Blockchain use Case for State and People

Blockchain use Case for State and People Hande ORTAY1 06/29/2024 Preface The project is about blockchain and its usability for the state and its citizens. Sources from the book Digital Gold by the author: Nathaniel Popper, Blockchain Revolution by Don Tapscott, Mastering Bitcoin by Andreas M. Antonopoulos were an enrichment to understand blockchain in general. 2 I would also like to thank Abdullah Çiftçi who emphasizes the topic of blockchain and that this technology is on the advance. I thank an old friend from Istanbul Yeni Yüzyil University, who introduced me to the blockchain world for the first time in 2017. I also thank my him for making me an enthusiast for the blockchain industry and for being one of the first to see the enrichment for the world in this technology. So, the purpose of the project is to start from the first principles and work our way up to what is Bitcoin and then explore a little bit about what the blockchain industry3 is about and why it’s such an exciting industry and why I’ve spent two years to kind of understand it and my hope is that other people will also understand it and see the potential in the Blockchain Industry. Abstract Most people wonder what Bitcoin is and what do I need it for. At the end of 2017, at the beginning of 2018, I started in the industry as an investor in various projects aimed at creating a new world of technology without the need for a trusted third party. We as a blockchain community try to bring as many people into our ecosystem as possible and Author: Hande Ortay (Ph.D. Student), İstanbul Yeni Yüzyıl University, Faculty of Economics and Administrative Sciences, Department of Political Science and International Relations, Istanbul, Türkiye. Email: [email protected] ORCID: 0000-0001-9553-5910. 2 Tamara Mrak, 5 Must-Read Books to Understand Blockchain and Cryptocurrencies. (November 23, 2022), https://bitcoin.com.au/5-must-read-books-to-understand-blockchain-and-cryptocurrencies/. 3 PWC, Bitcoin, cryptocurrency, blockchain… So what does it all mean?, 2017, https://www.pwc.com/us/en/industries/financial-services/fintech/bitcoin-blockchain-cryptocurrency.html. 1 1 also dispel many of the common myths, fears, uncertainties, disinformation, misnomers and things that have emerged. Bitcoin has millions of people in our ecosystem and the mainstream knowledge about it. Very few people actually understand what Bitcoin is, where it came from, why it was created, and where this industry is going. I am going to explain the relationship between Bitcoin and Blockchain and other Blockchain Projects providing huge technological advantages for real world use with sources from scientific and technological point of view. Keywords: Bitcoin, Blockchain, Blockchain Community, Technology, Money 2 Introduction The very beginning in 2009 Bitcoin was created. And Bitcoin was created by an unknown person or persons referred to as Satoshi Nakamoto.4 Basically, this was a pseudonym and the creator remained anonymous. So, the true form Bitcoin has always had a bit of mystery from the very beginning, but really what the point of Bitcoin is it was an experiment with frustration and passion. The frustration was that Bitcoin was really about an exploration of what is money and can we create better money. 5 It is important to understand the context of where Bitcoin came from. If we look at 2009 this was right on the back of the 2008 financial crisis, which was the worst financial crisis for the world since the Great Depression. 6 As a consequence, people were starting to go back to first principles and ask fundamental questions as: Are our Central Banks creating good Money? What makes good money? Can we create better money? Does money need to be controlled by centralized power? Do we need banks or can we be our own banks? What’s the influence of Internet on the money? Money 1. What is Money? Money has three Properties: 1. Unit of Account 2. Means of exchange 3. Store of Value The point of Unit of Account is the concept of standardization that’s gives you a sense of understanding how expensive things are or how cheap relative to some standard that you understand and familiar with. 7 So, it gives a mean that 1 million Dollar is a lot of money or a little bit of money relative to the things that you can buy and trade with it. Means of exchange is just that you have two or more parties they want to conduct 4 Adam Hayes, Who Is Satoshi Nakamoto? (March 22, 2024), Investopedia, https://www.investopedia.com/terms/s/satoshi-nakamoto.asp. 5 Roshan Dharia, Bitcoin & Global Money Flows: Hidden Routes of the Globe’s Growing Economies, ET CONTRIBUTORS, The Economic Times, (March 03, 2024), https://economictimes.indiatimes.com/markets/cryptocurrency/bitcoin-global-money-flows-hiddenroutes-of-the-globes-growing-economies/articleshow/108175551.cms?from=mdr. 6 Primavera De Filippi, Internet Policy Review, The Invisible Politics of Bitcoin: Governance Crisis of a Decentralised Infrastructure, (30 Sep 2016, DOI: 10.14763/2016.3.427), Volume 5, Issue 3, https://policyreview.info/articles/analysis/invisible-politics-bitcoin-governance-crisis-decentralisedinfrastructure. 7 Consumer Price Index Manual, Concepts and Methods, (2020), https://rm.coe.int/1680459f97. 3 commercial activity with each other. They have for ex. a product or a service that you want and you’re trying to acquire it from them. Money is that middleman that allows you to efficiently exchange that value with your counterparty. Store of Value is the concept when you get this money it doesn’t magically deteriorate, it does not disappear so as soon as you put in your pocket. It is the durability of value over a period of time. So, these are the three properties that anything that aspires to be money must have. Every sovereign currency whether it be the US Dollar or the YEN or some other stable currency has these properties. Money also has to have Quality side of things.8 Like is it easy to move, transport so if someone want to do commerce to trade or exchange with each other by a Visa or MasterCard for example they have to do it through some form of middleman and there are multiple networks and protocols to transfer the value before final settlement occurs, it goes through a very complex, heavily regulated, very expensive and not super inclusive process, because there are about three billion people throughout the world lacked sufficient financial access to have real economic identity, they are called as unbanked. So Blockchain tries to fix all the issues related to general problem of money. 1.1 Frustration Paves the Way Blockchain is a unique technology for example proof-of-work which is a decentralized way of payment by getting rid of any central authority, it’s online by default and somehow, it’s built in a way that people have enough faith in it that it’s going to be around, going to work, can’t be hacked and it doesn’t require a central authority to give it credibility.9 The frustration component was that the money systems that we have today are not working so well for us. Historically all fiat currencies tend to eventually deteriorate and collapse, because of the political and moral temptations to debase them for short-term gains at the expense of long-term gains for example the countries of Venezuela, Argentina, Zimbabwe the old Republic of Germany. There are many cases of Hyperinflation. So, the frustration saying can we remove people from this process so that 8 NEAR-ABDI, Duck-Koo Chung & Masahiro Kawai (Ed.), The Global Financial Crisis, Future of the Dollar, and the Choice for Asia, 2011, https://www.adb.org/sites/default/files/publication/159337/adbiglobal-financial-crisis-dollar-asia.pdf. 9 N26, What is a Blockchain?, (21 May 2024), https://n26.com/en-eu/blog/what-is-a-blockchain. 