must be international collaboration on the regulations
currently in place or planned for and how they may impact the changes blockchain will create in
international supply chains. In this regard, some initiatives are up and running. Established in May
2017, the ISO has a technical committee for developing standards for blockchain and distributed
ledger technologies. The committee is working on developing 10 ISO standards17 covering crucial
issues such as terminology, security, interoperability, governance and smart contracts. The
Standards Council of Canada is one of the 37 participating members.

Recommendations for Canadian Policy-Makers

The role of policy-makers at this point should be to focus on understanding the technology, its
workings in the economy and in trade – where there are economic potential benefits – and to the
extent possible, engage and enable co-operation. Moreover, the focus should be on anticipatory
policy-making. Endorsing the technology from a government position, as the EU has, lends
legitimacy to projects and sheds light on possibilities, opening the eyes of the public, SMEs,

16 https://www.fca.org.uk/news/press-releases/fca-reveals-fourth-round-successful-firms-its-regulatory-sandbox
17 https://www.iso.org/committee/6266604.html

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educators and students. Canadian policy-makers looking to support the development of blockchain
and its economic effects should educate themselves and the public on what blockchain is, and
perhaps even more importantly, on what it is not.

Despite the hype around cryptocurrencies like bitcoin and Ethereum, the interest and knowledge
around blockchain are quite limited. A first task for policy-makers would be to gather and provide
a basic understanding of what blockchain is. As frequently voiced in my interviews with the
blockchain industry, and summarized in the blog by Palfreyman (2017), explaining blockchain is
often still at the level of describing what it is not (bitcoin mostly, but also not a distributed database
replacement). Having a basic understanding of the technology, what its novelty entails and what
issues could be solved or improved, as well as how all these things are connected, would be a very
useful foundation for policy-makers. Beyond that, they should aspire to build some deeper in-house
expertise to monitor the broader goings-on and the issues that might need attention. As Urban and
Pineda (2018) suggest, this would also decrease the reliance on outside consultants.

There is currently a shortage of academic resources devoted to blockchain. First, this is a constraint
on the development of blockchain for industry. Despite much collaboration, silofication still plagues
the industry, something at which the Massachusetts Institute of Technology (MIT) has taken aim.
“MIT and the academic layer can be a place where we can do assessments, do research and be able
to talk about things like scalability without any bias or special interests,” says Joichi Ito, director of
the MIT Media Lab.18 Along the same lines, Stanford University has recently opened a Center for
Blockchain Research. From the industry side, Ripple has set up a $50 million fund for its University
Blockchain Research Initiative (UBRI), partnering with 17 academic institutions globally,19 seeking
to collaborate on R&D, creating curriculums and stimulating ideas and dialogue. The University
of Waterloo represents Canada in this partnership. Although the bigger, more prestigious (mostly
American) universities are starting to cater to student demands and offering courses on blockchain,
the shortage of blockchain developers is one of the biggest hindrances to the development of the
technology (Luu 2018).

Second, the shortage of academic resources devoted to blockchain is creating a shortage of
information for policy-makers. Since blockchain is both a very recent development and poised to
affect many aspects of society, it is imperative to get a broad understanding from a wide range
of sciences on the effects and expectations, which requires a much bigger commitment and co-
operation with academia. For Canadian policy-makers in trade specifically, it is important to gain
insight into blockchain’s effects on trade. There must be impact assessments on blockchain similar
to the work that Brynjolfson et al. (2018) did in their paper, estimating the effect AI has had on
translation of e-commerce platforms and the resulting effects on transactions and trade.

-Explore the technology and learn what it can and (cannot/should not do); try it
out on one’s own projects.

The large number of failed projects is an important part of the learning process for blockchain
developers. However, the learning-by-doing approach is an equally important part of the process
for users and policy-makers. Engaging in public-sector projects incorporating blockchain is an
essential part of understanding its workings, potential and limitations. This will provide a natural
way to collaborate with other parts of the ecosystem, such as developers and other stakeholders, so
that they can work together on anticipating, mitigating and learning from mistakes.

18 Tapscott and Tapscott (2018).
19 https://ripple.com/insights/ripple-introduces-the-university-blockchain-research-initiative/

13

Co-operating with local suppliers is also good for business. In their report, Urban and Pineda
(2018) point out that one of the most commonly voiced complaints from Canadian blockchain
entrepreneurs is the lack of large institutional reference customers like government, which are
needed for procuring larger scale projects.

-Engage on a wide range across the ecosystem, get involved in the setup of a
multi-stakeholder blockchain governance; communicate in a wider sphere, across
and within sectors, locally and globally.

An important lesson from internet governance is that a multi-stakeholder approach is imperative
to making the most of a technological platform that stands to fundamentally change how society
operates. The internet is a public and global good that is constantly changing and evolving, and
governance must mirror that. Blockchain is still a black box for most stakeholders and, therefore, a
holistic and co-ordinated effort will be necessary (Kim and Kang, 2018).

While blockchain has not yet reached either that scale or scope, the underlying nature is similar and
much could be gained at this stage by engaging across the ecosystem, starting with issues such as
developing a common taxonomy, sharing lessons and discussing basic policy issues.

Mirroring the World Summit on the Information Society’s (WSIS) (2005) definition of internet
governance as “the development and application by governments, the private sector and civil
society in their respective roles, of shared principles, norms, rules, decision-making procedures and
programs that shape the evolution and the use of the internet”, the governance of blockchain needs
to be based on a novel approach encompassing the interests of all parties, and the public sector is
an integral part of making that happen. Although blockchain is not nearly as evolved now as the
internet was in 2005, it is not too early to co-operate on issues like taxonomy or on outlines for
policy guides on basic principles.

This policy engagement needs to be done on a number of different levels. On the local level, it
should bring industry, consumers, academia and other community members together, to learn
and share on more concrete issues. Since blockchain space is not bound by national borders or
regulation spheres, any policy decisions taken on a local level will impact the global ecosystem as
well. Work must thus be done on the global arena through international organizations, such as via
the initiatives created by the OECD and WEF.

-Consider endorsing blockchain to officially support Canada as a good breeding
ground for the technology.

Policy-makers can do numerous things to empower their home field to receive blockchain
investment and development. Canadian policy-makers have been forthcoming in anticipating and
realizing many of these things, which have shown to be fruitful.

“Canada probably has one of the three biggest hubs for blockchain technology in the world.
We’ve achieved this position by virtue of having a lot of young innovators that got into the
industry three to four years ago, and also due in large part to the federal and provincial
governments that have been very pragmatic in working with the industry.”

Jason Cassidy, CEO, Crypto Consultant.

20

20 Johne (2018).

14

Home to two of Ethereum’s founders and several other people significant to the industry, Canada
is doing well, as it is already a destination for blockchain private-sector-related investments. While
the International Data Corporation (IDC) forecasts that the biggest investments will be in the U.S.
and western Europe, Canada is expected to be among the top growing investors in blockchain, with
an estimated annual growth rate of close to 90 per cent between 2018 and 2022 (IDC 2018).

Last spring, the EU took a more direct, policy-based approach to endorse blockchain, which
might be an option for Canadian policy-makers to consider to increase growth. The EU, which
has defined blockchain as “an important tool in fostering innovation and supporting the digital
single market”, launched the EU Blockchain Observatory and Forum in February 2018. The forum
was deemed “one of the world’s most comprehensive repositories of [blockchain] experience and
expertise.” The project’s direct goal is to ensure that the EU plays a leading role in blockchain
today and in the future. The project has a website where anyone can contribute to map out current
blockchain developments in the EU and engage in discussions on how best to foster innovation.

In addition, the European Commission launched an allocation of €380 million worth of investments
to be used for blockchain development by 2020. The Observatory and Forum declaration was
followed up on April 10 with the introduction of the European Blockchain Partnership, which set
out to be “a vehicle for cooperation amongst Member States to exchange experience and expertise
in technical and regulatory fields and prepare for the launch of EU-wide [blockchain] applications
across the Digital Single Market for the benefit of the public and private sectors.”21 By signing
the declaration, member states agreed to “contribute to the creation of an enabling environment,
in full compliance with EU laws and with clear governance models that will help services using
[blockchain] flourish across Europe.”

More practically, this initiative serves the dual purpose of making sure all willing member states
are on the same page, while increasing the technology’s credibility. The declaration mentions
committing to officially recognize blockchain’s potential to transform digital services, sharing
experiences, best practices and key takeaways, and agreeing to work together to realize its potential
for citizens, society and the economy.

SUMMARY/CONCLUSION
Blockchain’s potential benefits dovetail nicely with the underlying process and transactions that
make up the chain of international trade. By enabling a layer of trust and transparency, it stands
to increase not just current levels of trade, but also firms’ use of the current agreements, as well as
to empower the objectives driving modern, progressive, value-based trade policy. Blockchain has
the potential to increase productivity, economic growth and jobs, as well as help consumers make
informed choices among the greater variety of products that will be able to enter the market.

The combination of high potential for reforming the traditional pressure points/bottlenecks of the
trade chain and updating various parts that are notoriously stuck in their ways, combined with the
low investment costs, suggests that blockchain holds great potential for trade. This is particularly
important for open economies relying on trade for growth, such as Canada. While much talk,
investments and project developments are going on, it is still important to remember that we are in
blockchain’s early days. My best guess is that it will be five years before we start seeing and reaping
the benefits of its wider adoption. Fully developed, blockchain will be woven into the infrastructure
so we probably won’t even know it is there.

21 European Commission (2018): “Declaration on Cooperation on a European Blockchain Partnership.”

15

Canada is well-positioned to be a significant hub for investing in and developing blockchain. There
is room for policy-makers to take on a bigger role by serving as a hub for stakeholder participation
and encouraging academic resources, to enable the technology’s potential to be realized.

16

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21

RESOURCES FOR POLICY-MAKERS LOOKING TO LEARN MORE ABOUT/GET MORE
ENGAGED IN THE TECHNOLOGY.

Blockchain Canada is a not-for-profit organization that connects entrepreneurs, researchers,
regulators and the public to help make Canada a global leader in blockchain technologies.

22

Blockchain Canada was founded on the premise that blockchains have the potential to transform
many aspects of Canada’s financial, social and governance systems in ways that make them more
decentralized, open and equitable.

The Blockchain Association (BAC), (formerly the Bitcoin Alliance of Canada) founded in 2013
is a not-for-profit, industry-funded association working with all levels of government and other
stakeholders to support employment growth and career opportunities in blockchain technology,
to promote and sustain community development, and to enhance consumer safety and industry
competitiveness. BAC also provides its members with a full range of services and programs
including education and training, benchmarking and best practices, networking, advocacy and
industry information

22 http://blockchaincanada.org/

22

About the Author

Dr. Hanna C. Norberg is an independent trade policy advisor, founder of TradeEconomista, Co-Director of
DigitalTradePolicy.com and a #TradeExperettes Instigator.

She holds a PhD in International Economics from Lund University, Sweden, with the thesis largely written during
an extended study visit to Columbia University and the NBER office in NY. Primary academic research interests are
trade, trade policy, economic integration and development.

Apart from her work as university lecturer and researcher, Hanna has substantial experience in applied economics
doing numerous trade policy impact assessment projects for the European Commission (FTAs covering major parts
of the world e.g. T-TIP, Japan, ASEAN, Korea, various MENA countries, Mercosur), ECFIN, OECD, WTO and national
governments. She has considerable practical experience, working on implementing FTAs, surveying exporting
SMEs, and economic development thru private public partnerships. She is currently involved in projects on digital
protectionism, cross border data flows and the effects of blockchain on trade.

23

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THE GREENHOUSE GAS EMISSIONS COVERAGE OF CARBON PRICING INSTRUMENTS FOR CANADIAN PROVINCES
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Sarah Dobson, Jennifer Winter and Brendan Boyd | February 2019

SHOULD ALBERTA ADOPT A LAND TRANSFER TAX?
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Bev Dahlby and Braeden Larson | February 2019

COMMUNITY REVITALIZATION LEVY AS A MUNICIPAL FINANCING MECHANISM IN ALBERTA
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Marina Spahlinger and Nancy Wanye | February 2019

MEASURING AND RESPONDING TO INCOME POVERTY
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Ronald Kneebone and Margarita Wilkins | February 2019

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URBAN POLICY TRENDS: WHAT DO CALGARIANS THINK OF THEIR LOCAL, PROVINCIAL, AND NATIONAL ECONOMIES?
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Third World QuarTerly, 2017
Vol. 38, No. 8, 1710–1732
https://doi.org/10.1080/01436597.2017.1298438

Will blockchain emerge as a tool to break the poverty chain in
the Global South?

