Creating Corruption-Free Ecosystems with Blockchain: A Study

The Roman Empire was one of the greatest successes of human civilization. For most of its 1,000-years plus existence, Rome conquered and expanded across vast swathes of Europe, Asia, and North Africa, creating cultural, architectural, and societal imprints that last to the present day.

But such empire, mighty as it was, entered into a decline that led to its downfall around 480 AD.

The reasons for the fall of the Roman Empire are many and complex. Historians have debated the issue for centuries, and have put forward ideas such as invasion for well-organized and determined tribes, military overreach, cultural decay, and very significantly, corruption. 

One can argue that the Roman Empire’s decline began within itself, and more specifically, from the ruling classes. The rise of an autocratic system -which was, by and large, supported by the populace-, meant the advent of rigged elections, secret agendas, and political murders, among many other misdeeds. 

Corruption is, of course, not exclusive to the Roman Empire. Corruption is a man-made issue that has blighted many cultures, countries, and societies throughout history. And to a large extent, systemic and state-sponsored or abetted corruption and dishonesty are one of the most significant problems in today’s world.

The different forms of corruption

Roman law had a specific word to define political corruption: Ambitus. The term specifically referred to attempts to influence the outcome of an election through criminal practices, such as bribery, for example. Ambitus might be an archaic term, but its meaning certainly resonates in today’s political and social media landscape.

But corruption can take many other forms: Extortion, cronyism, cash-for-favors, slush funds, and so on. When it takes hold and becomes institutionalized, corruption develops into an endemic and systemic problem. Those living outside the inner circle can even come to accept it as part and parcel of daily life and live in resignation.

Deeply embedded corruption has a great detrimental effect on society. It may inhibit economic growth, for example, as funds earmarked for social projects might be redirected to malefactors. And corruption has a profound impact on foreign investment and business developments, as trust and prospects of prosperity are simply not there.

Corruption is an exclusively human trait. Animals kill each other for sustenance and to preserve their own species, but never for percentages. So when the very condition of humanity lies at the root of the problem, how can the riddle be solved?

Blockchain solutions for a very human problem

Malfeasance spreads across many shades of grey, and rooting out the bad actors can be difficult, depending on how widespread complicity is. 

One of the main allies of corruption at State and official agency level is the perception of impunity and anonymity by those engaged in the practice. In other words, those acting dishonesty can hide their deeds behind a wall of silence or veiled threats, which may, in some cases be abetted, or even encouraged by their superiors. Existing anti-corruption laws and legislations might not be particularly effective either, for the same reason.

One of blockchain technology’s inherent traits is transparency. Every node in the network can see every transaction, which instantly removes the possibility of interference. John P. Conley, a gifted economist, game theorist, and blockchain pioneer, proves this point, ‘Let’s take Bitcoin’s Proof-of-Work concept. Let’s say that we have 30,000 nodes that are validating transactions. How are they ever going to coordinate together and do something dishonest? The distribution of the nodes that are validating gives inherent stability. At least half would have to be dishonest for the system to break, but the notion that 15,000 nodes would coordinate to do something dishonest is ridiculous.’

Blockchain ensures that bad actors can no longer rely on anonymity to conceal their actions. Data stored on the blockchain is also immutable. In other words, it cannot be changed, nor can it be tampered with. Let’s take cadastral data, for example. That is, data about boundaries, property lines, and ownership. 

Cadastral corruption is not unheard of, particularly in emerging economies. Corrupt officials might alter land ownership or boundary records for their own benefit, or those of their cronies or associates. A blockchain framework would eliminate this type of crime by keeping a fully transparent and unchangeable block of land records.

Creating a decentralized anti-corruption framework built on the blockchain

Some define corruption as the abuse of entrusted power for private gain, and this is true. But fighting against it requires a more holistic approach.

Corruption often involves a cadre of individuals working in complicity, whereby one or two people might control a database, a set of bank accounts, or access to sensitive or confidential information, while the rest cover the tracks. The very centralization of today’s IT, banking, or land registry frameworks becomes its weakness.

Blockchain creates a decentralized environment that would remove the single point of failure conundrum, as data would no longer reside in just one or two easy-to-manipulate locations.