4 we can have a bit more objective predictability. 10 The objective predictability is basically saying that we know the supply ahead of time and we know by which rules the supply is going to change, so we understand this monetary policy not going to be dramatic changes to the qualitative aspects of the system and understanding the terms and conditions are up front. No hidden end user license agreement, no bureaucrat that can say we’re going to massively increase the supply or we’re going to do it to help me win an election. That’s the frustration component. In that essence Bitcoin began. 1.2 Philosophical Value of Bitcoin Bitcoin began in 2009. There was this kind of idea of money and the passion behind it with a philosophy behind it of decentralize everything we can, that people can do individually do business with each other, without any middlemen required and they can do that natively online. No central authority is required for those transactions to work. Self sustaining and also valuable.11 So, from 2009-2020 Bitcoin accomplished its aim goal. Bitcoin grown from a very small network that was unstable and unsustainable it has grown to a point where it has become a global scale network worth over a hundred billion dollars and you can literally buy pretty much anything you want and get any service you want using a Bitcoin. It’s a truly extraordinary experiment the remarkable growth of the underlying technology. There are very few examples in Human History where something has gone from a small group of people to over millions of users in every country in the World and had such a pervasive impact on law 12 and regulation and innovation of an industry as Bitcoin. It outpaced the growth of the Internet by a large factor. Blockchain 10 Troels Magelund Krarup, Economic discourse and European market integration: the problem of financial market infrastructures, Sociology, Institut d’etudes politiques de paris – Sciences Po. English, HAL Open Science, 2016, NNT: 2016IEPP0028, https://theses.hal.science/tel03466744v1/file/2016IEPP0028_Krarup_Troels_these.pdf. 11 European Parliament, How Blockchain Technology Could Change our Lives, EPRS – European Parliamentary Research Service, Author: Philip Boucher, STOA, PE 581.948, https://www.europarl.europa.eu/RegData/etudes/IDAN/2017/581948/EPRS_IDA(2017)581948_EN.pdf. 12 Barry M. Leiner, Vinton G. Cerf, David D. Clark…, Internet Society, A Brief History of the Internet, (1997), https://www.internetsociety.org/internet/history-internet/brief-history-internet/. 5 2. What is Blockchain? What makes Bitcoin work is the Idea of a Blockchain. The problem is that if you’re going to create a digital token you have to have a ledger somewhere and that ledger is basically just kind of a database. It’s a very special kind of database, it stores history. Its a database of facts. It stores Transactions. By middleman transaction by a financial institution, they act as a proxy to prove that you own the money you claim to send. The moment you get rid of the middleman by using Bitcoin, the blockchain proves that you own the value you claim to send by a ledger which stores transactions. 13 And by sending money the network receiving it processing verify that you own the money you claim to send and the other side getting it. This type of method is called cryptography and uses a mechanism called proof of work. So, Math and Computer Science is used to create a Blockchain and once a record of a transaction has been written its fact that it happened. Its a record of history, immutable. This was a revolutionary concept, because every attempt to do this previously required some trusted third party to maintain the ledger. Bitcoin was the first example of something that was released that did not require a trusted third party. The network by its very mere operation, would be able to simulate that. The minute you create something very innovative and revolutionary it inspires people. There are not just financial transactions there are all kinds of things in the world that we are trusting third parties which we could solve with Blockchain so we wouldn’t need them anymore. That’s open the door for the use case of the Blockchain Industry. 14 2.1 Use Case for Blockchain As an example, we would not want third parties at voting counting our votes. By blockchain technology everyone is able to verify that the vote counted and accurately counted and recorded as a fact. There is no need for a trusted third party to go and count those votes if you have another opportunity. It’s a vector of attack and if we’re making life-and-death decision and deciding who gets to be President and how the economy is going to run, we have to 13 BVNK, Blockchain Payments: A Step by Step Guide, https://bvnk.com/blog/blockchain-payments. Blockchain: The India Strategy, Towards Enabling Ease of Business, Ease of Living, and Easy of Governance, NITI Aayog, Part 1 January 2020, https://www.niti.gov.in/sites/default/files/202001/Blockchain_The_India_Strategy_Part_I.pdf. 14 6 have a lot of confident and faith in voting. Property is another example we could do differently. 15 Property is managed by some form of registry so if you have a title or you have land somebody has to keep that Database, but what happens if somebody can manipulate or edit that database or the government changes or back then when ISIS took over Syria and change records.16 After things get back to normal to decide who actually owned what and where is a big problem. Because its too expensive to maintain these systems, millions of people throughout the world live on unregistered land. So, the Blockchain Industry offers different financial products. Bitcoin was focused on money. For example, token representing Gold or commodity like oil. So, there are different ways we can represent these, using the same system that Bitcoin uses to represent a Bitcoin and not require trusted third parties to manage. Blockchain can be used for Supply Chains for personal protective equipment, vaccines or medicine. Identity itself is another example. Your Identity is given to you by trusted third parties by issuing to passport, driver license, and so on. You are not under control of the own identity. So, the whole point of the blockchain industry is to take a look at that same core principle of decentralization, getting rid of middlemen. 17 The key word is disintermediation. Basically, the idea is that you can check that the integrity of the records in these systems are as accurate as people assert them to be and you know that no ones tampered with the records, they’re time-stamped, they’re immutable, they’re auditable. These are important properties and there’s dozens of others.18 15 UNESCO Digital Library, Journalism, ‘Fake News’ & Disinformation, Handbook for Journalism Education and Training, UNESCO Series on Journalism Education, https://unesdoc.unesco.org/ark:/48223/pf0000265552. 