In 2021, the fish market in the Port of Celeiro in Lugo sold nearly five million kilograms of skewered hake with the Friends of the Sea certification, a label that ensures that its capture was done without significant impact on the seabed and with the use of sustainable fishing practices.
Many buyers are willing to pay a premium for this type of sustainably caught fish, even if it means paying up to 7% more for the product. However, this premium price raises questions among buyers about whether they are truly getting a superior product and not just regular hake.
To address this dilemma, the Port of Celeiro partnered with technology companies Lãberit and IBM to use blockchain technology to provide transparency to buyers about the product’s capture, certification, storage, and sale. By using QR codes, buyers can access all information about the hake, giving them confidence that they are paying more for a sustainably caught, premium product.
Ensuring transparency and quality through Blockchain technology
Traceability and immutability are two of the main advantages that blockchain technology brings to information recording. Traceability refers to the ability to track the entire life cycle of a product or process, while immutability refers to the cryptographic linking of each block in the chain, making it difficult to alter or cancel any operation. Any changes made to the blockchain would require generating a new block, leaving a record of the change and who made it.
In addition, the blockchain is a decentralized database replicated across multiple computers, making it difficult to make significant changes without compromising a majority of the nodes. This ensures that the information on the blockchain is accurate and reliable, and that any changes made are easily traceable.
Blockchain: A solution for ending corruption
Organizations such as the World Economic Forum and the OECD are questioning whether blockchain technology can be used to combat corruption in public administration processes by increasing transparency and traceability.
Hermogenes Montalvo, director of Compliance, Blockchain, Cryptoactives and Business Tokenization at the Bemylaw Abogados law firm, confirms that blockchain is a revolutionary technology at the compliance level. He argues that while any technology can be used illegally, blockchain makes it more difficult to be corrupt because it allows for tracking and traceability, making it easier to detect fraudulent activities.
According to the World Bank, corruption costs the global economy an estimated trillion dollars in bribes, with business operations becoming 10% more expensive on average due to these practices, and 25% in developing countries. By using blockchain technology, these funds could be redirected towards projects, benefits, and services for taxpayers.
Blockchain-based smart contract bids for transparency
Blockchain technology can be used to combat corruption by increasing transparency and traceability in financial transactions. This can be achieved through the use of three main functionalities: tokenization, digital identity systems, and smart contracts.
Tokenization is the virtual representation of value for digital transmission. Digital identity systems can be used in voting or in procedures with government agencies. Smart contracts are self-executing contracts that include clauses that commit the parties, and can be programmed to speed up and provide total transparency to public tenders.
The Government of Aragon utilized blockchain technology for its public tenders in 2019, which allowed for a fully traceable and transparent process for procuring goods, such as masks during the pandemic.
Smart contracts were used to automate the process, ensuring that the best offer wins and that funds are released as the project is carried out, and also speeding up the process and reducing bureaucracy. This technology can also help enforce penalties in case a contract does not comply with the terms of the tender.
Combating corruption with blockchain in Colombia and Georgia
Colombia and Georgia have been at the forefront of using blockchain technology to combat corruption. In Colombia, the World Economic Forum developed a pilot program that utilized blockchain for the selection of contractors for school canteens, which had previously been a source of corruption.
Similarly, in Georgia, after the Revolution of the Roses in 2003, the country implemented blockchain technology to combat corruption in land registration bureaucracy.
These cases demonstrate that countries with high levels of corruption stand to benefit the most from blockchain, but paradoxically, it is also in these countries where it is most challenging to implement a secure and reliable blockchain system.
Blockchain limitations and lack of political will
The CEO of Blockchain Intelligence has issued a warning that simply labeling a network as “blockchain” does not guarantee immutability, reliability, and traceability. He explains that if a database only has a small number of replicas and the nodes have similar incentives to manipulate information, it can lead to the database being altered in the same direction.
It is crucial for the media and the public to be active participants in the opportunities presented by this technology in order to oversee the actions of governments, businesses, and individuals. However, will the average person have difficulty understanding and utilizing this new technology?
The Director of Custom Projects from Laberit explains that at the user level, access to the blockchain is through a transparency portal or a QR code that can be scanned to reveal information about the outcome of a public tender or the progress of a project. Without this, the audit of these processes will be left to the winner of the contract, leading to a potential repeat of the same issues.
One application currently being tested utilizes blockchain cryptography to protect and incentivize whistleblowers to report fraudulent or unethical practices. As the CEO of Blockchain Intelligence points out, it is important to be vigilant and ensure that the use of blockchain technology is done correctly to truly reap its benefits.
Despite the clear benefits for citizens, many governments are not yet implementing blockchain technology. In 2019, Spain adopted a cautious approach and passed a decree-law that rejected the use of distributed records until they are regulated by the state and in compliance with EU law.
The EU, on the other hand, is actively exploring the potential of blockchain. In 2017, the European Blockchain Partnership was established as an intergovernmental agreement to support the technology through regulation and development, such as the creation of the European Blockchain Service Infrastructure (EBSI). This platform aims to facilitate cross-border recognition of academic titles and improve efficiency in social security matters, where corruption has been a persistent issue.
The question remains, when will citizens be able to enjoy the same benefits and security as clients of the Port of Celeiro? Hermogenes Montalvo emphasizes that while the technology is available, it ultimately depends on the political will of governments to implement it.