Nir Kshetri

Bryan School of Business and economics, The university of North Carolina at Greensboro, Greensboro, NC, uSa

ABSTRACT
Just like its recent predecessors, blockchain – also known as the
distributed ledger technology – is considered to have the potential
to cause major economic, political and social transformations in the
Global South. The visible effects of this technology are already being
noted there. We present early evidence linking the use of blockchain in
overcoming some economic, social and political challenges facing the
Global South. The article highlights the key applications and uses of
blockchain in developing countries. It demonstrates how blockchain
can help promote transparency, build trust and reputation, and
enhance efficiency in transactions. The article looks at opportunities
and key triggers for blockchain diffusion in these countries. It also
delves into challenges and obstacles that developing economies are
likely to encounter in the use of blockchain.

Introduction

Just like its recent predecessors such as cloud computing1 and the Internet of Things (IoT),2
blockchain – also known as the distributed ledger technology – is considered to have the
potential to cause major economic, political and social transformations in the Global South
(GS). Some have touted blockchain as the biggest innovation in computer science.3 Others
consider this technology to be ‘the biggest disruptor to industries since the introduction of
the Internet’.4 The World Economic Forum (WEF) considers blockchain to be among six com-
puting ‘mega-trends’ that are likely to shape the world in the next decade.5

A blockchain can be viewed as a data structure which makes it possible to create a tam-
per-proof digital ledger of transactions and share them. Cryptography allows anyone access
to add to the ledger securely. There is no central authority or a middleman such as a bank
or financial institution.6 It is impossible or extremely difficult to change or remove data blocks
recorded on the ledger.7 Due to these features, blockchain can arguably make it possible to
reduce or eliminate integrity violations such as fraud and corruption, and reduce transaction
costs.

According to the WEF, 10% of the global gross domestic product (GDP) will be stored on
blockchain by 2027,8 compared to 0.025% in 2016.9 While most discussion of blockchain

© 2017 Southseries inc., www.thirdworldquarterly.com

KEYWORDS
Blockchain
corruption
land registry
microinsurance
smart contract
transparency

ARTICLE HISTORY
received 5 September 2016
accepted 20 February 2017

CONTACT Nir Kshetri nbkshetr@uncg.edu

mailto: nbkshetr@uncg.edu

http://www.tandfonline.com

http://crossmark.crossref.org/dialog/?doi=10.1080/01436597.2017.1298438&domain=pdf

THIRD WORLD QUARTERLY 1711

focuses on bitcoin, this paper addresses additional, potentially more important, influences
of this technology in the GS.

Blockchain affects economic, social and political outcomes in the GS by many direct and
indirect pathways. As noted above, the first of blockchain’s direct benefits is potential reduc-
tion of corruption and fraud. For instance, blockchain can empower donors. It can ensure
that donations reach the intended recipients. To give an example, donors can buy electricity
for a South African School using bitcoin. A blockchain-enabled smart meter makes it possible
to send money directly to the meter. There are no organisations involved to re-distribute
funds. Donors can also track electricity being consumed by the school and calculate the
power their donations can buy.10 This programme was launched by South African bitcoin
startup Bankymoon via the crowdfunding platform Usizo. It allows African public schools to
use blockchain to crowdsource utility credits.11

Increase in efficiency and reduction in transaction costs constitute a second kind of ben-
efit. There is no third party or central body involved. That is, blockchain transactions are
conducted by the concerned parties themselves. There are already some signs of block-
chain-led disintermediation in international remittances and international trade finances.
In September 2016, the Chinese government announced that blockchain will be used in its
social security system in order to lower transactions costs. In 2015, China’s National Council
for Social Security Fund managed US$285 billion.12

To be sure, blockchain is in its infancy. Some compare the current level of development
to ‘the World Wide Web in the early 1990s’.13 Nonetheless, multinationals, local companies
and policymakers have devoted considerable attention to blockchain. The renowned
Peruvian economist Hernando de Soto, who is well known for his work on informal and
unofficial economy, is involved in the development of a blockchain-based platform for prop-
erty records in the Republic of Georgia.

Major global technology companies and software vendors such as IBM and Microsoft
have extended their offerings to incorporate numerous services around blockchain. For
instance, in September 2016, IBM announced an internal re-organisation to build blockchain
capability. A new unit called Watson Financial Services integrates Watson, cloud, and block-
chain-related offerings and strategy.14 IBM also created new roles specifically devoted to
blockchain. These companies’ blockchain-related offerings are available in the GS. IBM’s India
research labs are involved in some of IBM’s blockchain-related work.15 GS-based firms are
also susceptible to pressure to adopt blockchain from their business partners and other
value-delivery network members from the industrialised world.

We present early evidence linking blockchain use to overcoming economic, social and
political challenges facing the GS. The paper is structured as follows. We proceed by first
providing a literature review of key challenges in GS economies. Next, we look at blockchain’s
applications and uses to overcome these challenges. Then, we examine the opportunities
and key triggers for blockchain diffusion. The section following this looks at the challenges
and obstacles. It is followed by a section on discussion and implications. The final section
provides concluding comments.

Literature review: key challenges facing the GS

Causes of economic prosperity and poverty

There are many and varied sources of underdevelopment, which include colonialism
(Howard, 1978) dependence on commodities,16ethnic tension and political violence.17 In

1712 N. KSHETRI

this paper, we focus on institutional environments. Poor countries mostly lack good institu-
tions that ensure strict enforcement of property rights, have the ability to deal with corrupt
practices effectively, and provide equal opportunity to all members of society.18

The lack and poor enforcement of property rights
According to a 2011 report of the United Nations (UN) Food and Agriculture Organization
(FAO) and Transparency International, in over 61 countries, weak governance led to corrup-
tion in land occupancy and administration. Corruption varied from small-scale bribes to the
abuse of government power at the national, state and local levels.19

Enforcement of property rights increases incentives to invest and provides resources to
get out of the poverty trap. Clear property rights would allow entrepreneurs to use the assets
as collateral and thus increase their access to capital. A large proportion of poor people in
the GS lack property rights. For instance, about 90% of land is undocumented or unregistered
in rural Africa. Likewise, the lack of land ownership remains among the most important
barriers to entrepreneurship and economic development in India.20 One estimate suggested
that over 20 million rural families in India did not own land and millions more lacked legal
ownership to the lands they built houses on, lived on and worked.21 Indeed, landlessness is
arguably a more powerful predictor of poverty in India than caste or illiteracy.22

Disregard and lack of respect of the rule of law
In some GS economies, the rule of law is disregarded and not respected by corrupt politicians,
government officials and other powerful groups. These groups sometimes expropriate the
incomes and investments of poor people or create an uneven playing field.

Less opportunity for disadvantaged groups
Economically and socially disadvantaged groups have less opportunity to access finance,
credit, insurance, education and other things. These groups thus cannot make investments
and participate in productive economic activities. Consider for instance, insurance. In India,
86% of the rural population and 82% of the urban population lacks health insurance.23

Regarding access to finance, in China, small and medium-sized enterprises (SMEs) account
for 70% of GDP but have access to 20% of financial resources.24 Eighty-nine percent of SMEs
in the country face difficulty in satisfying banks’ requirements to get loans.25 Small borrowers
often lack sufficient collateral required by most traditional banks.26

Unavailability of financing is a more critical barrier faced by most entrepreneurs. For
instance, despite high interest rates, demand for credit exists in most GS economies. Banks in
the Democratic Republic of Congo (DRC) reject over one-third of credit and loan applications.
The fact that they cannot enforce their legal rights as lenders has led to the risk-averse behav-
iour of the banking industry. This situation is a manifestation of a broader structural problem
in the GS, such as the DRC in which a large proportion of the population lacks access to formal
banking institutions.27 The situation is not much different in other GS economies. For instance,
in Africa, only 20% have bank accounts – 10% in Kenya, 5% in Tanzania and 15% in Liberia.28

Barriers related to measurement, implementation, enforcement and
transaction costs

A related point is that poor-quality institutions lead to transaction cost-related barriers. To
make this statement meaningful requires a more detailed discussion of what is meant by

THIRD WORLD QUARTERLY 1713

transaction costs. In the context of business transactions involving two or more parties, for
Douglas North, ‘transaction costs are … two things: (1) the costs of measuring the dimensions
of whatever it is that is being produced or exchanged and (2) the costs of enforcement’.29
He goes on to say that ‘a lot of what we need to do is to try to measure the dimensions of
what we are talking about in such a way that we can define them precisely’.30

Many GS economies are faced with challenges in enforcing commercial contracts, social
and economic rights, laws and regulations (eg agro-environmental), and standards (eg pol-
lution-related). Put differently, these economies are characterised by the lack of effective
enforcement mechanisms. Emphasising the importance of measurements in enforcement,
North argues: ‘Without being able to measure accurately whatever it is you are trying to
enforce, there cannot be effective enforcement, even as a possibility’.31 The technology avail-
able is among the important factors that affect the costs of measurement and enforcement
and hence the transaction costs.32 In this regard, blockchain can make up for the lack of
relevant institutions or the problems associated with high transaction costs.

Enforcement can be implemented at three levels: first party, second party and third
party.33 It is suggested that third-party enforcement mechanisms, which are often formal
coercive enforcement measures by the state, have been relatively ineffective in the GS.34
Blockchain has the potential to strengthen the governments’ enforcement powers and sanc-
tions against individuals or organisations that breach regulations.

Key blockchain applications to overcome challenges facing the Global South

Some of the key current applications and future prospects of blockchain are presented in
Table 1. As is clear from the table, various barriers and challenges faced by the GS can be
addressed through blockchain. In parentheses, we indicate how the use cases have the
potential to address various causes of poverty by strengthening the rule of law (SRL), helping
to enforce property rights (EPR) and creating opportunity for disadvantaged groups (ODR).

Promoting transparency and reducing fraud and corruption

Blockchain can help achieve transparency in various settings. In mid-2016, Ant Financial,
Alibaba’s online payments affiliate, announced the launch of blockchain technology for
payments. Blockchain was first applied to Alipay’s donation platform. Donors on its ‘Ant Love’
charity platform can track transaction histories, and understand where their funds go and
how they are used.35 The goal is to increase transparency and provide a trust mechanism by
recording each payment and spending of donations on the blockchain.

The use of fake export invoices to disguise cross-border capital flows has been pervasive
in China. Since China has maintained strict capital control regimes, some importers and
exporters falsify trade transactions in order to move capital in and out of the country. Many
banks do not check the authenticity of trade documents.36 During April to September of
2014, China found US$10 billion worth of fake trade transactions.37 Some major fraud cases
were in Qingdao, the world’s seventh-busiest port. Some firms had used fake receipts to
secure multiple loans against a single cargo of metal.38

The Qingdao frauds involved 300,000 tons of alumina, 20,000 tons of copper and 80,000
tons of aluminium ingots.39 Due to the scandals, Chinese banks charge higher interest rates

1714 N. KSHETRI

Table 1. Blockchain in the Global South: some applications currently in use or being developed.

aSee note 12.
bSee note 11.
cSee note 41.
dSee note 44.
eredherring.com “Georgia Pilots and Sweden Ponders.”
fSee note 50.
gSee note 54.
hSee note 55
iSee note 59
jSee note 62.
kSee note 63, 64.
lSee note 65.
mSee note 75, 76.
nSee note 60.
oSee note 78.
pMaiya “Benefit with Blockchain.”
ePr: helping to enforce property rights, odr: creating opportunity for disadvantaged groups, Srl: strengthening the rule

of law.

