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Ethereum blockchain against corruption

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The World Economic Forum (WEF) is working with the Colombian government to see if Ethereum’s blockchain-based transparency can help in the fight against corruption. Which occurs in the bidding process for high value contracts to provide public goods and services.

The FEM partnered with the Inter-American Development Bank (IDB) and the Colombian government’s Attorney General’s Office to develop a proof of concept (PdC) using Ethereum’s public blockchain to overcome the fight against corruption.

The objective of the project is to apply a high level of transparency to the use case of corruption in the context of the country’s public procurement system. The PdC will be tested in a live auction for the acquisition of goods and services supplied to the National University of Colombia later this year.

Ethereum in the fight against corruption

Public procurement invites corruption because it involves close and repeated interaction between: government officials, the private sector, and large sums of money. For this reason, the Colombian government’s alliance with the FEM enables a project against corruption to be solidified.

According to the Organization for Economic Cooperation and Development (OECD). Governments collectively spend approximately $ 9.5 trillion on public contracts worldwide, and up to 30% of that amount is lost due to corruption.

Originally, we were very open about the division of the IG (Office of the Inspector General of Colombia) with which we would work directlysaid Sheila Warren, the head of blockchain and data policy at the FEM.

He also commented that: “Most of the feedback we got from the country after the workshops we held there was that acquisitions would be the most conducive system for having blockchain within it.”

What is Blockchain’s contribution to the program?

Today, most countries operate electronic purchasing platforms. So the process of bidding to build roads or schools, followed by the registration of suppliers to tender these contracts is digital. It also usually involves some level of encryption, so the auction process is blind to avoid collusion.

In this sense, the most conclusive advantage is the addition of a shared and immutable set of records. Which cannot be censored or altered. Not even by someone from the government, said Ashley Lannquist, leader of the FME project for blockchain and digital currency.

“I think the highest value proposition is that you can have great confidence that you are not deleting registrations, or denying vendor offers. This came out as a key added value and of course it is what you get the most from blockchain.s without permission like Ethereum “, Lannquist said.

Also, there were other blockchain-based benefits, Lannquist said. Such as automation and timestamping of periods when bids would be evaluated and also periods when public comments would be made.

Will there be risks?

The transparency of the entire variety of issue found in Ethereum can be a double-edged sword, at least when it comes to most business uses. For example, Colombian procurement laws require that suppliers that bid on contracts be anonymous, not pseudonymous.

“It is a requirement of the law in Colombia that throughout the process there is anonymity. So companies are used to it and they know it has to be this way. It depends on the law of the country; It may be different in other countries. But generally, it’s an anonymous bid on blind auctions. ”said Ximena Lombana of the Colombian Attorney General’s Office.

Thus, the FEM concluded the process of maintaining Ethereum accounts. So participants may have to make repeated transactions using crypto. This could lead to a leak of information related to the identity of the participants.

“The public blockchain without Ethereum permission, used in the PdC Transparency Project. It creates such challenges, as sellers are required to submit transaction fees with their tender offers. “ states the report.

“Since all transactions in the system are publicly visible, steps must be taken to ensure that this transaction fee does not reveal the identity of the vendor presenting it.”

It would not be the first time that a user of a company has a problem because he has to play with crypto. Spanish bank BBVA struggled when it wanted to use Ethereum’s core network as a public notary service for loans. But in the end he had to use a test network because European banks are prohibited from having crypto.

What will be the solution?

The conclusion the FEM came to is that it might make more sense to use a “hybrid” blockchain. There are business variations of Ethereum like Hyperledger Besu that combine permission with access to the main public network. Another option could be the Baseline Protocol, which uses public blockchain to compare and verify purchase orders.

“We think about pairing public Ethereum with Hyperledger Fabric, for example”Lannquist said. “Some transactions happen on one or the other, and you want the public Ethereum for permanent record.”

Although no exact agreement was reached on what would be the blockchain to be used, plans to use the blockchain against corruption remain active. And it could be a new opportunity for blockchain to leverage itself within governments and public institutions.

What do you think about Ethereum fighting corruption? Let us know in the comment box.



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