Conclusion

Society as a whole still has a long way to go to eliminate corruption from its fabric. It is, as we saw earlier, a purely human trait, much like greed or envy. And a man-made problem requires a man-made solution, such as blockchain.

The technology can help lift the veil of corruption through transparency, immutability, and decentralization, which are precisely the traits that make blockchain be.

 

Decentralized Hackers 'Anonymous' Promise Retribution for George Floyd, Will Expose Minneapolis Police Record of Systemic Racism

Hacktivist group ‘Anonymous’ has promised retribution against the Minneapolis Police Department (MPD) for the death of George Floyd last week.

On Saturday night, May 30, it appears the group has begun to make good on their promise, as the MPD website was inaccessible for most of the night and appears to have been subjected to unauthorized access and tampering.

As reported by Bloomberg on June 1, the alleged Anonymous hack occurred on Saturday night as protests reached a fever pitch around the country. Thousands of Americans rose in protest against the unlawful and completely unnecessary killing of George Floyd and the rate of police violence aimed at black Americans.

Although police officials did not immediately wish to comment on the alleged attack, there were noticeable anti-hack additions to the website on Sunday morning. Pages on the website required captcha verification, a popular automated hack bot deterrent for access to the public pages. 

Anonymous Promises to Reveal Depth of MPD’s Systemic Racial Profiling and Abuse

Anonymous posted the video below on their unconfirmed Facebook page on May 28. The video was aimed specifically at the Minneapolis police and promised to expose the department’s “horrific track record of violence and corruption”, of which they believe George Floyd is just the latest casualty. 

As protestors clashed violently with US police and the National Guard over the weekend, the video gained nearly 2.5 million views on Facebook.

The video is presented by the Anonymous figure dressed in the usual dark hoodie and displaying the Guy Fawkes mask, a popular symbol of protest made famous by the movie V for Vendetta. The figure concludes the video, which details the unjustified death of George Floyd and as many as 193 others, stating that the MPD is not capable of carrying out true justice. The figure promised, “we will be exposing your many crimes to the world. We are legion, expect us.”

The power of the Anonymous group can be found in these final words, “We are legion” – a nod to their decentralized model of operation. The hacktivist operation claims to operate as a series of decentralized cells, making them difficult to track and meaning that there is no distinguishable leader with which to bargain or negotiate.

Given the depth of the information already exposed in the warning video, we can only imagine what has been uncovered in the recent alleged hack that appears to have occurred last Saturday.   

Why Did Venezuela Block Citizens’ Access to Coinbase Crypto Exchange?

President Nicolas Maduro’s administration is denying the citizens of Venezuela access to United States crypto exchange Coinbase as well as fiat remittance platform MercaDolar according to a local digital rights advocacy group.

According to digital rights group Venezuela Inteligente, internet service providers (ISPs) in Venezuela have blocked Coinbase and MercaDolar under the instruction of President Nicolas Maduro’s government.

According to the Tweet by Inteligente on Sept 9, the move to block the exchange platforms was discovered late on Sept. 8 and the objective of the Maduro administration is unclear as only these two exchanges were singled out in Venezuela while the majority of exchanges are still accessible.

The Director of Venezuela Inteligente Andres E. Azpurua said, “Venezuela has a history of blocking exchange platforms […] Especially those used to exchange local currency for foreign currency.”

Why was Coinbase Singled Out?

The political climate in Venezuela is reaching a boiling point as the country continues to battle the corruption of the Maduro administration.

Juan Guaido is the self-proclaimed interim President of Venezuela and is fast being recognized as the official leader of the country.

Image: Interim President Juan Guaido

According to Reuters, President Juan Guaido on Monday announced a “unitary pact” supported by a coalition of parties calling for increased international pressure on President Nicolas Maduro as the country heads toward a congressional election in December.

Inteligente Director, Azpurua believes that attempts at capital controls over who receives what type of funding in a politically charged climate could be one of the main reasons for the recent ISP blocks of Coinbase and MercaDolar.

On August 20, Coinbase-backed Airtm, well-known for being a censorship-resistant P2P exchange was appointed to redistribute $18 million seized by US authorities to 62,000 healthcare workers.

President Juan Guaido quickly outlined his own plans for helping to return the seized funds to the country’s healthcare workers, however Maduro’s government swiftly blocked Airtm to Venezuelan citizens.