Blockchain use Explanation and examples
Promoting transparency and reducing fraud and corruption alipay’s donation platform (odr)a

South africa’s Bankymoon allows public schools in africa
to use blockchain to crowdsource utility credits (odr)b

Standard Chartered and dBS Group’s blockchain-based
platform detects falsification and frauds in trade
transactions (Srl)c

ukraine’s blockchain-based eauction platform (Srl, ePr)d

a Peruvian political party, Peru Possible, told voters that it
would use blockchain to fight corruptione (Srl).

reducing friction and costs of property registration honduran government’s plan to transfer land registry
onto a blockchain-enforced digital database (ePr)f

Bitland’s blockchain-based land registry system based in
Ghana (ePr)g

BitFury and the Georgian government’s agreement to
develop a system for registering land titles using
blockchain (ePr)h

Promoting efficiency in international B2B trade and
increasing access to trade and supply chain finance

Skuchain’s blockchain-based products for B2B trade and
supply chain finance (odr)i

reducing costs and increasing efficiency in international
payment systems

Bitspark’s bitcoin remittance from hong Kong to GS
economies (odr)j

Bitsoko uses bitcoin for money transfer, remittance
services and payment processing in Ghana, Zimbabwe,
uganda, Sierra leone and rwanda (odr)k

Mexico’s mexBT uses blockchain for cross-border
payments among firms in emerging economies (odr)l

Circle aims to focus on the Chinese international P2P
payments market (odr)m

insurance and risk management Mexican mobile payments platform Saldo.mx has
launched a microinsurance service (odr)n

China’s insurance company Ping an joined a global
consortium of financial institutions to explore
blockchain use (odr)o

Banking india’s central bank, the reserve Bank, was reported to be
considering the use of blockchain to reduce cheque
counterfeiting. digitised cheques are expected to
reduce paper use and the risk of theft and fraudp (Srl).

THIRD WORLD QUARTERLY 1715

and have a lower tendency for collateral financing.40 Blockchain arguably can stop scandals
such as those in Qingdao.

Recent high-profile fraud has increased blockchain’s attractiveness. The British multina-
tional banking and financial services company, Standard Chartered, lost about US$200 mil-
lion from Qingdao fraud. Standard Chartered has teamed up with DBS Group and Singapore’s
Infocomm Development Authority to develop a blockchain-based platform.41 Other players
such as Bank of America and HSBC are also exploring blockchain for trade finance and other
applications.42

In November 2015, Bitcoin Foundation Ukraine and KUNA Bitcoin Agency signed an mem-
orandum of understanding (MoU) with Ukraine’s Kyiv Regional State Administration to
implement a blockchain project to set up an e-governance system in the port city of Odessa.
It was announced that the first project would be a government real estate auction. The goal
is to ensure a fair, transparent auction and eliminate the chance of document forgery.
Subsequent application areas are expected to be in various public services such as personal
identification, public records and banking.43

In February 2016, Ukrainian technology innovation group Distributed Lab implemented
an eAuction platform, which is among the largest and most important public blockchain
initiatives in the country. Two banks – Oschadbank and PrivatBank – participated in the
project.44 Blockchain is connected to the banks’ infrastructures. When someone bids, the
payment goes to the seller’s account. The bank produces a signed receipt for the transaction,
which is added to the blockchain as a proof that money was sent.45

Reducing friction and costs of property registration

Blockchain can reduce friction and conflict as well as costs of property registration. Regarding
the costs, it is possible to do most or all of the process including the use of a notary service
using smart phones.46

In mid-2015, the US-based startup Factom and the Honduran government reportedly
reached an agreement to transfer land registry in Honduras into a blockchain-enforced
digital database. The goal is to create a land title-keeping system that is reliable and trans-
parent. According to the United States Agency for International Development (USAID), only
14% of Hondurans legally hold their properties. Among those properties that are occupied
legally, only 30% are registered.47 It is not uncommon for government officials to alter titles
of registered properties. In some case, government officials allocate properties with altered
titles to themselves. The country’s bureaucrats reportedly altered titles and registered beach-
front properties for themselves.48 They also allegedly accepted bribes in exchange for prop-
erty titles. Citizens often lack access to records, and records that are accessible provide
conflicting information. Property owners are often unable to defend themselves against
infringement of property use or mineral rights.49

However, sufficient progress has not been made in the Honduran government’s plan to
transfer land registry to blockchain. It was reported in December 2015 that the project had
‘stalled’ due to political issues.50

The US-based platform for real estate registration Bitland announced the introduction of
a blockchain-based land registry system in Ghana, where 78% of land is unregistered.51 There
is a long backlog of land-dispute cases in Ghanaian courts.52 About 90% of land is

1716 N. KSHETRI

undocumented or unregistered in rural Africa. Bitland records transactions securely with
global positioning system (GPS) coordinates, written description and satellite photos. The
process is expected to guarantee property rights and reduce corrupt practices. As of mid-
2016, 24 communities in Ghana had expressed interest in the project.53 Bitland is planning
to expand to Nigeria in 2017 in collaboration with the Organization of Petroleum Exporting
Countries (OPEC) Fund for International Development (OFID).54

Bitcoin company BitFury and the Georgian government signed a deal to develop a
system for registering land titles using the blockchain.55 As noted above, the Peruvian
economist Hernando de Soto will assist in the development of the platform. In order to
buy or sell land in Georgia, currently the buyer and the seller go to a public registry house.
They are required to pay US$50–200, which depends on the speed with which they want
the transaction to be notarised. The pilot project will move this process onto the block-
chain. The costs for the buyer and the seller are expected to be in the range of US$0.05–0.10
range.56

Promoting efficiency in international business to business (B2B) trade and
increasing access to trade and supply chain finance

The global trade finance market, which is valued at US$18 trillion, is likely to be transformed
by the blockchain by disintermediation and other efficiency measures. First, the global trade
finance market relies on paper documentation for most processes. Paper-based methods
such as letter of credit (LoC) and factoring account for about US$5 trillion of annual trade
worldwide.57 It costs 1–3% of the trade’s value to buy an LoC. The LoC involves mailing of
physical documents and verification.

Factors are key intermediary players in the global trade finance market. They offer money
to exporter. Based on the promised future payments, exporters borrow from factors.
Exporting firms make an outright sale of accounts receivable to factors in order to maintain
liquidity. For instance, a Chinese exporter selling to Walmart can take invoice for those goods
to a factor, which can pay the exporter right away. For a US$100 invoice, the factor may pay
as little as US$90. The upshot is that buyers such as Walmart pay more for goods they buy
from GS-based sellers. The global factoring market is estimated at over US$2 trillion
annually.58

Venture capital (VC)-funded startups such as Skuchain are creating blockchain-based
products to address inefficiencies in B2B trade and supply chain finance.59 The products are
expected to eliminate the roles of intermediaries and financiers. Buyers and sellers agree on
the terms of a deal. Blockchain can track and manage the transaction from start to finish.

Reducing costs and increasing efficiency in international payment systems

The transaction costs on remittances, especially small remittances, are very high. Immigrants
use transfer services such as Western Union, which cost as much as 7% of the transfer
amount.60 In order to transfer 300 Rand from South Africa to neighbouring countries, transfer
fees varied from 35 to 68.2 Rand by bank draft to 19.2 to 62.5 Rand by electronic transfer,
25.3 Rand by Moneygram and 6.2 Rand by iKobo’s services.61

Bitspark, the bitcoin remittance in Hong Kong, was reported to charge a flat HK$15 (about
US$1.90) for remittances of less than HK$1200, and 1% above that amount. For instance,

THIRD WORLD QUARTERLY 1717

when remittances are sent to the Philippines, Bitspark’s local partner, Rebit, converts bitcoin
into pesos for receivers.62

Bitcoin startup Bitsoko, which as of July 2016 had a presence in Ghana, Zimbabwe,
Uganda, Sierra Leone and Rwanda, uses bitcoins for money transfer, remittance services and
payment processing. It charges customers a fraction of the current rates.63

In mid-2015, Banco Santander launched a trial version of a blockchain-based app that
can be used to transfer £10–10,000 (US$13.20–1,320) in euros to 21 countries, and dollars
to the US.64

Mexico’s mexBT uses blockchain for cross-border payments among GS-based firms. The
company hopes that by lowering rates, payments and transfers of remittances can be made
easier. mexBT launched the platform Pay.meXBT for international payment, mainly between
Latin America and Asia. Pay.meXBT uses bitcoin and blockchain to facilitate cross-border
payments. The platform allows payments in local currencies. The system is also expected to
speed up payment processes.65

Insurance and risk management

Blockchain may provide risk managers with an effective way to protect individuals and
companies from uncertain loss or catastrophe. Insurance and derivatives can be used as a
tool to control or minimise the risk factors associated with unpredictable or uncontrollable
events. By supporting decentralised insurance models, blockchain may make derivatives
more transparent. A meaningful risk management process can be designed using reputa-
tional systems based on peoples’ social and economic capital and online behaviour.66
Blockchain-based insurance is connected to big data, the IoT and health trackers to ensure
better pricing and risk assessment.67

The IoT makes it easier for cars, electronic devices or home appliances to have their own
insurance policies. Using blockchain, they can be registered, and their insurance policies are
administered by smart contracts. Damages are automatically detected, which trigger the
repair process, claims and payments.68 Payouts are made against the insurable event and
the policyholder does not have to a make a claim. The insurer does not need to administer
claims. The costs of claims processing are thus close to zero. Even more importantly, there
is less likelihood of fraud.69

To take an example, Mexican mobile payments platform Saldo.mx has launched a micro-
insurance service, Consuelo, which allows users to buy blockchain-powered health and life
insurance policies. The target groups are Mexicans living in the country as well as
diaspora.70

Identity management has been a big issue. In financial institutions such as the insurance
industry, the ability to prove someone is who he/she says online is very important in order
to increase the accuracy of risk assessments and reduce fraud.71 In this regard, the Delaware,
USA-based blockchain startup Tradle is developing solutions for know-your-customer (KYC)
data. A customer can grant access to identity data to companies such as Tradle for a contract
closure. After verifying the KYC profile, a customer can forward the identity data to other
companies for different contracts. There is no need to repeat the identification and
verification process for each transaction, which speeds up the process and increases
efficiency.72

1718 N. KSHETRI

Opportunities and key triggers for blockchain diffusion

Among the main triggers of blockchain diffusion is a rapid rise in investment in this tech-
nology. VC-backed investments in blockchain totalled US$3 million in two deals in 2011,
which increased to 74 deals and US$474 million in 2015.73 An estimate by Virtual Capital
Ventures suggested that VC investments in blockchain-related startups would exceed US$2.5
billion by 2016.74

Blockchain investment is increasing in the GS. The Chinese search engine Baidu invested
in the US blockchain company Circle. Circle China announced a plan to enter the Chinese
peer-to-peer (P2P) payment market with bitcoin with the partnership of Goldman Sachs and
Barclays.75 Circle specifically aims to focus on the Chinese international P2P payments
market.76

Chinese firms have launched major initiatives to develop the blockchain industry and
market. Thirty-one technology and financial firms including the financial services firm Ping
An Bank and Tencent formed a blockchain consortium, which focuses on capital markets
technology, securities exchange, trading platforms, life insurance and banking.77

GS-based firms are also participating in strategic agreements such as global consortia
built around blockchain, which can facilitate the sharing of technology and resources. China’s
second-biggest insurance company, Ping An, joined a global consortium of financial insti-
tutions led by the FinTech firm R3.78 In September 2016, China Merchants Bank joined R3.79
R3’s consortium includes members from Asia, Europe and North America, such as Morgan
Stanley, HSBC, UBS, Credit Suisse, Barclays, Societe Generale and Commerzbank. These mem-
bers are working with R3 to use blockchain for a wide range of applications. In July 2016,
Barclays Africa also joined R3.

In some GS economies, there is a strong horizontal linkage providing supports for block-
chain diffusion. For instance, China is the world’s biggest bitcoin market, with an estimated
800,000 bitcoin users in 2016.80 Some argue that blockchain may allow China’s banking
system to leapfrog the west.

