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Blockchain

GovTech

GovTech refers to technological approaches that make services and processes within public institutions as well as interaction with citizens and businesses or between donor and partner countries more efficient and transparent. The Federal Ministry for Economic Cooperation and Development and the KfW have developed a standard tool for the latter form of interaction: TruBudget makes flows of resources transparent and traceable at all times.

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At a glance

Blockchain technology is a new form of data storage. Transactions are processed, verified and stored in a growing list through a distributed network of computers. This ensures a high level of data security and transparency.Transactions can be any type of information, such as financial transactions, contracts, shares or land register entries. Blockchain has three major advantages compared to conventional databases:

  1. the database entries are not located on a single server, such as at a bank or authority, but are simultaneously and completely distributed across many computers. This makes the data in the database more secure against manipulation and attacks, since hackers would have to attack all computers running the blockchain.
  2. All entries are cryptographically encrypted and cannot be changed. New information is added to the existing data block, but old information is never overwritten. The result is a chain of blocks – a blockchain. The result: changes remain traceable and transparent. Subsequent manipulations are not possible.
  3. Despite its transparency, blockchain protects the identities of the users – instead of names, there are only codes for each transaction. The traceability and transparency of the entries ensures trust between users and enables transactions between strangers without the need for a central control authority, such as a bank or notary.

These advantages make blockchain technology suitable for use in a wide range of cases for the Agenda 2030. This is feasible, for example, for forgery-proof education certificates, smart power grids, parametric climate risk insurance and supply chains with greater transparency.

Challenges of blockchain – the first mile problem

In addition to the potential of blockchain technology for the development cooperation, challenges also arise from its application. A blockchain is only as good as the data fed into it. What is stored on a blockchain is safe from manipulation, but blockchain technology cannot check the quality or correctness of the data originally fed into it. For example, a university can award a degree to a graduate and store it in a blockchain so that is protected from forgery. However, if the person in charge makes a typing mistake when entering the data and the degree is therefore saved incorrectly, the graduate will, in the worst case, be left with no degree or the wrong degree. This example demonstrates that blockchains can lead to the creation of trust in educational certificates by making them impossible to forge. However, incorrectly stored data can also have negative effects on users. Analogue controls, which carry a risk of manipulation, or automated data generation (e.g. by sensors or interfaces) are necessary to solve the problem.

Special challenges in supply chains

Due to international trade processes, the individual production steps are distributed worldwide. As a result, supply chains are often difficult to trace and in many cases there is no precise knowledge about the origin of a product. A typical application of blockchain technology is therefore the creation of a traceable supply chain, as the respective production and processing steps can be made visible in the form of transactions of the respective goods. Blockchains allow the individual parties to be identified, so they are forced to take greater responsibility for their misconduct. However, in addition to this technical solution, cooperation between the parties is also necessary to truly provide more transparent and reliable supply chains. This is because products registered on blockchain technology can be exchanged in the real process without being noticed by the system (i.e. the virtual representation of the process). For example, two virtually distinct water bottles from a particular manufacturer’s brand are not distinguishable in real terms. Although some companies label packaging with a product-specific QR code to precisely identify each individual water bottle, this method can also be manipulated: the affixed QR codes or the contents of the bottle can be exchanged in the manufacturing process along the supply chain. So controls are also necessary here.

Blockchain Partnerships

Blockchain-based applications have the potential to address existing challenges in development cooperation and to contribute to the achievement of the global sustainable development goals. For example, blockchain technology can help to make supply chains and administrative processes more transparent, reduce corruption and trace the use of financial resources.

With the Blockchain Partnerships initiative, the Federal Ministry of Economic Cooperation and Development is promoting a strategic network of actors in the blockchain ecosystem. Together with partners from the private sector, civil society and politics, it aims to advance the use of blockchain technology in the German development cooperation. To do so, innovative methods and formats (including BMZ digilab) are being used to scale up new and existing projects that create added value.

Current situation

Blockchain applications are currently being developed in several target areas of the Federal Ministry of Economic Cooperation and Development digitalisation strategy. These are still in the initiation or start-up phase. If they prove their worth and are scalable, the projects will be continued.

  • The introduction of a blockchain-based platform in Morocco is expected to improve the coordination of customs procedures in e-commerce. This is intended to make the clearance of goods faster and more efficient and make customs duties transparent. This will allow goods to be processed more quickly and will reduce trading costs.

    A develoPPP.de Classic project proposal for EUR 2 million was prepared and submitted together with DHL Express in August 2019.

Blockchain-Technologien in der Rohstoffindustrie

Die Rohstoffindustrie stellt in Bezug auf die Erreichung der Sustainable Development Goals (SDGs) eine besondere Herausforderung dar. Vor allem der Bergbau steht in Bezug auf seine soziale und ökologische Nachhaltigkeit in der Kritik.

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Blockchain technologies in the commodities industry

The commodities industry is a particular challenge for the achievement of the sustainable development goals (SDGs). Mining in particular is assessed critically with regard to its social and ecological sustainability.

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