Blockchain technology may not have the same public visibility as other emerging technologies like artificial intelligence (AI), cloud computing or the Internet of Things (IoT), but it nevertheless plays a vital role in building trust in systems that contain or concern personal and personal data. financial information.
In addition to personal and financial information, there is a growing need to provide assurance in supply chains.
Whether it is commercial products for which consumers need assurances about their origin, handling and storage, or raw materials whose journey requires visibility to ensure compliance with ethical, environmental and other standards.
Blockchain originated more than a decade ago when cryptocurrencies like Bitcoin began to become mainstream and is largely based on a ledger system that allows for an immutable process for recording transactions and tracking assets.
This capability is now used to improve the transparency and integrity of existing systems as well as to mitigate different types of fraud, anti-money laundering (AML) and terrorist financing.
In addition to ensuring the integrity of financial and other transactions, in cases where anonymity is prohibited and traceability is assured, blockchain can also interrogate transactions to reduce fraud, money laundering and other illegal financial activities (such as receiving payments in the form of cryptocurrencies for ransomware attacks). ) which he ironically activated before.
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Blockchain can ensure the integrity of financial transactions, reduce fraud, money laundering and other illegal financial activities. (Source: Image from Freepik)
In the public sector, blockchain use cases range from strengthening tax collection methods to voting systems to land registration.
Other areas where use cases are being tested to improve service delivery include public sector education (certification and credentialing), healthcare (record keeping and data collection integrity) and support for agriculture (supply chains of agricultural products, government-supported agricultural inputs, marketing of products, etc.).
As a middleware that works with existing systems such as supply chain management (SCM), enterprise resource planning (ERP), financial management, core banking and others, blockchain has even more potential to impact processes, improve data integrity and also positively impact security.
Common use cases in Africa
In Africa, several sectors are already benefiting from blockchain, including public administration, financial services, manufacturing, retail, healthcare and education.
Some of the most common use cases and resolved issues include:
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Financial – payment systems (including cross-border payments), loans, mortgages, insurance claims.
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Supply chain – track raw materials and products throughout manufacturing and retail supply chains to gain greater visibility into various issues such as pesticide use, storage, handling and carbon emissions (during transport, processing, packaging, etc.), ethical and other aspects as human rights.
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Document and records management – For example, land records to eliminate fraud and disputes, patient records in healthcare (to ensure accuracy, timeliness and confidentiality of medical records, etc. .).
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Digital identities – to access public services, pensions, social security, improve digital inclusion and civic participation by enabling trust in systems (e.g. in voting systems to reduce electoral fraud, guarantee identification correctness of voters, strengthening voting systems and accurate vote counting).
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Agriculture – ensuring greater fairness in pay, introducing price transparency and removing middlemen from the supply chain.
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Conservation and sustainable resource management – for wildlife, minerals, water and land.
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Education – monitor academic performance and accordingly support the issuance of credentials (certificates and diplomas).
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Legal – smart contracts.
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Intellectual property and copyright management.
Adoption factors
A good example of supply chain management that crosses different sectors and benefits both businesses and consumers is IBM’s Food Trust which is “a collaborative network involving producers, processors, wholesalers, distributors , manufacturers, retailers and others who can improve visibility and accountability.” throughout the food supply chain.
This platform has gained a foothold in markets where consumers, manufacturers and retailers evaluate products not only based on price and quality, but where their purchases are increasingly determined by traceability as a key factor in decision making.
This trend is gradually gaining momentum across the continent as companies examine their environmental, social and governance (ESG) frameworks and consumers become more demanding in markets where genetically modified foods or chemically processed products Pesticides are a source of concern for some.
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Blockchain can be used in agriculture to ensure greater fairness in compensation, price transparency, and the elimination of middlemen from the supply chain. (Source: Image from Freepik)
For manufacturers and retailers, another benefit of blockchain relates to counterfeit products and how this sometimes negatively affects brands when quality issues arise.
Additionally, throughout the same supply chain between factories and retail outlets, brand shrinkage is an issue when there is little visibility into the products moving between the two.
In addition to the needs of companies to adopt blockchain (to reduce fraud, give more integrity to processes, stem losses, improve their ESG frameworks, etc.) and more demanding consumer behavior, other factors of adoption include:
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Regulatory – compliance with existing laws relating to data protection and privacy, AML, Know Your Customer (KYC) and compliance with ever-changing tax regimes.
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Digital economy – where there is a need to have visibility into invisible transactions, assets and deliverables, e.g. advertisements, payments made online and paid via digital means, and cryptocurrency trading (especially where these intersect or involve fiat currency via banks or across borders).
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Digital transformation: increased digitization of documents, for example those in the legal sector, healthcare, education, public administration, insurance, banking, as well as smart contracts and purchase orders.
The obstacles facing blockchain
When it comes to challenges, those facing blockchain are similar to other types of technology adoption.
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Infrastructure, power supply and connectivity – these would be among the main enablers of a decentralized system like blockchain. Countries like South Africa, Nigeria and Kenya have been plagued by severe power outages, either due to low capacity or unstable power grids.
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Rural connectivity – in remote areas where connectivity is an issue, this hinders access to certain systems (e.g. in agriculture).
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Legacy systems – replacing or reconfiguring hardware and software systems to work with middleware like blockchain.
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Regulatory environment – new policies and regulations are emerging across the continent that seek to regulate rather than enable blockchain, and most of these rely on the genesis of blockchain and cryptocurrencies.
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Legal: in some cases, blockchain adoption is actually hampered by the absence of any articulated legal framework, for example in terms of data protection, cybersecurity, legal recognition of smart contracts and purchase orders, as well as other instruments (e.g. driving license, motor vehicle registration, land ownership). ).
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Skills – the ever-present specter looming over the evolving ICT landscape. This further affects the public sector as resource allocation, including skills and capacity development, is more focused on the actual delivery of government services.
Evolution and prospects
As more businesses and governments undertake digital transformation, underlying technological developments also impact how existing technologies are used, invariably deepening the extent to which blockchain is currently used.
Some key technologies that impact existing ICT systems and will also impact the evolution of blockchain include:
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AI – including machine learning, generative AI (query systems, loan application assessment, insurance claims processing, fraud detection).
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Cybersecurity – identity management and traffic monitoring.
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Mobile – digital identities and payment systems (for banking, social security, retail purchases).
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IoT – where devices help track information across supply chains or monitor the status of assets.
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Key public infrastructure – which is sometimes seen as an alternative to blockchain when it comes to transaction management – can be complemented by blockchain systems.
Apart from the impact of emerging technologies and ongoing digital transformation, blockchain is expected to grow and become more widespread.
For example, as part of the pan-African aspirations of the African Continental Free Trade Area (AfCFTA), one of the key enablers of this vision is cross-border payments and the free movement of goods, two areas where blockchain pays dividends. good dividends. at the level of a country.
In recent years, decentralized autonomous organizations have emerged, many of them leveraging finance-related activities like personal investing (and the use of cryptocurrencies).
This model can help scale existing microfinance organizations such as credit unions, as well as become a model for microcredit startups.
With the required political will, blockchain will not only improve the delivery of government services, ensure transparency and prudent use of resources, but its tamper-proof nature can continue to contribute greatly to democracy in elections, referendums and others. public participation mechanisms.