While Maduro has lost almost all credibility on the global stage and in the eyes of his citizens, his response to these measure indicates he is not ready to handover power to his opponent Guaido just yet.  

Corrupt Cop Sentenced to Prison for Accepting Bitcoin Bribe from Dark Web Drug Dealer

A former Russian police officer has been sentenced to eight years in prison for accepting a Bitcoin and cryptocurrency bribe from a dark web drug dealer, in exchange for his professional services.

Darknet: Bitcoin for professional services

The former cop, Yuri Zaitsev, was the former head of department for a drug trafficking task force operating under the Ministry of Internal Affairs for the Republic of Khakassia. He was found guilty of receiving a cryptocurrency bribe and of disclosing State secrets. 

The investigation started in 2018 and found that Zaitsev had initiated contact with a drug dealer operating for a darknet marketplace. The operator illicitly sold narcotics online and was fouled by a customer that had stolen from him. In exchange for tracking down the thief that had wronged the darknet dealer, Zaitsev accepted Bitcoin cryptocurrency payments amounting to 52,000 rubles.

In addition, the former chief officer was charged by the Investigative Committee of Russia for disclosing classified information to the dark web operator.

Charges against corrupted cop

Not only did Zaitsev accept Bitcoin bribes from the darknet dealer, but he also allegedly informed the criminal of State secrets and provided information concerning his work environment, officers he collaborated with as well as their schedule and daily conduct.

This confidential information was given as a means to ensure that the dark web dealer and his organized criminal group could operate their online drug business while remaining undetected by police officials and law enforcers.

Following prosecution from Russian law officials, the dirty cop was fired from the Main Directorate for Drugs Control in Khakassia and sentenced to 8 years in prison.

In addition, Zaitsev was charged with a penalty of 156,000 rubles and is prohibited from holding a position of authority within organizations for 4 years. Furthermore, he is stripped of his title as a police lieutenant colonel.

Silk Road defunct, dark web programmer arrested

This is not unlike the former Silk Road programmer Weigand’s verdict.

The dark web software operator was charged for using Bitcoin for his own gains, for lying to the FBI and the IRS about his involvement with the dark web marketplace as a tech advisor and programmer.

Weigand has been sentenced to five years of prison by the US Department of Justice. His sentencing is set for December.

UN Agency Advises Kenya to Embrace Blockchain Technology to Tame Corruption

The United Nations Office of Drugs and Crime (UNODC) has disclosed that the ball is in Kenya’s court to embrace blockchain technology if it is serious about fighting runaway corruption, which has infiltrated the nation’s public and private sectors.

Bridging the corruption gap

According to audit reports, the primary corruption loophole in Kenya entails manipulating procurement systems as well as other transactions. This has been detrimental because the cost of doing business has skyrocketed in the nation.

David Robinson, a UNODC East African region anti-corruption advisor, asserted that any blockchain-based app can be pivotal in easily tracing corruption and economic crimes.

He noted:

“When corruption represents a breach of trust, a technology that strengthens trust becomes an attractive solution in public projects. In the era of the 4th industrial revolution, online trust became a key asset for transactions between strangers and building confidence in government.”

By leveraging blockchain technology, immutable or tamper-proof storage is guaranteed and this makes transactions traceable. Furthermore, a roadmap of spotting illegal activities is created, which is instrumental in propelling the recovery of stolen assets, minimizing bribery, and decreasing unlawful financial flows.

A third of Kenya’s budget goes down the drain

In 2016, Philip Kinisu, the then Ethics and Anti-Corruption Commission chairman, disclosed that Kenya lost a third of its budget to corruption annually because of a huge technological void and lack of equipment.

The UN agency believes that blockchain technology can be a stepping stone towards addressing this problem by making data transparent, traceable, and accountable. Furthermore, it cuts red tape, eliminates the urge for intermediaries, and minimizes the risk of arbitrary discretion.

Robinson acknowledged:

“To combat government corruption, Blockchain solutions focus on automating and tracking high risk transactions such as public contracts, cash transfers and aid funds.”

Kenya is making headways in the blockchain/crypto space. Last month, the Central Bank of Kenya (CBK) disclosed that it was in discussions with other global apex banks about joining the central bank digital currency (CBDC) bandwagon.