16 U. S. Senate Select Commiittee on Intelligence (gov), Changes to the RNC’s Platform, (2020), https://www.intelligence.senate.gov/sites/default/files/documents/report_volume5.pdf. 17 Adam Hayes, Investopedia, Blockchain Facts: What Is It, How It Works, and How It Can Be Used, (June 24, 2024), https://www.investopedia.com/terms/b/blockchain.asp. 18 Niccolo Mendolia, SCUOLA DI INGEGNERIA INDUSTRIALE E DELL’INFORMAZIONE, POLITECNICO Milano 1863, (2021-22), https://www.politesi.polimi.it/retrieve/f4e0eec6-fa9e-4ac9b933-6e3d5e682dc9/Governance%20of%20blockchainbased%20decentralized%20applications%20an%20exploratory%20study_%20thesis%20of%20Mendolia %20Niccolò.pdf. 7 2.2 The Evolution of Blockchain The first generation of Blockchain is Bitcoin. It solved to create a decentralized money, living on a blockchain maintained by people all around the world. This idea had very old roots starting from the 1980’s and beyond.19 After just a few years Bitcoin not only accrued thousands of users but also started being worth real money. Tokens went from less than a penny to actually 1$ to eventually 100$ and right now around 30.000$. But Bitcoin is not able to do anything else than to transfer money from A to B. 2.3 Second Generation of Ethereum-Blockchain This created the second generation Ethereum. While Bitcoin was conceived as a pure payment system, Ethereum enables revolutionary smart contracts. These are intelligent contracts that are met when predefined criteria are met. Smart contracts work according to an if-then logic. If amount X has been received in ether, then do this and that. Imagine a largely digitized world in which, for example, the land register for real estate is completely mapped into the blockchain. The owner of a house is therefore the person whose wallet the house is linked to. When buying a house, a smart contract forwards the ether purchase price directly to the seller's wallet. At the same time, the property rights of both parties to the house are exchanged. The complex variant of smart contracts is also decentralized applications (DApps).20 These are programs that are executed in parallel on all nodes of the Ethereum blockchain. That is why Ethereum is also called a world computer. Although the Ethereum blockchain is noticeably slower than a conventional central server, it also offers many advantages such as security against manipulation, fault tolerance and high availability. With 3.000 transactions per second, it can process much more TPS as Bitcoin, but in comparison to PayPal and Visa it is certainly not the right choice for a permanent establishment as an alternative means of payment. As mentioned before, however, as a platform for smart contracts and decentralized applications. At Ethereum, new blocks are also generated by the electric proof-of-work consensus, which inserts a new block about 19 Ron Karjian, A timeline and history of blockchain technology, (27 Sep 2023), https://www.techtarget.com/whatis/feature/A-timeline-and-history-of-blockchain-technology. 20 Nick Szabo, Scaling Parrots, What is a Smart Contract – 3 Real Example of Smart Contract, https://www.scalingparrots.com/en/smart-contract-what-is-it/. 8 every 10 to 12 seconds. Despite its advanced age of three years, Ethereum is still in a development phase that will involve the switch to the modern proof-of-stake consensus procedure in the serenity phase.21 Proof-of-stake is much more ecological, since the right to generate new blocks is granted taking into account the ownership of ether. Ethereum brought a programming language to a blockchain, so this programming language paradigm allowed smart contracts to be written to have customizable transactions with terms and conditions to particular needs. So Ethereum became the second largest crypto currencies and has a huge developer community, but Ethereum can’t scale to millions or billions of users. 2.4 Third Generation of Proof of Stake-Blockchain This led to the creation of the third generation of blockchain. Third generation is all about three topics. One is scalability, two interoperability and notion of sustainability. The third-generation crypto currencies try to solve each of these categories. In terms of scalability is transaction per second. For example: Bitcoin has seven transaction per second (TPS), Ethereum has 3.000 per second, while VISA processes 15.000 TPS. As you get more transactions you require more network resources. Going to millions and billions of users that system could require hundreds of megabytes to gigabytes per second of bandwidth to be able to support all the data flowing through. This is common in the enterprise world, but not quite in the peer-to-peer world. Also, there is a notion of data scale. Blockchains store transaction forever regardless if it’s relevant or not it ends up in the log. As you have more and more transactions per second you need more and more data. As a consequence, blockchain will from megabytes to gigabytes, terabytes, petabytes and potentially even exabytes. When we talk about a replicated system whose security model relies upon each node having a copy of the blockchain this is not tractable for consumer hardware devices. The third generation uses Proof-of-Stake. In POS there’s a slot leader and they do the exact same thing that a miner would do in Bitcoin. It’s basically the same as a person who discovers a block wins a block, but it doesn’t require the extensive computational resources that Bitcoin requires to construct a block and as a 21 Joao Paulo Morais. Medium. Learn Ethereum in 2024. 6. Ether and the Cryptocurrencies. https://jpmorais.medium.com/learn-ethereum-in-2024-6-ether-and-the-cryptocurrencies-fb00500a7f66. 9 consequence this system is considerably cheaper to run even though we still have similar security guarantees that Bitcoin currently enjoys. In POS differs in way of POW you don’t need subsidized electricity, regardless of the price of electricity you can still stake. No need for patented hardware to participate, just need to be able to purchase the token. Also, the POS System is 1.6 million times more energy efficient than Bitcoin, which in the moment using the electricity same as Belgium. 22 Blockchain Application Examples for Banks and Financial Institutions 3. International Payments Some organizations are using blockchain technology to cut the cost of international remittances, which runs to about $ 440 billion annually - almost three times the amount of international aid given to developing countries each year. It is currently estimated that at least $ 32 billion in remittances will not reach recipients due to high transaction fees. The money transfer service Abra claims to reduce transaction fees by 90 percent. Already active in 155 countries, Abra converts money into bitcoins, transfers it via its blockchain platform and settles it at the other end in a local currency. In addition, a transfer, which can normally take up to a week, can take place in one day. Blockchainbased payment services or exchanges use Bitcoin as a starting point. The provider converts the payer’s local currency into bitcoin and then converts the bitcoin into the recipient’s local currency. 23 In Turkey, for example, PARIBU, BTC-TURK etc. use this method to convert the assets into Turkish Lira and pay them out if desired, but international payments can also be made in this way. The company Ripple, for example, is a current challenger from the SWIFT system. The SWIFT System process is expensive, cumbersome, and slow. This is because the SWIFT system requires a number of intermediaries between the local and the 22 Environment Agency Austria & Borderstep Institute, Energy-efficient Cloud Computing Technologies and Policies for an Eco-Friendly Clound Market, Final Study Report, Umweltbundesamt, https://www.francedatacenter.com/wp-content/uploads/2020/11/FINALSTUDYEnglishKK-03-20-210EN-N13072020pdf.pdf. 23 Mike Faden, American Express, Coming in 2017: “Live” Blockchain Deployments Promise to Accelerate Payment Processing Services and Trade Finance, https://www.americanexpress.com/us/foreign-exchange/articles/blockchain-to-accelerate-paymentprocessing-services/. 