Industrialised world-based blockchain companies are also making inroads to the GS. For
instance, the public blockchain-based distributed computing platform Ethereum, which
features smart contract functionality, has a presence in many GS economies. The Chinese
online insurance company Zhong An announced a partnership with Ethereum to use the
platform in smart contracts.81 Likewise, a number of South African banks were reported to
be testing the use of Ethereum.82 As of 2015, the US-based blockchain infrastructure provider
and transaction processing company BitFury Group had a data centre located in Gori,
Georgia.83 In September 2015, the company announced a US$100 million investment to
build second data centre in Tbilisi.84

Investments have also been made or are being planned in niche-market applications. A
study suggested that finance and technology companies’ investments related to capital
markets would reach US$1 billion in 2016.85 As of mid-2016, about 20 blockchain startups
were focusing on insurance solutions.86

Many blockchain solutions are based on cloud services of global information technology
(IT) giants such as IBM and Microsoft. For instance, verification of the microfinance operation
on Mijin and some processes of the eAuction platform in Ukraine are performed on Microsoft
Azure.87 IBM’s supply chain customers can build and test blockchain solutions on the com-
pany’s LinuxOne system. Its target users are companies that want to track high-value items

THIRD WORLD QUARTERLY 1719

in complex supply chains.88 Global IT companies’ significant presence in the GS would help
stimulate blockchain diffusion.

Opportunities

Blockchain has opened up new opportunities to solve a number of fundamental problems
facing the GS. Among the positive externalities created by blockchain could be that it will
be harder for corrupt government officials to hide financial waste or corruption. Among the
benefits of blockchain is also that people across the world can more freely interact financially
with each other.89

As noted above, blockchain can promote transparency and reduce fraud and corruption.
Blockchain deployment for purposes such as crowdsourcing utility credits for schools is likely
to become more commonplace since smart meters are increasingly affordable and accessible
to organisations in developing countries. For instance, in the US, total capital costs per meter,
including installation, were reported to be as little as $81.90 Some utility companies such as
Nevada’s NV Energy instal smart meters for free.

Blockchain can also improve internal and external auditing. A public auditor can make a
real-time audit of data. The auditor can examine the registry daily instead of yearly. More
frequent auditing may lead to less corruption and more efficient economies.

Pervasiveness of fraud in the insurance sector has been a concern in the GS. One estimate
suggested that false claims in the Indian healthcare insurance industry account for 10–15%
of total claims. The industry is estimated to lose about US$90 million on false claims annually.
Major fraud categories or schemes reported include misrepresented services, services not
provided and services provided to ‘rented’ patients.91 Likewise, the Chinese insurance indus-
try suffers from rampant abuses and malpractices that are committed by patients and med-
ical staff. In Lipanshui city in Guizhou province, fraud cases were found in 107 of the 135
hospitals and medical centres. All hospitals in Anshun were also found to engage in mis-
management of medical insurance. Some medical staff had provided fake medical records
to get payments for treatments which were not performed.92 Such fraud can be prevented
with blockchain.

Fraud is rampant in the microfinance sector too. During 2010–2012, in India’s Kerala state,
the president and secretary of the Adoor Sree Narayana Dharma Paripalana Union received
loans of US$1.15 million from Bank of India on behalf of 5000 families. The families had no
knowledge of the loans but faced debt collection proceedings.93 Blockchain can prevent
such fraud. In July 2016, two Japan-based firms, Tech Bureau and Infoteria, successfully
demonstrated the deployment of microfinance service in Myanmar using the blockchain
platform Mijin. They transferred loans and the account data located in the system of local
microfinance firm BC Finance.94

Blockchain has the potential to drastically reduce administrative and operations costs in
diverse economic sectors. According to Santander, by facilitating cross-border payments
and securities trading, and streamlining regulatory barriers and processes, blockchain is
likely to generate cost savings in the range of US$15–20 billion by 2022.95

In the insurance industry, for instance, an automated verification of policyholder identity
and contract validity can be performed using blockchain. Submission and registration of
claims are done online, and are auditable. Relevant data (eg encrypted transaction of data
on injured parties prepared by hospitals and medical centres) are obtained from third parties,

1720 N. KSHETRI

which are made accessible to the insurer to verify payment. Payouts for claims can be made
via a blockchain-based infrastructure or smart contracts.96

Reinsurers can be provided with controlled access to claims and claims histories registered
on the blockchain. Having access to auditable data in an automated way improves trans-
parency for the reinsurer.97

The distributed nature of blockchain can promote trust. In a centralised database, some
actors may corrupt the contents. They can be bribed to mark forged or stolen items as legit-
imate.98 ‘The Trust Machine’ was the title of the cover story of an October 2015 issue of the
Economist magazine which explained blockchain’s potential impacts.99 Blockchain enables
the accrual of reputation to connect trading partners directly. For instance, global multina-
tionals such as Walmart can provide supply-chain financing directly to their small GS-based
suppliers.

In order to establish trust and verify identity, banks rely on rating agencies, data analytics
firms, and retail and wholesale banks. These actors decide the access to finance and insurance.
Blockchain lowers or eliminates the need for third-party trust-producing institutions.

Challenges and obstacles

GS economies encounter a number of challenges and obstacles in blockchain adoption.
While bitcoin is just one of the applications of blockchain, currently it is the most popular
way of using blockchain. The bitcoin network is already congested. It was reported in
November 2016 that over 65,000 transactions were waiting to process during peak times.
During some periods in October 2016, users were required to wait for an average of more
than six hours.100

It is not clear how the capacity to meet blockchain’s growth needs will be financed. For
instance, there is a lack of a formal roadmap and action plans for how all global financial
transactions could be transferred to blockchain. Analysts say that enough investments have
not been flowing in blockchain. For instance, investments on the Internet during the early
phase of its development were many times bigger than the current investment in blockchain.
Marc Andreessen, of the VC firm Andreessen Horowitz, considered bitcoin in 2014 to be
similar to PC in 1975, and the Internet in 1993, in terms of its levels of development and
maturity.101 In this regard, it is worth noting that as of early 2014, total VC investment in
bitcoin was less than US$100 million, compared to more than US$500 million received by
Internet startups in 1995.102

The attempts to regulate blockchain have been another area of controversy. The roles of
regulators and state authorities are not clear. It is not also clear how best to determine relative
priorities and allocate resources to different economic and social segments. The functioning
of blockchain may also conflict with regulatory requirements. For instance, information
stored in a public ledger cannot be modified or deleted. The information can be accessed
by any user instantly. This feature is in contradiction to the right to be forgotten.103

A further concern is related to energy consumption. Due to the burden of proof-of-work
consensus, writing data in blockchain is extremely energy intensive. The ‘miners’ that perform
validation are required to show proof of work – consumption of electricity and use of com-
puting power – and are paid in new bitcoins for their work. First, in order to add blocks of
transactions to the blockchain, validation of all of the transactions is required within the

THIRD WORLD QUARTERLY 1721

block. Then it is required to perform repeated calculations (called hashing) to find a ‘magic
number’ that makes the created block valid and acceptable to other participants according
to the network’s rules. The second step is computationally expensive and energy intensive.104
They need to reach consensus to confirm each other’s work in order to establish a new page,
also known as a block, of the ledger.105

Energy consumption is also a function of the hardware. Data miners keep details of their
hardware secret. It is thus difficult to estimate power consumed by the network. One estimate
suggested that if the bitcoin miners use the most efficient hardware, the annual electricity
usage could be about two terawatt-hours (more than that used by 150,000 people in the
US). Under pessimistic assumptions, the amount of electricity consumed could be up to 40
terawatt-hours.106

Among the negative externalities created by blockchain is the additional bandwidth
required to relay transaction across the network.107 This may be even more severe in GS
economies facing network congestion problems.

Many GS economies lack absorptive capacity to benefit from blockchain. For instance, in
order to develop the eAuction platform in Ukraine, the platform needed to be integrated
into the bank’s system. Digital signatures and a special application programming interface
(API) were integrated to retrieve signed receipts, which needed to be connected to core
back offices. The entire process reportedly took only two days.108 While Ukraine is known for
technological achievement, many GS economies have limited technological capabilities.

The major obstacles also include the lack of education, information, and user-friendly
applications.109 There has been a lack of awareness of blockchain among key stakeholders.
For instance, Saldo is reported to educate underbanked communities. The company also
works with the Mexican foreign ministry in financial literacy events. Saldo found that it is
too complex to talk about blockchain. It started educating financial institutions first, which
are more familiar with blockchain.110

There are also negative perceptions of blockchain due to its association with bitcoin,
which has been used in illegal and dark-side activities such as money laundering and illegal
drugs.111 Overcoming such perceptions remains a significant challenge.

Among key challenges are also interoperability and standardisation. For instance, the
participants on a distributed ledger need to agree on common standards for an invoicing
platform. For one thing, different banks need to have an agreement on the number of data
fields used from an invoice to generate the hash value. They may also need common mes-
saging standards. The banking industry, which is among the early adopters of blockchain,
is characterised by a culture of competitiveness, which poses a challenge to working
together.112

Finally, regarding the effect on the reduction of fraud and corruption, blockchain may
face different risks and obstacles. For instance, systems such as Bankymoon’s blockchain-en-
abled smart meter to crowdsource utility credits may be subject to other, different risks such
as tampering and physical tapping of school meters in order to resell electricity to non-school
users. In order to ensure that inappropriate actions do not occur, an appropriate party to
audit and verify may be needed.

1722 N. KSHETRI

Discussion and implications

While it can be argued that it may be within the self-interest of providers of blockchain-re-
lated services to exaggerate the potential benefits of this technology, the above analysis
suggests that blockchain, in combination with other technologies such as the IoT and cloud
computing, has the potential to drive economic, social and political transformations in the
GS. Among the most attractive features of blockchain is that once a record is created it is
almost impossible to tamper with, forge or alter it. Blockchain will thus make data secure.
Transactions can also be conducted to achieve any degree of privacy or openness depending
on the need.113

An Economist article asserts that blockchain is ‘[t]he great chain of being sure about
things’.114 This technology helps make sure that corrupt officials do not engage in fraudulent
activities. Organisations can make sure that their business partners play by the rules. Services
providers can make sure that people are who they say they are when they enrol and partic-
ipate in various services. These features are of special interest in the GS economies that lack
effective trust-producing institutions. Blockchain can compensate for the unavailability of
such institutions.

The widespread adoption of blockchain may enhance a country’s image. For instance,
Georgia has been trying to promote itself as a corruption-free country with a modern and
transparent governance model.115

Blockchain is especially likely to make contract enforcements more efficient and effective.
For instance, a blockchain-based life or health insurance smart contract can be a powerful
tool to improve the market mechanism. A smart contract can be executed either ‘above’ the
blockchain or ‘on’ the blockchain. In the former, the software program runs outside the block-
chain and feeds information to the blockchain. In the second case, the software program is
coded into blocks.116 It is possible to automatically activate policy based on diagnosis. For
instance, if a diagnosis indicates the existence of a triggering condition for the policy that
is written in the smart contract, the information is fed to the blockchain. The smart contract
automatically authorises payments based on the policy. Smart contracts can also act as a
warranty for down payment to the medical service provider, and there is no need to have a
previous contractual relationship between the medical service provider and the insurance
company. In this way, smart contracts drastically reduce administrative costs.

Some application areas discussed above are land registration (eg Honduran government),
and tracking donations and payments (eg Alibaba and Bankymoon’s crowdfunding platform,
Usizo). Bitcoin as an interoperable system can more easily convert various currencies and
facilitate cross-border trade.

Blockchain is particularly suitable for detecting widespread fraud in diverse industries
such as insurance and banking. As Bankymoon’s crowdsourcing of utility credits suggest,
blockchain makes it possible for donors to directly make payments to the causes that they
are passionate about. Donors no longer need to depend on other organisations to act as
middlemen. In this way, blockchain helps prevent the misuse and abuse of donor money.

The GS needs to deal with various challenges and bottlenecks in successful blockchain
deployment. Powerful actors that are against transparency and openness may oppose block-
chain. In the land ownership example, blockchain can increase the transparency of land
ownership records and make it difficult or impossible for corrupt officials to alter land

THIRD WORLD QUARTERLY 1723

registries after the records are on the blockchain. However, blockchain cannot address cor-
ruption in decisions about how land is registered in the ledger.117

Blockchain’s takeoff hinges on harmonised standards and regulations. In order to realise
the benefits of blockchain beyond what is possible with traditional database solutions, coop-
eration and coordination among a number of actors such as industry associations, compet-
itors (eg cooperation among insurers), manufacturers, customers and other parties are
needed.118 If regulatory reforms are brought about to digitise the relevant regulatory infor-
mation and transfer it to a blockchain ledger, compliance with disclosure laws can also be
increased.

