Can the Blockchain Technology Win the Battle Against Fraud and Bribery?

The estimated investments devoted to the blockchain startups are $1.2 billion. The majority of that is going to financial services solutions, but the blockchain technology could be used much more widely. It can make transactions and databases more independent, transparent and thus less corrupt. 

First, let me provide you with the brief overview what the blockchain is and how it works. One way to think about the blockchain is to imagine layers in a geological formation. Once you go few centimeters deep, geological layers become more and more stable. By the time you look a ten or twenty meters down, you are looking at a snapshot of the past that has remained undisturbed for millions of years.

Basically, the blockchain technology encrypts and records blocks of information one on top of the other making sort of layers. Every next layer attaches to the previous, which reminds a chain.

Another important quality of blockchain is decentralization. The blockchain works in a peer-to-peer network so it spreads every updated version of your chain of information to all computers in the network. Therefore, you cannot change something backdated without everybody else noticing it. Hence, there is no need for somebody to be in charge and control the data.

Now, when we are familiar with the basic principles behind the blockchain, let’s see where itcould be used to reduce corruption.  The most relevant applications are in spheres of proof of ownership, smart contracts, electronic auctions, electronic voting and identification systems, patenting, public databases like land registry, stock exchange and others. In this post I will talk only about the first three mentioned.

The first and very powerful application is proof of ownership. The topic is very relevant nowadays in Ukraine. As you probably know, requirements to make use of notary when establishing a company or changing the ownership structure were eliminated in most of the cases. However, the simplification of procedures gave a rise to fraudulent schemes like “corporate raid” or illegal takeover of corporate rights. Moving the registration services online with digital signature and blockchain-backed database could eliminate the mentioned problem. Moreover, in some jurisdictions you can already incorporate a company and have your shares represented in a blockchain-based crypto-currency. It is impossible to bribe somebody and bend the rules to takeover such a company. One cannot do it because the process of buying shares completely runs according to a programmed algorithm, called smart contract.

The second important application of blockchain is the abovementioned “smart contract”. It is not a usual contract as we used to see it but a programmed protocol or algorithm which is executed automatically when something that does not need a direct input from a human happens. For example, when the price of a stock jumps to a specific level a smart contract can automatically execute the purchase.

Of course, not all agreements can be substituted with smart contracts because in many spheres an input from a person is needed, which makes the system vulnerable to fraud. For example, a program cannot assess the quality of services like construction or cleaning in order to have a go for making payment. However, wider use of smart-contract transactions can help eliminating a huge corruption habitat, namely enforcement of contracts. By the way, you can now create your own smart contracts too.

The third example where one can use blockchain for fighting corruption is electronic auctions. Governmental auctions are one of the biggest niches for manipulations nowadays. The blockchain-backed auction platform has already been created in Ukraine. And it is the first of its kind in the world. It’s called eAuction 3.0. This decentralized blockchain-backed auction (selling platform) could complement an internationally recognized online procurement system (buying platform) Prozorro. It can save millions by eliminating corruption risks and increasing competition. The Minister of Finance of Ukraine announced big plans of utilizing eAuction3.0 to sell state-owned property worth millions.

A well-known investor and founder of Netscape Marc Andreessen called blockchain “the most important invention since the internet itself”. It has the potential to reform nearly every industry. Law practice and white-collar crimes in particular are not exceptions. The blockchain is a powerful instrument to be used in many spheres. However, it cannot eliminate a fraudulent intention, conspiracy or tolerance for bribery in society. This is still up to us.


Dmytro currently holds the position of Innovation Justice Agent at the Dutch foundation with the focus on brining more justice to society through innovations and legal tech solutions. Previously he worked in a Dutch law firm and Ukrainian multinational companies providing legal support to science-backed technological industries like pharmaceutical and clinical trials industries.

Dmytro obtained his LL.M. degree with distinction from Tilburg University, the Netherlands, in International Business Law. In his Master thesis he researched on compulsory licensing of patents. He also attended the Summer School on European Business Law at Heinrich Heine University, Germany and completed an intensive training on social innovation and entrepreneurship from the Social Innovation School in Eastern Europe.