10 receiving bank. Each agent charges a transfer fee. The transfer often takes between 2-3 days. The system has been modernized to SWIFT Global Payments Innovation (GPI) so that the transactions go faster, but the transfer fees are still the same. However, Ripple challenges the SWIFT payment system. By eliminating middlemen, international money transfers become significantly cheaper and more efficient. Ripple sees itself as a payment network and supports almost all currencies. The company works specifically with banks and ultimately aims to establish the Ripple protocol with them. At its core, Ripple is based on a shared database or decentralized accounting. The records and value transfers contained therein are publicly available. 24 Using the blockchain simplifies transactions in real time without the need for middlemen such as banks. International payments are thereby: 1. Inexpensive (40-60% cheaper) 2. Safe (can’t be hacked) 3. Fast (365 days 24/7, can be sent within seconds) 3.1 Peer-to-Peer (P2P) Transactions A peer-to-peer network referred as a P2P Network is one of the key parts of blockchain technology and is a huge improvement in how we store our data. The mean of Network is a group of interconnected devices that exchange information. These devices can be connected locally by a cable or wirelessly through the internet. The most commonly used type of network is a centralized client-server model, this is a single server often operated by single entities such as Amazon (AWS), Microsoft, Google or Dropbox.25 The Server will handle all the tasks and requests on the network and store all the information exchanged, because there is a central authority storing and managing all the information this model has some serious problems. For example, all the private data can be stolen by hacking one server and the user has almost no control in the way that their 24 Erika Rasure, Investopedia, What Investors Need to Know About Altcoins, The Investopedia Team, (June 01, 2024), https://www.investopedia.com/terms/r/ripple-cryptocurrency.asp. 25 Course Sidekick, Internet Computing – Summary, https://www.coursesidekick.com/computerscience/3439772. 11 information is controlled or even exploited. Whatever Blockchain Networks are different from traditional client-server models, because there is no central point of storage and therefore no controlling party, instead all the information on the network is constantly recorded and transferred between the participants on the network who all store multiple identical copies of the network’s information. These participants are known as nodes or peers. So, a P2P network is a distributed that stores and transfers data without a central server. Blockchain technology is built on top of P2P having no central point of storage makes the information on a network far less vulnerable to being hacked, exploited or lost. These is a huge improvement on traditional centralized models and are the future of data storage and ownership. 26 3.2 Capital Markets The capital market is one of the largest marketplaces for exchanging money for securities, but the procedure is also carried out here via a third party such as a bank or a stock exchange. Here, in turn, there are a lot of costs and it is a lengthy and regulated process until the procedures are through. When a company goes public, it is nerve-wracking to follow the provisions of the IPO (Initial Public Offering). Much easier, on the other hand, with an ICO (Initial Coin Offering) in which you already provide your coins as an investment to the company via a smart contract and in return the company sends the coins to the wallet via the blockchain. 3.3 Protection Against Money Laundering With "Know Your Customer" (KYC), for example, customers on the stock exchanges share their personal information. Companies such as Starbucks, McDonalds, Burger King, Daimler, Volkswagen, Fiat etc. are provided with special addresses for their various locations identify and track incoming payments. Tola Or-Aruwaji, Medium, Beginner’s Guide to Blockchain P2P Network, (Aug 23, 2021), https://thecraftman.medium.com/beginners-guide-to-blockchain-p2p-network-33e90252c25e. 26 12 Small or medium-sized companies that are paid for their service also receive a special address with which they can receive their remuneration. 27 The wallet address is associated with your own data. All transfers can be tracked through the blockchain. If there is suspicion of money laundering at a private person or a company, e.g., at Starbucks, who have shifted profits in Europe to tax havens such as Holland or Luxembourg and to keep profits in other countries lower to save taxes. Blockchain technology makes it possible to determine the profit of individual locations and where they have flowed. This enables billions of tax dollars that go through the hands of the states to draw a line. 3.4 Insurances Smart contracts are automatically set in contract terms based on the data applied in the network. A secure general ledger with reviewable transactions accessible to all attendees with a customizable permissions-based view available to third parties. 28 All parties can quickly and simultaneously ensure the current status across borders in order to guarantee contract security. The third party in this case can be the police who determine an accident and document who is to blame for the accident, furthermore an expert would determine the damage to the vehicle and report it. This would measure the amount due to the injured party via the blockchain. The payment release to the injured person is released. Blockchain Applications in Different Business Areas 4. Land Rights and Real Estate Another groundbreaking blockchain application is securing land rights. Proof of land ownership is a challenge in many parts of the Third World, where severe inequalities in the distribution of money and power prevail, making it difficult, especially for poorer landowners, to enforce their property rights and stave off land grabbing by governments and companies. The Bitland organization is testing a project in Ghana to offer services 27 GOV.UK, Companies House Accounts Guidance, (April 5, 2023), https://www.gov.uk/government/publications/life-of-a-company-annual-requirements/life-of-a-companypart-1-accounts. 28 Chiradeep BasuMallick, What Are Smart Contracts? Types, Benefits, and Tools, Spiceworks, (Nov 20, 2023), https://www.spiceworks.com/tech/innovation/articles/what-are-smart-contracts/. 13 that enable individuals and groups to record land and property deeds in a blockchain and thus create a permanent and auditable record. Bitland also acts as a liaison with the government to help resolve disputes. Several governments, including those in Dubai, Estonia, Georgia and Sweden, are working on blockchain-based approaches to securing property rights. The tokenization of real systems is considered to be one of the blockchain mechanisms in which a greater potential for disruption could actually lie dormant. It opens the door to new sources of capital for startups and, in principle, creates the opportunity for everyone to make direct investments in values, assets and companies. Blockchain real estate enables a building or apartment to be tokenized. In return, if the property is resold or rented, the profit is shared between the holders of the tokens. Each property has its own token that reflects the share in a property.29 4.1 Artists, Media & Advertising Blockchain technology enables once a work of art has been registered, it can be recognized again and again using this technology - a "digital birth certificate" is created. All transfers of owner or owner rights can be clearly traced: they are logged on the blockchain. The big advantage is that entries in the blockchain can no longer be changed and the owner can forever prove that he is the legitimate owner of a work of art. In the media area, a platform can be established in which journalists are rewarded by the community in return for high-quality reports. Bad contributions or false news can be punished by the token holder, which means that a journalist can be banned from the platform by the majority of token holders.30 It is in the interest of the journalist to write articles that are only informative and not trend-setting as is the case today. In the area of advertisement, consumers are now able to generate income. A blockchain web browser makes it possible to block 29 Caroline Moriarty, Is Real Reality? Investigating the Use of Blockchain Technology and Tokenization in real Estate Transactions, Volume 24, Issue 2, 5-6-2023, Article 5, Libraries Publishing, https://scholarship.law.umn.edu/cgi/viewcontent.cgi?article=1544&context=mjlst. 