Countries vary in their ability to benefit from blockchain. Forward-looking politicians in
some countries have recognised blockchain’s potential. The lack of political motivation has
acted as a barrier in others. For instance, compare Georgia and Honduras. Georgia’s rank on
Transparency International’s Corruption Perception Index was 48th in 2015,119 compared to
the 112th place ranking of Honduras. Georgia has an efficient property registration process.
According to the World Bank’s Doing Business survey, in 2016, Georgia ranked third in terms
of the ease of property registration for SMEs, compared to Honduras’ rank of 88th.120
Registering a property is costlier and more time consuming in Bangladesh, which ranked
185th in the world in 2016.121 To register a property, Bangladesh requires eight procedures,
which take 244 days and cost 6.5% of the property value. In countries characterised by
dysfunctional institutions, such as Bangladesh, blockchain should hold even greater
potential.

Regarding the transparency feature of blockchain, some caveats need to be made.
Blockchain is in an infant stage of development, and various alternate models are evolving.
For instance, many firms in the financial sector are unhappy with blockchain’s transparent
nature that gives other users access to the details of transactions conducted. In order to
make blockchain more appealing to financial institutions, the cryptocurrency Zcash, which
was launched in October 2016, has promised transactional privacy.122 Zcash has envisioned
two types of addresses: transparent and shielded. In transparent addresses, as in the case
of bitcoin, the amounts sent as well as the receiver and the sender show up on the blockchain.
On the other hand, if one opts to use a shielded address, the address is ‘obscured’ on the
public ledger. Moreover, if the sender and the receiver of funds both use shielded addresses,
the transaction amount will also be encrypted. This could be a big concern for regulators
that are interested in countering money laundering.

Finally additional side effects associated with widespread adoption of blockchain may
include a potential decline in jobs. Initiatives are needed to stimulate and encourage entre-
preneurial activities to create new jobs to overcome the potentially adverse economic and
social effects associated with blockchain-led job losses.

Blockchain from a diffusion-of-innovation perspective

Rogers123 identified various characteristics of a technology affecting its diffusion pattern:
relative advantage, compatibility, complexity, observability and trialability. Based on the
examples discussed earlier, Table 2 presents how blockchain performs in terms of these char-
acteristics. As is clear from the table, blockchain is likely to have a mostly favourable impact
on social and economic aspects of development. From the perspective of the GS, there are
some key roadblocks at present to the rapid diffusion of this technology, including a high
degree of complexity and potential resistance from corrupt politicians and bureaucrats.

1724 N. KSHETRI

Concluding comments

Blockchain applications are in a nascent stage of development. Rather than viewing them
as a self-contained phenomenon, they must be seen against the backdrop of economic and
institutional realities facing the GS. In theory, there are many possible uses of the blockchain
and several channels and mechanisms through which the GS may benefit. In practice, how-
ever, a number of challenges stand in the way of implementation and practical results.
Blockchain-based innovations and business models are as yet far from inclusive of SMEs in

Table 2. Characteristics of a technology influencing diffusion: blockchain in the Global South.

aSee note 51.
bdale, “Three Small economies.”
cSee note 60.
dSee note 62.
eNash, “Wal-Mart Turns To Blockchain.”
Source: Based on rogers (1995), and the author’s research.

Dimension Explanation Blockchain’s performance Example
relative advantage • Perceived benefits of a

technology over previous
technologies and the extent
to which it is better than the
idea it supersedes.

• Blockchain performs better
than most other technolo-
gies in key areas including
promotion of transparency,
reduction of fraud and
corruption, and reduction
of friction and costs of
property registration.

• Bitland’s blockchain-based
land registry system in
Ghanaa

Compatibility • The degree to which a
technology and the tasks it
performs are perceived as
being consistent with the
existing values, beliefs, past
experiences and needs of
potential adopters.

Corrupt politicians and
bureaucrats are likely to
resist blockchain since it
enhances transparency and
accountability.

• The honduran govern-
ment’s plan to transfer land
registry onto a block-
chain-enforced digital
database was reported to
face political roadblocksb

Complexity • The level of difficulty of
installing and using a
technology (variety and
uncertainty increase
complexity).

• Most potential adopters
consider blockchain to be a
highly complex technology.

• Saldo found it too complex
to talk about blockchain
and needed to educate
financial institutions firstc

observability • The degree to which the
features and benefits of a
technology are visible,
noticeable and understand-
able to self/others; the
results can be described to
non-users.

Blockchain-based remittance
services providers have
lower transaction costs.

• Bitspark charges about 1%
of the remittance amount,
significantly lower than that
charged by other money
transfer companiesd

Trialability • The ability to experiment or
try (on a limited basis)
before formally adopting.

• it can be tried on a limited
basis before full-scale
adoption.

• in order to enhance food
safety, Wal-Mart announced
a plan to build a blockchain
online ledger to track the
movement of pork in its
Chinese supply chain. The
project is scheduled to run
for four months. after the
trial period, Wal-Mart will
evaluate results with
technology providers iBM
and Tsinghua university and
make decisions about
expandinge

THIRD WORLD QUARTERLY 1725

the GS. If the technology is properly developed, utilised and implemented, some of the
institutional bottlenecks can be alleviated. Overall, blockchain can unlock entrepreneurship
opportunities.

Disclosure statement

No potential conflict of interest was reported by the author.

Acknowledgements

I am extremely grateful to TWQ Editor Shahid Qadir and two anonymous reviewers for their detailed,
generous and insightful comments.

Note on Contributor

Nir Kshetri is a professor at the University of North Carolina-Greensboro. He has authored
seven books. His 2014 book Global Entrepreneurship: Environment and Strategy (Routledge:
New York) was selected as an Outstanding Academic Title by Choice Magazine. He has also
published around 100 articles in various journals. He participated as lead discussant at the
Peer Review meeting of UNCTAD’s Information Economy Report 2013 and Information
Economy Report 2015. He is the winner of the 2016 Bryan School Senior Research Excellence
Award. He is also a two-time winner of the Pacific Telecommunication Council’s Meheroo
Jussawalla Research Paper Prize (2010 and 2008). He has been interviewed and/or quoted
by over 80 TV channels, magazines and newspapers.

Notes

1. Kshetri, “Cloud Computing in the Global South.”
2. Kshetri, “Economics of the Internet of Things.”
3. Tapscott, “How Will Blockchain Change Banking?”
4. PWCHK.com, “Blockchain the Biggest Disruptor.”
5. WEF, “Deep Shift Technology.”
6. Heires, “Risks and Rewards of Blockchain Technology.”
7. Nash, “IBM Pushes Blockchain.”
8. WEF, “Deep Shift Technology.”
9. Huckstep, “What Does the Future Hold.”
10. Higgins, “How Bitcoin Brought Electricity.”
11. Mulligan, “5 African Crowdfunding Startups to Match.”
12. Quentson “China’s Social Security.”
13. Ramada-Sarasola, “Want to Get an Insurer’s Attention?”
14. Roberts, “America’s Big Banks Are Staffing Up.”
15. Mahalingam, “With India Type of Ideals.”
16. Sindzingre, “Impact of the 2008–2009 Crisis.”
17. Murshed, “Conflict, Civil War and Underdevelopment.”
18. Acemoglu, “Root Causes”; Acemoglu, “Political Economy of Development and

Underdevelopment”; Acemoglu, Johnson, and Robinson, “Institutions as a Fundamental Cause.”
19. UN News Center, “Corruption Leading to Unequal Access.”
20. Kshetri, “Fostering Startup Ecosystems in India.”
21. Hanstad, “Case for Land Reform in India.”
22. Ibid.

1726 N. KSHETRI

23. Bansal, “Health Cover: Too Little, too Scarce.”
24. Klein and Cukier, “Tamed Tigers, Distressed Dragon.”
25. Jing, “Alibaba, Lenders Team Up.”
26. Wildau, “Alibaba’s Finance Arm Launches;” Kshetri, “Big Data’s Role.”
27. Kshetri, “Global Entrepreneurship: Environment and Strategy.”
28. Dovi, “Boosting Domestic Savings in Africa.”
29. North, “Dealing with a Nonergodic.”
30. Ibid.
31. Ibid.
32. Ibid.
33. Ibid.
34. Kshetri, “Economics of the Internet of Things.”
35. Chen, “Jack Ma Takes on.”
36. Shengxia, “China Uncovers $10b Worth of Falsified Trade.”
37. Ibid.
38. Smith, “7 Ways Blockchain Technology.”
39. Shengxia, “China Uncovers $10b Worth of Falsified Trade.”
40. Smith, “7 Ways Blockchain Technology.”
41. Chanjaroen and Boey, “Fraud in $4 Trillion.”
42. Ibid.
43. Lyon, “First Blockchain-Powered Government.”
44. Allison, “Ukraine’s Government.”
45. Ibid.
46. Shin, “Republic Of Georgia.”
47. USAID, “USAID Country Profile.”
48. Puiu, “How Bitcoin’s Blockchain.”
49. Jeong, “Bitcoin, Blockchain, and Land Reform.”
50. HondurasNews, “Blockchain Land Title Project.”
51. Ogundeji, “Land Registry Based on Blockchain.”
52. Jones, “How Blockchain Is Impacting Industry.”
53. Ogundeji, “Land Registry Based on Blockchain.”
54. EconoTimes, “Bitland Partners with CCEDK.”
55. Higgins, “Republic of Georgia to Develop Blockchain.”
56. Higgins, “Survey: Blockchain Capital Markets.”
57. Allison, “Skuchain.”
58. Ibid.
59. PRNewswire, “Skuchain Developing Blockchain.”
60. Valenzuela, “Bitcoin Remittances to Mexico.”
61. Gupta, Pattillo, and Wagh, “Effect of Remittances.”
62. Chan, “Bitcoin Transactions.”
63. Prisco, “African Bitcoin Startup.”
64. Williams-Grut, “Santander is Letting Staff Use.”
65. Bogdan, “MeXBT Announces Its Cross-Border.”
66. Tapscott, “How Will Blockchain Change Banking?”
67. Ramada-Sarasola, “Want to Get an Insurer’s Attention?”
68. Lorenz et al., “Blockchain in Insurance.”
69. Huckstep, “What Does the Future Hold.”
70. Valenzuela, “Bitcoin Remittances to Mexico.”
71. BoostVC, “5 Ways that Insurance Will Be Disrupted.”
72. Ibid.
73. Maras, “VC Fintech Funding.”
74. Palmer, “7 Emerging Trends for Bitcoin.”
75. Maye, “China’s Baidu Enters FinTech.”
76. Meola, “Blockchain Payment Company.”

THIRD WORLD QUARTERLY 1727

77. Higgins, “China Merchants Bank.”
78. Ferguson, “Blockchain Technology Coming to China.”
79. Higgins, “China Merchants Bank.”
80. Ferguson, “Blockchain Technology Coming to China.”
81. Leung, “Chinese E-Insurance Company.”
82. Finextra, “South Africa and Blockchain.”
83. AGENDA.ge, “Bitcoin Industry.”
84. Menezes, “Georgia, Attracts $100 m.”
85. Higgins, “Survey: Blockchain Capital Markets.”
86. Del Castillo, “McKinsey Report.”
87. Phyo, “Japanese Firms.”
88. Nash, “IBM Pushes Blockchain.”
89. Ver, “Time to End the Block-Size Blockade.”
90. King, “How much do smart meters cost?”
91. Bardhan, “Frauds in Health Insurance.”
92. Yan, “High Levels of Medical Insurance Fraud.”
93. The New Indian Express, “Micro-Finance Scam.”
94. Phyo, “Japanese Firms.”
95. Harwood-Jones, “Road to Mass Adoption of Blockchain.”
96. Lorenz et al., “Blockchain in Insurance.”
97. Ibid.
98. Greenspan, “For Genuine Blockchain”.
99. The Economist, “Trust Machine.”
100. Taylor, “Bitcoin’s Governance Model?”
101. Andreesen, “Why Bitcoin Matters.”
102. Hileman, “Following the Money.”
103. Beloussov, “Blockchain: Panacea or Hype.”
104. Lewis, “So, You Want to Use a Blockchain.”
105. Lee, “Getting to Grips with Blockchain.”
106. The Economist, “Trust Machine.”
107. Ver, “Time to End the Block-Size Blockade.”
108. Allison, “Ukraine’s Government.”
109. Valenzuela, “Bitcoin Remittances to Mexico.”
110. Ibid.
111. Pearson, “Blockchain is the New Buzzword.”
112. Chanjaroen and Boey, “Fraud in $4 Trillion.”
113. Rangwala, “Will Blockchain be the Same.”
114. The Economist, “Trust Machine.”
115. Mougayar, “Blockchain is Perfect for Government Services.”
116. Farrell et al., “10 Things You Need.”
117. Jeong, “Bitcoin, Blockchain, and Land Reform.”
118. Lorenz et al., “Blockchain in Insurance”
119. Transperency International, “Corruption Perception Index 2015.”
120. World Bank Group, “Doing Business. Registering Property.”
121. Ibid.
122. Clozel, “How Zcash Tries to Balance.”
123. Rogers, Diffusion of Innovations.

