JOHANNESBURG - The Bitcoin craze has many swept up in a get-rich fever, with “To the moon”, “Lambo time”, and “Hodl” filling online forums and WhatsApp chat pages.
Yes, money has been made and there is possibly more waiting for the brave (or stupid) at the trough. However, a question that seems to be lacking among the converted - and there is a lot more to crypto markets than just Bitcoin - is what makes Bitcoin special in the first place? Why are other cryptocurrencies and tokens such as Ripple, Ethereum, Neo, and Monero part of a new technological wave that can change the shape of human commerce forever?
The answer is blockchain. Blockchain is the technology that underpins the cryptocurrency world, and their spin-offs that are resulting from it at a speed comparable to a Peregrine falcon in mid-flight.
Blockchain, to quote CoinDesk.com, a leading cryptocurrency website, is not a new technology but “rather a combination of proven technologies applied in a new way”. It is constructed from private key cryptography, the Internet, and a protocol governing incentivisation.
The result is an open, decentralised database of every transaction involving value. The blockchain, as the name suggests, is a chain of information blocks. It is a database, or distributed ledger, that is completely open to everyone. Once data has been recorded inside the blockchain, it becomes extremely difficult to change.
Each block contains data, a hash, and the hash of the previous block. The data stored inside the block depends on the type of blockchain. The Bitcoin blockchain for example stores the details of a transaction, being the coin sender, coin receiver, and amount sent.
The hash can be compared to a person’s fingerprint or DNA. It identifies the contents of the block, and is unique to that specific block. When a block is created, it has its own unique hash, but as soon as something changes inside the block, the hash will change, indicating that is no longer the same block.
With the hash of a block also stored in the block that is created after it, a chain is created. Changing a single block makes all blocks that follow it invalid. However, computers are fast enough to be able to change a single block, and all those that follow it.
This is where proof-of-work comes in. It is a mechanism that slows down the creation of new blocks, and in Bitcoin’s case, it takes some time to calculate the required proof-of-work for each block. To tamper with one block, and all blocks that follow it, would mean doing all the calculations for the proof-of-work for every single block.
Distributed ledger
The fact that the blockchain is a distributed ledger, instead of being placed within a single, central entity, makes it a peer-to-peer network, and anyone is allowed to join. When someone joins the network, that person receives a full copy of the blockchain. When a new block is created, every single person on the network, representing a node, verifies that the blockchain has not been tampered with.
If everything is kosher with that block, it is added on to the blockchain. In other words, verification is done via the consensus of the entire peer-to-peer network. To change the blockchain would require changing block hashes, calculating the proof-of-work for each block, and then taking majority control of the peer-to-peer network. Achieving this three-peat is virtually impossible to do at present. So, what on earth does this have to do with Africa?
Last year, I met an American who had come to South Africa to assist certain financial institutions with blockchain. He had previously worked with the Ghanaian government in attempting to apply blockchain to the country’s land registry.
Applying blockchain to a country’s land registry would make it extremely secure and virtually tamper proof. The same technology can be applied to medical records, court transcripts, evidence from police interviews, and in a myriad other ways to shore-up a government's ability to store, and most importantly, protect information from tampering.
In South Africa, it is not uncommon to hear of a case being thrown out due to lack of evidence, or, more on the rumour-mongering side, a well-placed “beneficiary payment” being made to a person near the case to somehow make a docket disappear. When it comes to drunken driving charges, it is a well-discussed point that the longer proceedings are delayed, the greater the chance a sample will be contaminated, or evidence misplaced.
In theory, the blockchain could make all these loopholes and inefficiencies disappear. Evidence would always be available, and untampered with. Doctors will be able to proceed in the knowledge that the case file they have is the accurate one, and bankers moving money - or crypto if you are that way inclined - will have an exact record of who they are sending funds to, where, and how much. Would the Panama Papers scandal have happened if the blockchain was used, providing a verified digital paper trial? Perhaps not.
Africa, for all its potential, is hobbled by the legacy of colonialism and revisionist history. Beyond that, many of the continent’s politicians, with a couple of South Africa’s most well-known being a case in point, seem to think helping themselves to the public purse does not matter. They bend public process and systems to their will, and distort information and the law.
With blockchain, such manipulations would become extremely difficult to hide. It would allow the forces of good - and I use that term loosely since context is everything - to have unmolested records and data at their finger tips to prosecute and prosecute those guilty of betraying the public trust.
It would be naive to suggest that blockchain technology would fix all ills, given blockchain-based applications are still in their infancy. But, if applied correctly and intelligently, it could significantly raise the efficiency of African governments and improve the quality of their dealings with the private sector.
This is not to say that government dysfunction is an exclusively African problem. Far from it. The recent government shut down in the US, and the numerous questionable dealings linked to that country’s president and his high-ranked supporters, is proof enough of that.
However, given Africa’s unique legacy-related problems, harnessing the blockchain could, no doubt, contribute to the continent achieving its full potential.
Alan Watson is a contributing tech and innovation writer for AfricanTechRoundup.com.
The views expressed in this article are not necissarily those of the Independent Group.
- BUSINESS REPORT