30 Jeffrey Gottfried, Amy Mitchell, Mark Jurkowitz and Jacob Liedke, Pew Research Center, Journalists highly concerned about misinformation, future of press freedoms, (June 14, 2022), https://www.pewresearch.org/journalism/2022/06/14/journalists-highly-concerned-about-misinformationfuture-of-press-freedoms/. 14 advertisements and ads. Only verified members are able to show advertisements. In this way, users are paid for viewing advertisements with tokens that are sent to the respective individual address of the browser on the laptop or smartphone. Via the browser you can either donate the tokens to a verified account creator or you can have them paid out as money. 4.2 Supply Chain Management It is difficult to guarantee the complete social or ecological sustainability of a product. Because there is often a lack of transparency about the production conditions in large parts of the manufacturing network. Blockchain technology offers a solution here. In this way, all critical processes along the supply chain can be stored in the blockchain so that they are visible and unchangeable for everyone. You can see this, for example, in the diamond industry, which is one of the pioneers, because the stones are very valuable, the sellers try to digitize the manufacturing process and prove that the stones were promoted in ethical conditions or not. Startup Ever ledger has uploaded unique data on more than 1.6 million diamonds in a blockchain to determine the origin of diamond products and control the flow of “blood diamonds”. However, the use of blockchain for the purpose of transparency is still not very widespread. In addition to the diamond industry, the food industry is also making its first pilot tests.31 The companies want to prove that their articles were created sustainably in order to get the end customer more willing to pay. The origin can be traced back by either party: the farmer, producers, freight forwarders, retailers and customers can trace from the cowshed to the table via the blockchain. This product verification will be an important aspect of which manufacturer you buy which article in the future. The introduction of the blockchain in a supplier network can only take place if many actors expect a profit from it. At the moment, however, it is mainly those actors who are closest to the end customer who are motivated, e.g., Diamond buyers who hope for added value and a differentiating 31 Cardone, Carl, & Zavjalova, Anna, Examing the adoption of blockchain technology in the diamond industry, Master Thesis, Linnaeus University Sweden, VT23, Innovation, https://www.divaportal.org/smash/get/diva2:1763108/FULLTEXT01.pdf. 15 feature for their products through the transparency of the production conditions compared to others. 4.3 Detecting Counterfeits Since the Internet, it has become easy for counterfeiters and fraudsters to imitate and manufacture articles. Items from luxury goods, medicines, clothes, shoes to art items are all counterfeit and sold for a lower price. Counterfeit items such as medicines are very dangerous for people, because they are not manufactured under controlled standards and can usually lead to the death of people who unconsciously ingest the medicine with the thought that these are originals. By tracing the authentic products, companies and customers can verify that the articles have been manufactured according to the norm and that the purchased articles meet the high original quality standard. 32 4.4 Mobility With regard to mobility, cars will in future be able to pay for services such as parking or charging themselves. Blockchain technology enables machine-to-machine payment systems to communicate with each other for parking lots, petrol stations or traffic fines, which automatically calculates and pays the costs. Due to the artificial intelligence in the vehicles, a decentralized platform will also be required in the future on which different brands of vehicles can communicate with each other in order to communicate impending dangers or traffic jams on the roads to find a solution to avoid traffic jams automatically or to inform the driver that he should set off at a later point in time until the traffic jam has cleared or the danger has been eliminated. 32 McKinsey & Company, Perspectives on retail and consumer goods, Number 8, August 2020, https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/perspectives%20on%20re tail%20and%20consumer%20goods%20number%208/perspectives-on-retail-and-consumer-goods_issue8.pdf. 16 It would be of great interest to vehicle companies and politicians that no company owns the platform that controls the exchange of information between vehicles, but rather a decentralized platform with unchangeable rules. 33 4.5 Health Services One of the biggest problems in healthcare today is that organizations keep many different and separate medical records. However, almost all medical records are combined via a blockchain, creating a smart health ecosystem. Limited access to a patient’s electronic health record is created via a smart contract.34 Doctors can add notes, scans and laboratory reports to the contract, as well as medication issues in the pharmacies. Patients can give the insurance company access so that they can verify and pay for the treatment. Patients can also allow doctors access for consultations and second medical opinions or insurances to check their fitness level in order to pay lower contributions. The personal information can also be shared with research institutions for medical studies in return for payment. Case study: Abroad, if you have an accident or health problems, doctors can access your digital medical record in order to treat you properly. Usually this takes days or weeks by requesting medical records from the family doctor in your home country. Thanks to the blockchain, this is no longer necessary and you have your own health data that no one has access to. 4.6 Energy One possible application is the self-organization of the electricity market using smart meters in combination with a blockchain. 35 Equipped with smart meters, the electricity production of decentralized systems and the consumption of pantographs are continuously monitored. With the blockchain, a consumer who needs more electricity 33 EU Blockchain Observatory and Forum, Digital Product Passports: A Blockchain-based Perspective, https://blockchain-observatory.ec.europa.eu/document/download/b6e3c85c-43c1-405b-aba8e49a71249ef7_en?filename=EUBOF_DPP_report.pdf. 34 Blockchain Technology: Security Issues, Healthcare Applications, Challenges and Future Trends, (Jan, 2023), Electronics 12(3): 546, DOI:10.3390/electronics12030546, License: CC BY 4.0, https://www.researchgate.net/publication/367344776_Blockchain_Technology_Security_Issues_Healthca re_Applications_Challenges_and_Future_Trends. 