1728 N. KSHETRI

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Georgia Pilots and Sweden Ponders – Is Blockchain the Future for Europe’s Land Registries?

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1732 N. KSHETRI

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http://www.ft.com/cms/s/0/34e77fe8-a6a3-11e4-9bd3-00144feab7de.html

http://www.businessinsider.com/santander-develops-blockchain-international-payment-app-with-ripple-2016-5?r=UK&IR=T&IR=T

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individual use.

• Abstract

Introduction
Literature review: key challenges facing the GS
Causes of economic prosperity and poverty
The lack and poor enforcement of property rights
Disregard and lack of respect of the rule of law
Less opportunity for disadvantaged groups

• Barriers related to measurement, implementation, enforcement and transaction costs

Key blockchain applications to overcome challenges facing the Global South
Promoting transparency and reducing fraud and corruption
Reducing friction and costs of property registration
Promoting efficiency in international business to business (B2B) trade and increasing access to trade and supply chain finance
Reducing costs and increasing efficiency in international payment systems
Insurance and risk management
Opportunities and key triggers for blockchain diffusion
Opportunities
Challenges and obstacles
Discussion and implications
Blockchain from a diffusion-of-innovation perspective
Concluding comments
Disclosure statement
Acknowledgements
Notes
Note on Contributor
Bibliography

111
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Currencies
Digital currencies were the first ever application of blockchain technology, arguably
without realizing its true potential. With the invention of bitcoin the concept of blockchain
was introduced for the very first time, but it wasn’t until 2013, with the advent of Blockchain
2.0 that the real benefits of blockchain were realized with its possible application in many
different industries. Since then a number of use cases of blockchain technology in different
industries, have been proposed including but not limited to finance, the Internet of Things,
digital rights management, government, and law. In this chapter, four main industries
namely the Internet of Things (IoT), government, health, and finance, have been selected
for discussion. Readers will be introduced to all these fields and various related use cases
will be presented

.

Internet of Things
The Internet of Things or IoT for short has recently gained much traction due to its potential
for transforming business applications and everyday life. IoT can be defined as a network of
computationally intelligent physical objects that are capable of connecting to the Internet,
sensing real-world events or environments, reacting to those events, collecting relevant
data, and communicating it over the Internet. This simple definition has huge implications
and has led to exciting concepts, such as wearable’s, smart homes, smart grids, smart
connected cars, and smart cities, that are all based on this basic concept of an IoT device.
After dissecting the definition of IoT above, there are four functions that come to light as
being performed by an IoT device. These include sensing, reacting, collecting, and
communicating. All these functions are performed by using various components on the IoT
device.

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Sensing is performed by sensors. Reacting or controlling is performed by actuators,
collection is a function of various sensors, and communication is performed by chips that
provide network connectivity. One thing to note is that all these components are accessible
and controllable via the Internet in the IoT. An IoT device on its own is perhaps useful to
some extent but if it is part of a larger IoT ecosystem it is more valuable.

A typical IoT can consist of many physical objects connecting with each other and to a
centralized cloud server. This is shown in the diagram below:

Elements of IoT are spread across multiple layers and various reference architectures exist
that can be used to develop IoT systems. Generally, a five layer model can be used to
describe IoT, which contains a physical object layer, device layer, network layer, services
layer, and application layer. Each layer or level is responsible for various functions and
includes various components. These are described in detail below.

Physical object layer
These include any physical real-world objects includes people, animals, cars, trees, fridges,
trains, factories, homes, and in fact anything that is required to be monitored and controlled
can be connected to the IoT.

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Device layer
This layer contains things that make up the IoT such as sensors, transducers, actuators,
smart phones, smart devices, and Radio Frequency Identification tags (RFIDs). There can
be many categories of sensors such as body sensors, home sensors, and environmental
sensors based on the type of work they perform. This is the core of an IoT ecosystem where
various sensors are used to sense real-world environments. This includes sensors that can
monitor temperature, humidity, liquid flow, chemicals, air, pressure, and much more.
Usually, an Analog to Digital Converter (ADC) is required on a device in order to turn the
real-world analog signal into a digital signal that a microprocessor can understand.

Actuators in this layer provide the means to enable control of external environments, for
example, starting a motor or opening a door. These components also require digital to
analog converters in order to convert a digital signal into analogue. This is especially
relevant when control of a mechanical component is required by the IoT device.

Network layer
This layer is composed of various network devices that are used to provide Internet
connectivity between devices and to the cloud or servers that are part of the IoT ecosystem.
These devices can include gateways, routers, hubs, and switches. This layer can include two
types of communication. First is the horizontal means of communication, which includes
radio, Bluetooth, WiFi, Ethernet, LAN, ZigBee, and PAN and can be used to provide a
communication between IoT devices. Second, we have communicating to the next layer,
which is usually through the Internet and provides communication between machines and
people or other upper layers. The first layer can optionally be included in the device layer
as it physically is residing on the device layer where devices can communicate with each
other at the same layer.

Management layer
This layer provides the management layer for the IoT ecosystem. This includes platforms
that enable processing of data gathered from the IoT devices and turn that into meaningful
insights. Also, device management, security management, and data flow management are
included in this layer. It also manages communication between the device and application
layers.

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Application layer
This layer includes applications running on top of the IoT network. This can include a
number of applications depending on the requirements such as transportation, healthcare,
financial, insurance, or supply chain management. This of course is not an exhaustive list by
any stretch of the imagination; there is a myriad of IoT applications that can fall into this
layer:

With the availability of cheap sensors, hardware, and bandwidth, IoT has gained popularity
in recent years and currently has applications in many different areas including healthcare,
insurance, supply chain management, home automation, industrial automation, and
infrastructure management. Moreover, advancements in technology such as the availability
of IPv6, smaller and powerful processors, and better Internet access have also played a vital
role in the popularity of IoT. The benefits of IoT range from cost saving to enabling
businesses to make vital decisions and thus improve performance based on the data
provided by the IoT devices. Raw data from millions of things (IoT devices) is analyzed and
provides meaningful insights that help in making timely and effective business decisions.

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The normal IoT model is based on a centralized paradigm where IoT devices usually
connect with a cloud infrastructure or central servers in order to report and process the
relevant data back. This centralization poses certain possibilities of exploitation including
hacking and data theft. Moreover, not having control of personal data on a single,
centralized service provider also increases the possibility of security and privacy issues.
Whilst there are methods and techniques to build a highly secure IoT ecosystem based on
the normal IoT model there are certain much more desirable benefits that blockchain can
bring to IoT. A blockchain-based IoT model differs from the traditional IoT network
paradigm. According to IBM, blockchain for IoT can help to build trust, reduce costs, and
accelerate transactions. Additionally, decentralization, which is at the very core of
blockchain technology, can eliminate single points of failure in an IoT network. For
example, a central server perhaps is not able to cope with the amount of data that billions of
IoT devices (things) are producing at high frequency. Also the peer-to-peer communication
model provided by blockchain can help to reduce costs because there is no need to build
high-cost centralized data centres or implementation of complex public key infrastructure
for security. Devices can communicate with each other directly or via routers.

As an estimate from various researchers and companies, by 2020 there will be roughly 22
billion devices connected to the Internet. With this explosion of billions of devices
connecting to the Internet, it is hard to imagine that centralized infrastructures will be able
to cope with the high demands of bandwidth, services, and availability without incurring
excessive expenditure. Blockchain-based IoT will be able to solve scalability, privacy, and
reliability issues in the current IoT model.

Blockchain enables things to communicate and transact with each other directly and with
the availability of smart contracts negotiation and financial transactions can also occur
directly between the devices instead of requiring a middleman, authority, or human
intervention. For example, if a room in a hotel is vacant, it can rent itself out, negotiate the
rent, and can open the door lock for a human who has paid the right amount of funds.
Another example could be that if a washing machine runs out of detergent, it could order it
online after finding the best price and value based on the logic programmed in its smart
contract.

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The above mentioned five-layer IoT model can be adapted to a blockchain-based model by
adding a blockchain layer on top of the network layer. This layer will run smart contracts,
and provide security, privacy, integrity, autonomy, scalability, and decentralization services
to the IoT ecosystem. The management layer in this case can consist of only software related
to analytics and processing, and security and control can be moved to the blockchain layer.
This can be visualized in the following diagram:

In this model, other layers would perhaps remain the same but an additional blockchain
layer will be introduced as a middleware between all participants of the IoT network.

It can also be visualized as a peer-to-peer IoT network after abstracting away all the layers
mentioned above. This is shown in the following diagram where all devices are
communicating and negotiating with each other without a central command and control
entity:

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It can also result in cost saving which is due to easier device management by using a
blockchain based decentralised approach. The IoT network can be optimized for
performance by using blockchain. In this case there will be no need to store IoT data
centrally for millions of devices because storage and processing requirements can be
distributed to all IoT devices on the blockchain. This can result in completely removing the
need for large data centres for processing and storing the IoT data.

Blockchain-based IoT can also thwart denial of service attacks where hackers can target a
centralized server or data centre more easily but with blockchain’s distributed and
decentralized nature, such attacks are no longer possible. Additionally, if as estimated there
will be billions of devices connected to the Internet in the near future, it will become almost
impossible to manage security and updates of all those devices from traditional centrally-
owned servers. Blockchain can provide a solution to this problem by allowing devices to
communicate with each other directly in a secure manner and even request firmware and
security updates from each other. On a blockchain network these communications can be
recorded immutably and securely which will provide auditability, integrity, and
transparency to the system. This is not possible with traditional P2P systems.

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In summary, there are clear benefits that can be reaped with the convergence of IoT and
blockchain and a lot of research and work in academia and industry are already in progress.
There are various projects already proposed providing blockchain-based IoT solutions. For
example, IBM Blue Horizon and IBM Bluemix are IoT platforms supporting blockchain IoT
platforms. Various start-ups such as Filament have already proposed novel ideas on how to
build a decentralised network that enables devices on IoT to transact with each other
directly and autonomously driven by smart contracts.

In the following section, a practical example is provided on how to build a simple IoT
device and connect it to the Ethereum blockchain. This IoT device is connected to the
Ethereum blockchain and is used to open a door (in this case the door lock is represented by
an LED) when the appropriate amount of funds are sent by a user on the blockchain. This is
a simple example and requires a more rigorously-tested version in order to implement it in
production but it demonstrates how an IoT device can be connected, controlled, and
responded to in response to certain events on an Ethereum blockchain.

IoT blockchain experiment
This example makes use of a Raspberry device which is a Single Board Computer (SBC).
Raspberry Pi is a single-board computer developed as a low cost computer to promote
computer education but has also gained much more popularity as a tool of choice for
building IoT platforms. A Raspberry Pi 3 model B is shown in the following figure:

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In the following section, an example will be discussed where a Raspberry Pi will be used as
an IoT device connected to the Ethereum blockchain and will perform an action in response
to a smart contract invocation.

First, the Raspberry Pi needs to be set up. This can be done by using NOOBS which
provides an easy method of installing Raspbian or any other operating system. This can be
downloaded and installed from the link .
Alternatively, only Raspbian can be installed from the link

. Another alternative available at
can also be used to install a

minimal non-GUI version of Raspbian OS. For the purpose of the example, NOOBS has
been used to install Raspbian, as such the rest of the exercise assumes Raspbian is installed
on the SD memory card of the Raspberry Pi.

Once the Raspbian operating system is installed, the next step is to download the
appropriate binary for the Raspberry Pi ARM platform. The platform can be
confirmed by running the following command in a terminal window in Raspberry Pi
Raspbian operating system. The command output shows that which architecture the
operating system is running on. In this case it is , therefore ARM-compatible binary
for will be downloaded.