Kenya was also among a pack of leading African nations whose weekly Bitcoin trading volumes exceeded $1 million in July. Moreover, in December last year, the Red Cross showed intentions of helping disaster-riddled communities in this nation using blockchain-backed “local currencies” meant to establish a thriving economy on the foundation of smooth trades. 

Alex Gladstein Fights Government Corruption

Alex Gladstein, an advocate for Bitcoin as well as the chief strategy officer of the Human Rights Foundation, is of the opinion that the cryptocurrency helps mend democracies that are broken and combats government corruption by limiting the capacity of governments to influence the citizens of their respective countries. In other words, Bitcoin makes it more difficult for governments to manipulate the citizens of their respective countries. Bitcoin, in other words, makes it harder for governments to control the people living in their different nations by making it more difficult for them to do so.

During an interview that took place on the 20th of February, Gladstein expressed his belief that the decentralized nature of Bitcoin (BTC) may serve as a defense mechanism against tyranny and corruption. This conversation took place in the United States of America, which served as the location.

“I do feel that it is very simply related to fiat money, and I do think that Bitcoin answers this in some way,” he added. “I do think that Bitcoin answers this in some manner.” “In my opinion, there is a very clear connection between what you’re describing and fiat money,” you said. I have no doubt that Bitcoin will, in some fashion, figure out a method to overcome this obstacle. The author makes the claim that he thinks “I do feel that the use of fiat money is very simply tied to the decline of democracy in those countries,” and he is certain that this is the case.

Since 2007, Gladstein has been working at HRF, a charitable non-profit organization, in which capacity he has held the position of chief strategy officer. The Human Rights Foundation is referred to by its abbreviation, HRF. The mission of the organization is to advance and protect human rights all throughout the globe, with a particular emphasis on countries in which the population suffers “under authoritarian tyranny.”

It is stated in Gladstein’s profile that he often participates in events that are organized by Singularity University. During these occasions, he also gives speeches on topics such as the cryptocurrency Bitcoin and the development of future monetary systems.

Venezuela Shuts Down Crypto Mining Operations

Venezuela, a country known for its volatile political climate, has recently made headlines for shutting down several crypto mining facilities throughout the country. According to reports from local media outlets and tweets from Venezuela’s National Association of Cryptocurrencies, mining operations were ceased in the states of Lara, Carabobo, and Bolívar in the past few days. Although it is unclear how many crypto firms were affected by the shutdown, several crypto exchanges were also ordered to cease their operations.

The closure of crypto mining facilities is believed to be part of an ongoing investigation into corruption involving Venezuela’s state-owned oil company, Petróleos de Venezuela S.A. (PDVSA), and the country’s national crypto department. The Venezuelan government has been grappling with the financial crisis and hyperinflation, leading many to turn to cryptocurrencies as a more stable investment option. However, the mining of cryptocurrencies requires a significant amount of energy, which is often subsidized by the government. As a result, the shutdown of crypto mining facilities could be seen as a way to conserve energy and resources amidst Venezuela’s financial struggles.

Additionally, the corruption investigation involving PDVSA and the national crypto department has been ongoing for several years. PDVSA has been accused of embezzlement and money laundering, with the country’s former oil minister, Rafael Ramirez, at the center of the investigation. The national crypto department, which was created in 2018 to oversee the country’s cryptocurrency operations, has also been under scrutiny for alleged corruption and mismanagement of funds.

The shutdown of crypto mining operations in Venezuela has raised concerns among crypto investors and traders, who are now questioning the government’s stance on cryptocurrencies. While some experts believe that the shutdown is simply a way to conserve energy and resources, others believe that it is part of a larger crackdown on cryptocurrencies in the country. The Venezuelan government has been known to take drastic measures to control the country’s economy, including imposing strict capital controls and devaluing the country’s currency.

In conclusion, the shutdown of crypto mining operations in Venezuela is just one of many challenges facing the country’s cryptocurrency industry. The ongoing corruption investigation involving PDVSA and the national crypto department, coupled with the country’s economic struggles, has created an uncertain future for cryptocurrencies in Venezuela. It remains to be seen how the government will navigate these challenges and what impact they will have on the country’s crypto industry.