35 Frontiers, Implementation of a smart energy meter using blockchain and Internet of Things: A step toward energy conservation, Volume 10 – 2022, https://doi.org/10.3389/fenrg.2022.1029113, https://www.frontiersin.org/journals/energy-research/articles/10.3389/fenrg.2022.1029113/full. 17 could automatically have this electricity purchased from participating producers on the blockchain - it would also be possible to preset that this producer should be (primarily) in close proximity to the consumer. In this way, which in the long term could lead to a reduction in electricity costs and a self-organizing electricity landscape from decentralized systems. Another use case could be the coordination between the transmission network and distribution network level. At the moment it is difficult to understand at the distribution network level how the demand for balancing energy from aggregators is provided by systems that are connected to the distribution network, since communication only takes place directly between the aggregator and the transmission network operator.36 Blockchain Application Examples from the Public Sector 5. Data and Identity Management of Citizens Just as the dignity of a person is inalienable, so should his identity and information also be inalienable. However, most people today are not careful with who they share their personal information with. Credit card information, passwords, search history, inquiries or even personal messages Photos are freely accessible to companies and authorities via databases and servers. The person himself cannot access his own information, but companies and companies can. Furthermore, this type of centralized identity system is also very expensive for the state and there is a great risk of being hacked. The state and companies incur huge amounts of money to maintain the systems and perform security updates. Using a blockchain-based identity system, it would be easy for the state to transmit and digitize the information of its citizens. 37 All information would be encrypted via the blockchain and can only be released if the person so wishes. Case example: Fraud messages often occur on social media because people with falsified 36 CoordiNet, Aggregation of large-scale and small-scale assets connectes to the electricity network, V1.0, Ref, Ref. Ares (2021)1155613-10/02/2021, https://ec.europa.eu/research/participants/documents/downloadPublic?documentIds=080166e5d940cccd& appId=PPGMS. 37 Elsevier, ScienceDirect, Blockchain for healthcare systems: Architecture, security challenges, trend and future directions, Journal of Network and Computer Applications, Volume 215, June 2023, 103633, https://www.sciencedirect.com/science/article/pii/S1084804523000528. 18 information open multiple accounts to cause mischief or they simply do not want to share their real name on social platforms. Via a blockchain-based system, every citizen would have the opportunity to open just one account and to prove that you are a real person via the identity system, but without being forced to give your own name. The citizen would be completely under the control of his own identity and can share his information with third parties if required. Citizen’s data can be encrypted from the date of birth and death to the current relationship status, name and address, health insurance, residence permit, etc. via the blockchain. This in turn can be carried by the citizen via an app. In a case where the citizen has to identify himself, he can in turn prove via the app that he is the person he claims to be. The person opposite can access and verify this via the blockchain. Furthermore, the citizen can make any changes he wants to make via the app without having to go to the state-office himself, since the administrations usually work on a paper-based system, this burden can be solved with the blockchain, since it is possible to carry out any procedure via the app. This would make passports, ID cards and driver’s licenses easier to issue, would be forgery and it would even be impossible to lose them.38 5.1 Elections We are a society that prefers to live online, but elections still are held on papers and in elections, we usually have central authority that records, counts and checks all of the votes; and with blockchain, the process is decentralized. 39 So, everyone can hold a copy of the full voting record on their own devices. The data is encrypted to protect the identity of individual voters. The voter needs to submit his identity information which gets verified by the organization conducting the elections and then the organization will refer to the database of the registered voters and verify if the person is registered on their database and is eligible to vote. Then all the information of the voter will be securely added on to the voter blockchain. Latif Anıl Büyükbaskın & Isa Sertkaya, Requirement Analysis of Some Blockchain-based E-voting Schemes, L. Büyükbaskın et al., Vol.9, No.4, pp.188-212, https://dergipark.org.tr/en/download/articlefile/2160155. 39 David Jefferson, US. Vote Foundation, The Myth of “Secure” Blockchain Voting, https://www.usvotefoundation.org/blockchain-voting-is-not-a-security-strategy. 38 19 Blockchain can help to implement an electronic voting system that is transparent, immutable and cannot be hacked into in order to change the results. Illegitimate votes cannot be added and the historical record cannot be changed, because everyone holds a copy and can check that all the votes comply with the rules and are counted properly. Blockchain voting has already been used for decision-making in smaller organizations, including political parties and companies. Blockchain could help voters to engage more deeply and make decision-making more fluid. People could vote regularly on all kinds of issues, they could update their vote if they change their mind, or set it to automatically “follow” the votes of other individuals that they trust.40 We could even encode elections into smart contracts so that once the votes are counted, the results automatically take effect, like a self-implementing manifesto. So, for example, a vote amongst shareholders about investment decisions could automatically sign contracts on behalf of the company. This has led some people to ask whether we should use blockchain voting for major political elections. E-voting could improve voter turnout by appealing to young people and allowing citizens to vote on their own devices, whenever they want. Public confidence is crucial. Any system has to be understandable and trustworthy enough, so that even if a voter is disappointed with the result, they can accept that it was fair and valid. The voting systems we have today they are imperfect they didn’t get that way by accident. They got that way through years of trial, error, lessons and accepting some harsh realities about how technology works in general. It’s essential that we move towards e-voting, because we need to be able to have much more ballot diversity, voting systems and election systems. We need to pool our population frequently especially for referenda or constitutional changes. It’s not acceptable to have leaders get elected with less than 50 percent of the population going to vote.41 40 European Parliament, EPTA European Parliamentary Technology Assessment, Towars a digital democracy Opportunities and challenges, EPTA Report 2018, https://epub.oeaw.ac.at/0xc1aa5576%200x003a275b.pdf. 41 Civil Rights Division U.S. Department of Justice, Title 52-Voting and Elections – Subtitle I and II, https://www.justice.gov/crt/title-52-voting-and-elections-subtitle-i-and-ii. 20 5.2 Taxes Blockchain technology could help standardize and automate indirect taxation because it clearly demonstrates the subject, place and time of a transaction. Financial service providers in particular are coming under pressure from the blockchain. You have to fear that classic sales models will lose their importance and new players will enter the market. Even more: Blockchain technology enables participants to come into direct contact with one another, which calls into question the role of classic intermediaries. The chronologically stored transactions can no longer be changed as soon as they are in the blockchain. 