The following steps are described in detail:

download:, note that in the example below a specific version is downloaded1.
however other versions are available which can be downloaded from

.

wget https://gethstore.blob.core.windows.net/builds/geth-linux-
arm7-1.5.6-2a609af5.tar.gz

Unzip and extract into a directory, the directory named 2.
will be created automatically with that tar command

next:

tar -zxvf geth-linux-arm7-1.5.6-2a609af5.tar

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This will create a directory named and will extract
binary and related files into that directory. binary can be copied into

or the appropriate path on Raspbian to make it available from anywhere in the operating
system. When the download is finished, the next step is to create the genesis block.

The same genesis block needs to be used that was created previously in ,
Ethereum Development. The genesis file can be copied from the other node on the network.
This is shown in the following screenshot. Alternatively, an entirely new genesis block can
be generated. This was discussed in detail in , Ethereum Development.

Once the file is copied onto the Raspberry Pi, the following command can
be run in order to generate the genesis block. It is important that exactly the same genesis
block is used that was generated previously otherwise the nodes will effectively be running
on separate networks:

$ ./geth init genesis.json

This will show the output similar to the one shown in the following screenshot:

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After genesis block creation, there is a need to add peers to the network. This can be
achieved by creating a file named , which contains the enode ID of the
peer that geth on the Raspberry Pi will connect to for synching.

This information can be obtained from the geth JavaScript console by running the following
shown command, this command should be run on the peer to which Raspberry is going to
connect:

> Admin.nodeInfo

This will show the output similar to the one shown in the following screenshot:

After this step, further instructions presented below can be followed in order to connect
Raspberry Pi to the other node on the private network. In the example, the Raspberry Pi
will be connected to the network ID 786 created in , Ethereum Development. The
key is to use the same genesis file created previously and different port numbers. Different
ports are not a strict requirement however. If the two nodes are running under a private
network and access from an environment external to the network is required then a
combination of DMZ/router and port forwarding will be used. Therefore it is recommended
to use different TCP ports to allow port forwarding to work correctly. The identity switch,
which hasn’t been introduced previously, in the following command allows for an
identifying name to be specified for the node.

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First node setup
First, needs to be started on the first node using the following command:

$ geth –datadir .ethereum/privatenet/ –networkid 786 –maxpeers 5 –rpc –
-rpcapi web3,eth,debug,personal,net –rpcport 9001 –rpccorsdomain “*” —
port 30301 –identity “drequinox”

Once is started up it should be kept running and another instance should be
started from the Raspberry Pi node.

Raspberry Pi node setup
On Raspberry Pi, the following command is required to be run in order to start and
sync it with other nodes (in this case only one node). The following is the command:

$ ./geth –networkid 786 –maxpeers 5 –rpc –rpcapi
web3,eth,debug,personal,net –rpccorsdomain “*” –port 30302 –identity
“raspberry”

This should produce the output similar to the one shown in the following screenshot. When
the output contains the row displaying Block synchronization started it means that the
node has connected successfully to its peer.

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This can be further verified by running commands in the console on both nodes as
shown in the following screenshot. can be attached by simply running the command
on the Raspberry Pi:

$ geth attach

Similarly can be attached to by running the command below on the first node:

$ geth attach ipc:.ethereum/privatenet/geth.ipc

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Once the console is available can be run to reveal the details about other
connected nodes as shown in the following screenshot:

Once both nodes are up-and-running further prerequisites can be installed in order to set
up the experiment. Installation of Node.js and the relevant JavaScript libraries is required.
The required libraries and dependencies are listed below. First Node.js and npm need to be
updated on the Raspberry Pi Raspbian operating system. For this the following steps can be
followed:

Install latest Node.js on the Raspberry Pi using the following command:1.

$ curl -sL https://deb.nodesource.com/setup_7.x | sudo -E bash
–

This should display output similar to the following. The output is quite large therefore only
the top part of the output is shown in the following screenshot:

Run the update via :2.

$ sudo apt-get install nodejs

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Verification can be performed by running the following command to ensure that the correct
versions of Node.js and are installed, as shown in the following screenshot below:

It should be noted that these version are not a necessity; any latest version of and
will work. The examples in this chapter makes use of npm 4.0.5 and node v7.4.0.

Install Ethereum web3 npm, which is required to enable JavaScript code to access3.
the blockchain:

Similarly, can be installed, which is required in order to4.
communicate with the Raspberry Pi and control GPIO:

When all prerequisites are installed, hardware setup can be performed. For this purpose a
simple circuit is built using a breadboard and a few electronic components.

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These components are listed as follows:

LED: The abbreviation of Light Emitting Diode, this can be used as visual1.
indication for an event.
Resistor: A 330 ohm component is required which provides resistance to passing2.
current based on its rating. It is not necessary to understand the theory behind it
for this experiment; any standard electronics engineering text covers all these
topics in detail.
Breadboard: This provides a means of building an electronic circuit without3.
requiring soldering.
T-Shaped cobbler: This is inserted on the breadboard as shown in the figure 4.
below and provides a labeled view of all GPIO (General Purpose I/O) pins for
the Raspberry Pi.
Ribbon cable connector: This is simply used to provide connectivity between the5.
Raspberry Pi and the breadboard via GPIO. All these components are shown in
the following image:

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Circuit
As shown in the following image, the positive leg (long leg) of the LED is connected to pin
number 21 of the GPIO and the negative (short leg) is connected to the resistor, which is
then connected to the ground (GND) pin of the GPIO. Once the connections are set up the
ribbon cable can be used to simply connect to the GPIO connector on the Raspberry Pi.

Once the connections are set up correctly and the Raspberry Pi has been updated with the
appropriate libraries and geth, the next step is to develop a simple smart contract that
expects a value. If the value provided to it is not what it expects it does not trigger an event;
otherwise, if the value passed matches the correct value, the event triggers which can be
read by the client JavaScript programme running via Node.js. Of course, the solidity
contract can be very complex and can also deal with the ether sent to it and if the amount of
ether is equal to the required amount then the event can trigger; but in this example the aim
is to demonstrate the usage of smart contracts to trigger events that can then be read by
JavaScript programmes running on Node.js, which then in turn can trigger actions on IoT
devices using various libraries.

The smart contract source code is shown as follows:

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The solidity online compiler can be used to run and test this contract. The Application
Binary Interface (ABI) required for interacting with the contract is also available in the
Interface field as shown in the following screenshot:

There are two methods by which Raspberry node can connect to the private blockchain via
the web3 interface. The first is where the raspberry device is running its own geth and
maintains its own ledger but with resource-constrained devices it is not possible to run a
full node, or even a light node in a few circumstances. In that case, the web3 provider
can be initialized to connect to the appropriate RPC channel. This will be shown later in the
client JavaScript Node.js programme. A comparison of both of these approaches is shown in
the following diagram:

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There are obvious security concerns which arise from exposing RPC interfaces publicly,
therefore it is recommended that this option is used only on private networks and if
required to be used on public networks appropriate security measures are put in place, such
as allowing only the known IP addresses to connect to the geth RPC interface. This can be
achieved by a combination of disabling peer discovery mechanisms and HTTP-RPC server
listening interfaces. More information about this can be found in geth help. The traditional
network security measures such as firewalls, Transport Layer Security (TLS) and
certificates can also be used, but have not been discussed in this example.

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Now Truffle can be used to deploy the contract on the private network ID 786 to which at
this point the Raspberry Pi is connected. A truffle deploy can be performed simply by using
the following shown command; it is assumed that and other preliminaries
discussed in , Ethereum Development have already been performed:

$ truffle migrate

It should produce the output similar to the following screenshot:

Once the contract is deployed correctly, JavaScript code can be developed that will connect
to the blockchain via web3, listen for the events from the smart contract in the blockchain,
and turn the LED on via the Raspberry Pi. The JavaScript code is shown as follows:

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Note that in the example above the contract address
is specific to the deployment and it

will be different when readers run this example. Simply change the address in the file to
what the readers see after deploying the contract. This JavaScript code can be placed in a file
on the Raspberry PI, for example, . It can be run by using the following
command:

$ sudo nodejs index.js

This will start the programme, which will run on Node.js and listen for events from the
smart contract. Once the program is running correctly, the smart contract can be invoked by
using the Truffle console as shown in the following screenshot.

In this case the function is called with parameter 10, which is the expected value.

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After the contract is mined, will be triggered, which will turn the LED on. In
this example it is a simple LED but it can be any physical device such as a room lock that
can be controlled via an actuator. If all works well, the LED will be turned on as a result of
the smart contract function invocation as shown in the following image:

As demonstrated in the preceding example, a private network of IoT devices can be built
that runs a geth client on each of the nodes and can listen for events from smart contracts
and trigger an action accordingly. The example shown is simple on purpose but
demonstrates the underlying principles of an Ethereum network that can be built using IoT
devices along with smart contract-driven control of the physical devices.

In the next section, other applications of the blockchain technology in government, finance,
and health will be discussed.

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Government
There are various applications of blockchain being researched currently that can support
government functions and take the current model of e-government to the next level. First, in
this section some background for e-government will be provided and then a few use cases
such as e-voting, homeland security (border control), and electronic IDs (citizen ID cards)
will be discussed.

E-government or electronic government is a paradigm where information and
communication technology is used to deliver public services to citizens. The concept is not
new and has been implemented in various countries around the world but with blockchain
a new avenue of exploration has opened up. Many governments are researching the
possibility of using blockchain technology for managing and delivering public services.
Transparency, auditability, and integrity are attributes of blockchain that can go a long way
in effectively managing various government functions.

Border control
Automated border control systems have been in use for decades now in order to thwart
illegal entry into countries and prevent terrorism and human trafficking.

Machine-readable travel documents and specifically biometric passports have paved the
way for automated border control; however current systems are limited to a certain extent
and blockchain technology can provide solutions. A Machine-readable Travel Document
(MRTD) standard is defined in document ICAO 9303 by the International Civil Aviation
Organization (ICAO) and has been implemented by many countries around the world.

Each passport contains various security and identity attributes that can be used to identify
the owner of the passport and also circumvent attempts at tampering with the passports.
These include biometric features such as retina scan, finger prints, facial recognition, and
standard ICAO specified features including Machine Readable Zone (MRZ) and other text
attributes that are visible on the first page of the passport.

One key issue with current border control systems is centralization whereby the systems are
controlled by a single entity and the fact that data is not readily shared between law
enforcement agencies. This makes it difficult to track suspected individuals. Another issue
is related to the immediate implementation of blacklisting of a travel document, for
example, when there is an immediate need to track and control suspected travel documents.
Currently, there is no mechanism available to immediately blacklist or revoke a suspected
passport.

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Blockchain can provide a solution to this problem by maintaining a blacklist in a smart
contract which can be updated as required and any changes will be immediately visible to
all agencies and border control points thus enabling immediate control over the movement
of a suspected travel document. It could be argued that traditional mechanisms like PKIs
and P2P networks can also be used for this purpose but they do not provide the benefits
that a blockchain can provide. With blockchain the whole system can be simplified without
the requirement of complex networks and PKI setups which will also result in cost
reduction. Moreover blockchain based systems will provide cryptographically guaranteed
immutability which helps with auditing and discourages any fraudulent activity.

The full database of all travel documents perhaps cannot be stored on the blockchain
currently due to scalability issues but a backend distributed database such as BigChainDB,
IPFS, or Swarm can be used for that purpose. In this case, a hash of the travel document
with the biometric ID of an individual can be stored in a simple smart contract and a hash
of the document can then be used to refer to the detailed data available on the distributed
file system such as IPFS. This way, when a travel document is blacklisted anywhere on the
network, that information will be available immediately with the cryptographic guarantee
of its authenticity and integrity throughout the distributed ledger. This functionality can
also provide effective support in anti-terrorism activities, thus playing a vital role in the
homeland security function of a government.

A simple contract in solidity can have an array defined for storing identities and associated
biometric records. This array can be used to store the identifying information about a
passport. The identity can be a hash of Machine readable zone (MRZ) of the passport or
travel document concatenated with the biometric record from the RFID chip. A simple
boolean field can be used to identify blacklisted passports. Once this initial check passes,
further detailed biometric verification can be performed by traditional systems and
eventually when a decision is made regarding the entry of the passport holder that decision
can be propagated back to the blockchain, thus enabling all participants on the network to
immediately share the outcome of the decision.