Binance CEO Highlights Disproportionate Narrative on Illicit Activities in Crypto versus Fiat Currencies

The debate surrounding illicit financial activities within the cryptocurrency space has been a contentious issue, with critics often pointing to the potential for misuse. However, recent remarks by Binance CEO Richard Teng and analysis by Dr. Andrzej Gwizdalski, a lecturer at the University of Western Australia, offer a new perspective.

Dr. Gwizdalski compiled data from the United Nations, World Economic Forum, and blockchain analytics firm Chainalysis to compare illicit activities in crypto and traditional fiat currencies. His findings present a stark contrast: while cryptocurrencies are often highlighted for their use in illegal activities, the volume is significantly lower than that in the traditional fiat system.

The United Nations Office of Drugs and Crime notes that the estimated amount of money laundered globally in a year is between 2-5% of global GDP, translating to $800 billion to $2 trillion. This is primarily through traditional fiat currencies. On the other hand, the World Economic Forum reports that corruption costs developing countries about $1.26 trillion annually, highlighting the scale of illegal activities in the traditional financial system.

In contrast, Chainalysis data revealed that the illicit use of cryptocurrencies reached a record $20.1 billion in 2022. This figure, while significant, pales in comparison to the estimates for fiat currencies. Importantly, the nature of blockchain technology means that transactions in cryptocurrencies are transparent and traceable, arguably making them a less attractive medium for illegal activities.

Richard Teng, CEO of Binance, echoed these sentiments. He emphasized the need to shift the narrative around crypto’s role in illicit activities, especially in light of such comparisons. Quoting Dr. Gwizdalski, Teng highlighted that traditional fiat, like the USD, is implicated in an estimated $3.2 trillion in illegal activities annually, over 100 times the amount linked to cryptocurrencies. He suggested a rethinking of the narrative, arguing that fiat currencies’ involvement in corruption and money laundering should not extend their reputation to cryptocurrencies.

The information compiled by Dr. Gwizdalski and echoed by Binance’s CEO calls for a reconsideration of the perspective on cryptocurrencies in the context of illicit financial activities. It suggests that while cryptocurrencies are not free from being used for illegal purposes, their scale and nature of misuse are significantly smaller compared to traditional fiat currencies. This insight is crucial for policymakers and the general public in understanding and regulating the crypto space.

China Identifies Cryptocurrency as a New form for Bribery and Corruption

A recent conference held by the Chinese Association for the Study of Integrity and Legal Systems highlighted the rise of new forms of corruption facilitated by cryptocurrencies and electronic gift cards. This national organization, approved by the Chinese Law Society and registered with the Ministry of Civil Affairs, focuses on legal systems and corruption issues.

Experts at the 2023 annual meeting discussed the challenges posed by these new mediums, which have become covert channels for bribery and corruption in the digital era. Traditional cash and tangible assets are no longer the only means of bribery; now, online transfers, electronic gift cards, and even cryptocurrencies are used for illicit transactions, enabling more discreet and hard-to-trace corrupt practices.

The rapid advancement in digital currencies and blockchain technology poses a significant challenge to existing legal and regulatory frameworks. As these technologies offer anonymity and decentralization, they have become attractive tools for corrupt activities. Some corrupt individuals use encrypted digital currencies for cross-border transactions, avoiding online surveillance through “cold storage” methods like offline wallets and hard drives.

The increasing use of virtual currencies and digital assets in corruption reflects a shift towards more sophisticated, technology-driven methods. This trend necessitates a dual approach of legal and technological governance. Strengthening legislation to cover new forms of bribery and corruption, expanding the definition of bribery to include non-material benefits, and enhancing the digital infrastructure for monitoring and enforcement are essential steps.

Experts recommend establishing comprehensive databases and rapid analysis systems to improve case handling. Integrating core corruption data with industry-wide big data can enhance preventive measures against new forms of corruption. Additionally, understanding the legal status of virtual properties and regulating them effectively within criminal law is crucial.

To effectively combat these emerging challenges, experts suggest refining anti-corruption legislation, enhancing the technological capabilities of monitoring and enforcement agencies, and fostering public participation in reporting corrupt activities. Addressing the root causes, such as gaps in the power and supervision systems, particularly in areas with high concentrations of power and resources, is also vital.

In summary, combating new forms of corruption in the age of digital currencies and electronic gift cards requires a comprehensive approach, combining legislative updates, technological advancements, and societal vigilance to maintain integrity and fairness in governance.

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