42 The blockchain technology is more than just a vision, it will be used specifically in tax consulting. The advantages of this technology are firstly in the documentation, the almost infinite possibility of stringing blocks together and the chronological order of the unchangeable entries. This “timestamping” enables automated invoice recording and thus efficient and audit-proof invoice processing. For the entrepreneur, the administration costs are reduced, there is a higher level of data security and the exchange of information in the company is increased. The tax authorities will then be able to collect taxes more efficiently. The verifiability in tax audits will be made more transparent and data will be exchanged between the authorities more quickly. 43 5.3 NGO’s and Non-Profit Organizations Some charities and foundations accept Bitcoin and other cryptocurrency donations from donors. Then they exchange them for the national currency at the current exchange rate via an online wallet. In addition, some organizations have created bespoke “Charity Coins” to raise money for specific charitable or social projects. Donors can, for example, buy “Clean Water Coins” to finance the work of the NGO Charity: Water. Other examples PwC Global Power & Ultilities, Blockchain – an opportunity for energy producers and consumers?, (11/07/2016), https://www.pwc.com/gx/en/industries/assets/pwc-blockchain-opportunity-for-energyproducers-and-consumers.pdf. 43 GLOBAL FORUM ON, TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES, Establishing and Running an Effective Exchange of Information Function, A joint Global Forum and ATAF Toolkit, OECD Better Policies for Better Lives, OECD 2020, https://www.oecd.org/tax/transparency/documents/EOI-Unit-toolkit_en.pdf. 42 21 are “root tokens”, which were created to finance poverty reduction projects, and “ImpakCoins”, which serve as an impact investment mechanism. To date, the value of such specialized charity coin offerings has risen anywhere from a few thousand to more than a million dollars apiece. Digital currencies and blockchains have also led to a movement for greater transparency in development aid. The BitGive Foundation has launched an initiative called "Give Track" that enables Bitcoin donors and the public to track charitable transactions on a public platform in real time to see how the funds are being spent.44 This ensures that the final destination is reached and the results of the donations can be tracked. As part of an experiment by the United Nations World Food Program (WFP), Syrian refugees based in Jordan were provided with digital currency vouchers for trading in selected markets. The WFP used the platform to successfully deliver $ 1.4 million to more than 10,000 people, avoiding the dangers of carrying cash. This gave the organization a more effective, less costly method of distributing and tracking payments. These new applications even support donations and tracking from private sector charities. China’s e-commerce conglomerate Alibaba launched a unique blockchain donation system called Ant Love last year. It can record the donations from all 450 million Alibaba users and gives them the ability to donate to various charities and NGOs. The users can also better understand where and how the organizations use their donations. 45 Further Examples for Blockchain Applications 6. Shareholder Voting By holding tokens of a certain crypto currency, you are able to influence the system with the amount of your tokens. In an election that is released for voting, voters can cast their votes via an app, whether they vote for or against a proposal. The choice is recorded in a smart contract and immortalized in the blockchain. Depending on the result, 44 David Kariuki, Crypto Morrow, How the blockchain can help charitable funding/donation, grants and philanthropy, (June 7,2019), https://cryptomorrow.com/2019/06/07/blockchain-can-help-charities-anddonations-and-philanthropy/. 45 Course Hero, In addition a handful of organizations have created, (2/22/2022), Institute of Chartered Accountants of Sri Lanka, Colombo 7, Management 20530, https://www.coursehero.com/file/ptjc5ug/Inaddition-a-handful-of-organizati-ons-have-created-customized-charity-coins-to/. 22 the proposal is either accepted or rejected. This allows you to vote at any time and from anywhere and to prove that you are part of the company via the tokens. 6.1 Diplomas and Certificates Falsification of university certificates or diplomas has been a major problem for some time. In order to verify a comparison with the submitted paper of the employee, the employer must first contact the university, which in turn contact the employee whether he allows his information to be viewed. A very time-consuming undertaking that could be mastered within seconds via the blockchain. 46 In this case, the university uses an internationally recognized app to transfer the certificates and diplomas to the blockchain using a hash tag (a unique key that does not exist twice). This ensures the employer's trust that the documents are original and belong to the person concerned, in turn the employee is under the control of his own information. Nobody can delete their certificates or diplomas. They are immortalized and verifiable in the blockchain forever. The blockchain would also make it possible to send documents internationally without the need for a notary to verify that the documents are originals documents internationally without the need for a notary to verify that the documents are originals. 6.2 Cybersecurity Fraud and hacking are one of the biggest problems facing the internet. Blockchain technology, however, is a system based on blockchain that is safe from hacking. Since it is almost impossible to hack the blockchain itself.47 In the event of fraud, you always have the option of using the blockchain to trace where a payment went or where it came from. To uncover the source or endpoint of a fraudulent circle. Blockchain offers the possibility to protect the Internet in its principles from any danger from outside. 46 Gli Global Legal Insights, Blockchain & Cryptocurrency Regulation, 2019, First Edition, Contributing Editor Josias Dewey, https://www.acc.com/sites/default/files/resources/vl/membersonly/Article/1489775_1.pdf. 47 Matthew, Websummit, The blockchain: Not as secure as it seems, Lisbon, (Nov 11-14, 2024), https://websummit.com/blog/tech/blockchain-security-hacks-crypto/. 23 6.3 Big Data & Data Storage Most of us, require storage for our pictures, documents, videos and other digital content. If we reached the maximum storage, we have to move our content to the cloud or an external data server to save space. To do this, we have the option of uploading our data via various providers such as Google Drive, Microsoft One Drive, Dropbox or Amazon Web, but for prices such as $ 140 per year for 2 terabytes at Dropbox up to $ 120 per year for 1 terabyte at Google Drive. For companies or government institutions, however, the costs can be immense, as the data sets are enormous and have to be saved. Cost is one thing and security is another. 