A high-level approach to building a blockchain-based border control system can be
visualized as shown in the following figure. In this scenario, the passport is presented for
scanning to an RFID and page scanner which reads the data page and extracts machine-
readable information along with a hash of the biometric data stored in the RFID chip. At
this stage, a live photo and retina scan of the passport holder is also taken. This information
is then passed on to the blockchain where a smart contract is responsible for verifying the
legitimacy of the travel document by first checking its own list of blacklisted passports and
then requesting more data from the backend IPFS database for comparison. Note that the
biometric data such as photo or retina scan is not stored on the blockchain, instead only a
reference to this data in the backend (IPFS or BigChainDB) is stored in the blockchain.

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If the data from the presented passport matches with what is held in the IPFS as files or in
BigChainDB and also passes the smart contract logical check then the border gate can be
opened.

After verification this information is propagated throughout the blockchain and is instantly
available to all participants on the border control blockchain. These participants can be a
worldwide consortium of homeland security departments of various nations.

Voting
Voting in any government is a key function and allows citizens to participate in the
democratic election process. Whilst voting has evolved over time into a much more mature
and secure process, it still has limitations that need to be addressed in order to achieve a
desired level of maturity. Usually, the limitations in current voting systems revolve around
fraud, weaknesses in operational processes, and especially transparency. Over the years,
secure voting mechanisms have been built which make use of specialized voting machines
that promised security and privacy but they still had vulnerabilities that could be exploited
in order to subvert the security mechanisms of those machines. This can lead to serious
implications for the whole voting process and can result in mistrust in the government by
the public.

Blockchain-based voting systems can resolve these issues by introducing end-to-end
security and transparency in the process. Security is provided in the form of integrity and
authenticity of votes by using public key cryptography which comes as standard in a
blockchain. Moreover, immutability guaranteed by blockchain ensures that votes cast once
cannot be cast again. This can be achieved through a combination of biometric features and
a smart contract maintaining a list of votes already cast. For example a smart contract can
maintain a list of already casted votes with the biometric ID (for example a fingerprint) and
can use that to detect and prevent double casting. Secondly, zero knowledge proofs can also
be used on the blockchain to protect voters’ privacy on the blockchain.

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Citizen identification (ID cards)
Electronic IDs or national ID cards are issued by various countries around the world at
present. These cards are secure and possess many security features that thwart duplication
or tampering attempts. However, with the advent of blockchain technology there are
several improvements that can be made to this process.

Digital identity is not only limited to just government-issued ID cards, it is a concept that is
applicable in online social networks and forums too. There can be multiple identities used
for different purposes. A blockchain-based online digital identity allows control over
personal information sharing. Users can see who used their data and for what purpose and
can control access to it. This is not possible with the current infrastructures which are
centrally controlled. The key benefit is that a single identity issued by the government can
be used easily and in a transparent manner for multiple services via a single government
blockchain. In this case, the blockchain serves as a platform where government is providing
various services such as pensions, taxation, or benefits and a single ID is being used for
accessing all these services. Blockchain in this case provides an immutable record of every
change and transaction made by a digital ID, thus ensuring integrity and transparency of
the system. Also citizens can notarize birth certificates, marriages, deeds, and many other
documents on the blockchain tied with their digital ID as a proof of existence.

Currently, there are successful implementations of identity schemes in various countries
that work well and there is an argument that perhaps blockchain is not really required in
identity management systems. Although, there are several benefits such as privacy and
control over the usage of identity information but due to the current immaturity of
blockchain technology perhaps it is not ready for use in real-world identity systems.
However, research is being carried out by various governments to explore the usage of
blockchain for identity management.

Moreover, laws such as the right to be forgotten can be quite difficult to incorporate in to
blockchain due to its immutable nature.

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Miscellaneous
Other government functions where blockchain technology can be implemented in order to
improve cost and efficiency include collection of taxes, benefits management and
disbursement, land ownership record management, life event registration (marriages,
births), motor vehicle registration, and licenses. This is not an exhaustive list and over time
many functions and processes of a government can be adapted to a blockchain-based
model. The key benefits of blockchain such as immutability, transparency and
decentralization can help to bring improvements to most of the traditional government
systems.

Health
The health industry has been identified as another major industry that can benefit by
adapting blockchain technology. Blockchain provides an immutable, auditable, and
transparent system that traditional P2P networks cannot. In addition blockchain provides a
cost-effective, simpler infrastructure as compared to traditional complex PKI networks. In
healthcare, major issues such as privacy compromises, data breaches, high costs, and fraud
can arise from lack of interoperability, overly complex processes, transparency, auditability,
and control. Another burning issue is counterfeit medicines; especially in developing
countries, this is a major cause of concern.

With the adaptability of blockchain in the health sector, several benefits can be realized,
ranging from cost saving, increased trust, faster processing of claims, high availability, no
operational errors due to complexity in the operational procedures, and preventing the
distribution of counterfeit medicines.

From another angle, blockchains that are providing a digital currency as an incentive for
mining can be used to provide processing power to solve scientific problems that can help
to find cures for certain diseases. Examples include FoldingCoin, which rewards its miners
with FLDC tokens for sharing their computer’s processing power for solving scientific
problems that require particularly large calculations. FoldingCoin is available at

. Another similar project is called CureCoin which is available at
. It is yet to be seen that how successful these projects will be in

achieving their goals but the idea is very promising.

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Finance
Blockchain has many applications in the finance industry. Blockchain in finance is the
hottest topic in the industry currently and major banks and financial organizations are
researching to find ways to adapt blockchain technology especially due to its highly-desired
potential to cost-save.

Insurance
In the insurance industry, blockchain technology can help to stop fraudulent claims,
increase the speed of claim processing, and enable transparency. Imagine a shared ledger
between all insurers that can provide a quick and efficient mechanism for handling inter-
company claims. Also with the convergence of IoT and blockchain, an ecosystem of smart
devices can be imagined where all these things are able to negotiate and manage their own
insurance policies controlled by smart contracts on the blockchain.

Blockchain can reduce the overall cost and effort required to process claims. Claims can be
automatically verified and paid via smart contracts and the associated identity of the
insurance policy holder. For example a smart contract with the help of Oracles and possibly
IoT can make sure that when the accident occurred, it can record related telemetry data and
based on this information can release payment. It can also withhold payment if the smart
contract after evaluating conditions of payment concludes that payment should not be
released. For example in a scenario where the vehicle was not repaired by an authorized
workshop or was used outside a designated area and so on and so forth. There can be many
conditions that a smart contract can evaluate to process claims and choice of these rules
depend on the insurer, but the general idea is that smart contracts in combination with IoT
and Oracles can automate the entire vehicle insurance industry.

Several start-ups such as Dynamis have proposed smart contract-based peer-to-peer
insurance platforms that run on Ethereum blockchain. This is initially proposed to be used
for unemployment insurance and does not require underwriters in the model. It is available
at .

Post trade settlement
This is the most sought-after application of blockchain technology. Currently, many
financial institutions are exploring the possibility of using blockchain technology to
simplify, automate, and speed up the costly and time-consuming post-trade settlement
process.

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In order to understand the problem better, the trade lifecycle is described briefly. A trade
lifecycle contains three steps: execution, clearing, and settlement. Execution is concerned
with the commitment of trading between two parties and can be entered into the system via
front office order management terminals or exchanges. Clearing is the next step whereby
the trade is matched between the seller and buyer based on certain attributes such as price
and quantity. At this stage, accounts that are involved in payment are also identified.
Finally, settlement is where eventually the security is exchanged for payment between the
buyer and seller.

In the traditional trade lifecycle model, a central clearing house is required in order to
facilitate trading between parties which bears the credit risk of both parties. The current
scheme is somewhat complicated, whereby a seller and buyer have to take a complex route
in order to trade with each other. This comprises of various firms, brokers, clearing houses,
and custodians but with blockchain a single distributed ledger with appropriate smart
contracts can simplify this whole process and can enable buyers and sellers to talk directly
to each other.

Particularly, the post trade settlement process takes two to three days and has dependency
on central clearing houses and reconciliation systems. With the shared ledger approach, all
participants on the blockchain can immediately see a single version of truth regarding the
state of the trade. Moreover, peer-to-peer settlement is possible, which results in the
reduction of complexity, cost, risk, and the time it takes to settle the trade. Finally,
intermediaries can be totally eliminated by making use of appropriate smart contracts on
the blockchain.

Financial crime prevention
Know your customer (KYC) and Anti Money laundering (AML) are the key enablers for
the prevention of financial crime. In the case of KYC, currently each institution maintains
their own copy of customer data and performs verification via centralized data providers.
This can be a time-consuming process and can result in delays in on-boarding a new client.
Blockchain can provide a solution to this problem by securely sharing a distributed ledger
between all financial institutions that contains verified and accurate identities of customers.
This distributed ledger can only be updated by consensus between the participants thus
providing transparency and auditability. This can not only reduce costs but also enable
meeting regulatory and compliance requirements in a better and consistent manner.

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In the case of AML, due to the immutable, shared, and transparent nature of blockchain,
regulators can easily be granted access to a private blockchain where they can fetch data for
relevant regulatory reporting. This will also result in reducing complexity and costs related
to the current regulatory reporting paradigm where data is fetched from various legacy and
disparate systems and aggregated and formatted together for reporting purposes.
Blockchain can provide a single shared view of all financial transactions in the system that
are cryptographically secure, authentic, and auditable, thus reducing the costs and
complexity associated with the currently employed regulatory reporting methods.

Media
Key issues in the media industry revolve around content distribution, rights management,
and royalty payments to artists. For example, digital music can be copied many times
without any restriction and any attempts to apply copy protection have been hacked in
some way or other. There is no control over the distribution of the content that a musician
or song writer produces; it can be copied as many times as needed without any restriction
and consequently has an impact on the royalty payments. Also, payments are not always
guaranteed and are based on traditional airtime figures. All these issues revolving around
copy protection and royalty payments can be resolved by connecting consumers, artists,
and all players in the industry, allowing transparency and control over the process.
Blockchain can provide a network where digital music is cryptographically guaranteed to
be owned only by the consumers who pay for it. This payment mechanism is controlled by
a smart contract instead of a centralized media agency or authority. The payments will be
automatically made based on the logic embedded within the smart contract and number of
‘downloads’. Moreover, illegal copying of digital music files can be stopped altogether
because everything is recorded and owned immutably in a transparent manner on
blockchain. A music file for example can be stored with owner information and timestamp
which can be traced throughout the blockchain network. Furthermore, the consumers who
own a legal copy of some content are cryptographically tied to the content they have and it
cannot be moved to another owner unless permissioned by the owner. Copyrights and
transfers can be managed easily via blockchain once all digital content is immutably
recorded on the blockchain. Smart contracts can then control the distribution and payment
to all concerned parties.

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Summary
There are many applications of blockchain technology and as discussed in the chapter they
can be implemented in various industries to bring about multiple benefits to existing
solutions. In this chapter, five main industries that can benefit from blockchain have been
discussed. First IoT was discussed, which is another revolutionary technology on its own;
and by combining it with the blockchain several fundamental limitations can be addressed,
which brings about tremendous benefits to the IoT industry. More focus has been given to
IoT as it is the biggest and most ready candidate for adapting blockchain technology.
Already, practical use cases and platforms have emerged in the form of Platform as a
Service (PaaS) for blockchain-based IoT such as the IBM Watson IoT blockchain. IBM Blue
Horizon is also now available for experimentation, which is a decentralized blockchain-
based IoT network. Second, applications in the government sector were discussed whereby
various government processes such as homeland security, identification cards, and benefit
disbursements can be made transparent, secure, and more robust. Furthermore, issues in
the finance sector were discussed with possible solutions that blockchain technology can
provide. Although the finance sector is exploring the possibilities of using blockchain with
high energy and enthusiasm, it is still far away from production-ready blockchain-based
systems. Finally, some aspects of the health sector and music industry were also discussed.
All these use cases and many more in the industry stand on pillars provided by core
attributes of blockchain technology such as decentralization, transparency, reliability, and
security. However, certain challenges need to be addressed before blockchain technology
can be adapted fully; these will be discussed in the next chapter.

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