by Francis Quartey
What is Blockchain?
Blockchain is open source system ledger that employs mathematical algorithm and cryptography to establish digital trust instead of the traditional intermediary role that exists today. Blockchain is a decentralized system. This means each computer that is part of the network maintains a copy of legitimate ledger at all times. Therefore, it becomes increasingly difficult to compromise the integrity of the ledger as more computers join the network. In fact, Bitcoin–which was the first blockchain established in 2009–is secure to the extent that it has not been compromised since inception. However, this is not for the lack of attacks; Bitcoin is under constant attack by hackers, by agents, and by various governments for one reason or another. Over time, these attacks have helped Bitcoin to develop resistance. One can reasonably conclude Bitcoin blockchain to be the most secured public record of transactions in existence to date. What does this concept of digital trust mean for Africa?
It means the removal of gatekeepers and the increase of capital, a means to build wealth through the transfer there will be a system means of accountability and a system to build wealth.
Removal of Trust
The key here is the fact that we now have a new global protocol platform that minimizes the emphasis of trust in transactions between two parties, and therefore allows parties to transact directly with each other without the benefit of prior knowledge of who or where or how big or small the parties. In effect,the traditional expensive roles performed by intermediaries to ensure that transactions are secured and safe is now a function of mathematics and software. No more gatekeepers such as bankers and no burden of exchange rates. This is exceptionally beneficial to developing nations because digital trust does not draw the heavy hidden charges that traditional intermediaries levy on transaction. The freed capital is passed through to consumers.
Transfer Value in Assets
Another tenet of blockchain, is the fact that records are registered on all participating computers. What this means is that at any particular time, all the computers, no matter where it is located geographically, possess the same ledger or information. Of course, if we just digitize an asset without the capability of transfer, we have merely limited the asset to a digital edition of the product. We need a way to be able monetize and unlock the value in the asset. Like in most countries, real estate comprises a big part of asset ownership and source of wealth.
However, it is common knowledge of properties owned in Africa, that there is no proper and convenient linkage of attestation to the formal ownership of the asset. Therefore, owners are limited to using their properties as abodes with no option to transfer the wealth. Zero knowledge proof, an application of blockchain, is a useful tool that can be applied to address the situation. Since blockchain allows peer to peer transactions to be accomplished safely with the assistance of the digital trust mechanism and digital attestation of individuals, blockchain is a unique opportunity for Africa to develop new property platforms and new financial products by unlocking and transferring the values in the assets.
Means of Accountability
African countries tend to lack institution of attestation such as credit bureaus and therefore no formal accredited and transparent mechanism to vet its citizens on the global stage. Consequently, the citizens of these countries are “unknown” and effectively considered high risk. The nature of blockchain is such that the system is less trust dependent. Is there a benefit to moving to such a system? Yes! Maybe not so much for the developed western countries because those institutions exist and have been built over the last couple of centuries. However, for Africans and other developing nations, eliminating such risk factor from the equation presents a significant opportunity for its citizens to access the new global financial economy—one that has eluded them until the advent of blockchain.
All of the above activities: registering of assets or value, transferring of assets or values, stamping of time of registration, who signed what, etc. are all captured in the audit trail, and can never be changed in a blockchain. In the case of public and permission-less blockchain networks such as Bitcoin and Ethereum, the audit trail of information could be accessed openly. Private blockchains such as Hyperledger, Ethereum Enterprises, and a host of others may choose to limit access to only permissioned parties. Because of the audit trails in the blockchain and the immutability of the records and signatures, it becomes very difficult to deny an action once recorded. This is how blockchain shines “light” and creates visibility on activities. Thus, blockchain engenders good behavior and could serve as part of a major tool in fighting corruption in Africa.
Blockchain has vast potential for restructuring African finance and creating a stronger economy. Now is the time to understand it and integrate blockchain.