48 Attacks on servers can lead to shutdowns that last for hours, thus preventing the accessibility of your own data or even being deleted. Your own data is never really private in the central servers. They are under the control of the cloud provider who can access the personal data through back doors. Decentralized cloud providers such as Sia or Bluzelle offer decentralized storage options. With the decentralized cloud, the data is saved via a network of computers. With no single point of failure or single authority who has oversight over your files. This type of decentralized cloud system offers greater privacy, faster downloads, better prices and the minimum possible loss of data.49 With the decentralized server, your data is split between the computers in the network, broken up, encrypted and distributed via global nodes. If you want to download your data, you download fragments from the various participating nodes. If a node is not available, another node on which the data is also made available for download. This means that each node in the network only supports a small part of your files multiple times in order to intervene in the event of a node that is not available. This means that no data can be lost and privacy is assured, while the nodes also have no access to the stored data. Michael Chui, James Manyika, Mehdi Miremadi…, McKinsey & Compay, Notes from the AI frontier: Applications and value of deep learning, McKinsey Global Institute, (Apr 17, 2018), Discussion Paper, https://www.mckinsey.com/featured-insights/artificial-intelligence/notes-from-the-ai-frontierapplications-and-value-of-deep-learning. 49 Business Standard, Sarvvid launches Sarvvid Box – India’s first decentralized cloud storage application, (Oct 5, 2021), 11:20 PM Ist, https://www.business-standard.com/content/press-releasesani/sarvvid-launches-sarvvid-box-india-s-first-decentralized-cloud-storage-application121100500505_1.html. 48 24 The system is also faster than central cloud systems that may be further away, the closest nodes are used via the decentralized system to download the data. Bit Torrent is an example of this. The computers in the network offer their own memory for a fair price. Sia Coin e.g., Offers 1 terabyte for a monthly price of $ 2. 50 6.4 Internet of Things (IoT) Internet of Things (IOT) means that everyday objects are networked with one another via the Internet. They are either equipped with small chips, sensors, data memories or software systems. These enable data exchange with one or more other objects. Example: To save energy, a thermostat with a sensor is installed in the house and a device with a software system is installed on a boiler. Both are connected to the internet and automatically raise and lower the temperature according to predefined values without having to be at the same place. All of our everyday objects will be connected to the internet over time. 51 Proponents see many benefits for consumers. However, many critics criticize data security with the fear that hackers will hack into the systems and cause damage. As the first step, IOT will be connected to the Internet of Everything (IOE), because with IOE; processes, people and data will also be connected. Whole cities are then conceivable in which everything is networked.52 This vision of the future, however, requires a technology such as the blockchain that encrypts and transfers information or allows a wide variety of things to communicate with one another via smart contracts. Furthermore, a decentralized AI platform (Artificial intelligence) can be used to ensure that certain processes such as energy efficiency, traffic control, crime and much more are controlled. The AI’s also have the opportunity to exchange information with one another via the platform in order to learn from one another and to improve. Everything a vision of the future ... soon no more! 50 Politecnico Di Milano, DeMusic A decentralized application for artists, (2020)https://www.politesi.polimi.it/retrieve/7126000d-a402-4323-93e7f9f075f1ca6d/DeMusic_a_decentralized_platform_for_artists.pdf. 51 Course Hero, Such a system requires that the sensor and the boiler, (6/14/2021), ChancellorElement 2656, CSE TMA111, CSE, https://www.coursehero.com/file/p2c1uoh1/Such-a-system-requires-that-thesensor-and-the-boiler-controller-are-connected/. 52 Jeff Aboud, CISCO, Friend or Foe? When loT Helps you get Hacked by Your Security, (August 8, 2023), https://blogs.cisco.com/digital/friend-or-foe-when-iot-helps-you-get-hacked-by-your-security. 25 Conclusion The blockchain revolution is currently still based on a young technology. But the basic ideas of the inventor Satoshi Nakamoto are ideas that offer many attractive options for our future. Decentralization, transparency and joint control without an external authority could be a key to many problems of the future. For this reason, one should now deal comprehensively with blockchain technology and be actively involved at the beginning of this movement. And anyone who deals in detail with this new technology and its current use in crypto currencies such as Bitcoin also protects themselves against the devaluation of cash. Bitcoin launched an entire movement of millions of people in it. They construct protocols and new ideas to revolutionize the way that society and commerce works. The Blockchain Technology is one of the most significant human experiments ever conducted, because as we enter the 21st century it becoming increasingly clear that globalization is going to fundamentally change how the entire world operates. We’re moving from nation-states/ siloed economies into economies that are deeply interconnected intrinsically transnational. Many ways as our laws, how we live, how we trade, how we think are as interconnected to the affairs of other states as they are our backyard. The entire point of the blockchain industry is basically trust regulation. The idea that people have to work together who don’t really trust each other, but they have to find a way to do so for a common good to solve a common problem. Either to trade, to preserve the resources and value that we have sustainability and environmental policy to solve things like global pandemics. Unfortunately, the old systems that we have of trust regulation were through domination and hierarchies. The fundamental question of who’s in charge of the 21st century and we’re left with one of two answers either it’s going to be a transnational group of people that nobody knows much about, we didn’t pick and we just to have accept the edicts and mandates that they’ve made just like the totality of human history. There’s always been kings and pope’s and emperors and rulers that have done so or we can try something fundamentally different that’s never really worked before but we get now as a consequence of technology in the internet where we can try to build a world where no one is in charge. That’s what the blockchain industry at its heart is really about. 26 Trust regulation so that we can build systems where no one is in charge and those systems have inclusive accountability. The blockchain industry is saying that we can accomplish trust regulation by answering the Question who is in charge in a connected world, by saying NO ONE. We trust in code. You just in charge of your own life. 27