A third set of blockchain experiments to combat government corruption focus on automating and tracking high-risk transactions, such as public contracts, cash transfers, and aid funds. There has been less experimentation in this area, however.

Each year, according to the OECD, an estimated $9.5 trillion dollars is spent on public sector contracts and large public investment projects. It is estimated that corruption adds up to 10 percent of the total cost of doing business globally and up to 25 percent of the costs of procurement contracts in developing countries.

The World Bank estimates businesses and individuals pay $1.5 trillion in bribes every year, which corresponds to 2 percent of global GDP. While public contracting processes have become increasingly transparent and digitalized through open e-procurement platforms, blockchain-based solutions have yet to be fully tested.

Technology-driven solutions now provide end-to-end transparency in public contracting, allowing one to detect red flags, bid rigging, phantom vendors, and price fixing using advanced analytics. Blockchain could add critical value to public contracting up to the delivery of the goods and services, by locking in critical information at every step of the procurement chain that can be monitored, tracked, and audited.

In addition, “smart contracts,” which are still at the experimental stage, would allow the automatic exchange of real assets to be programmed into an inalterable blockchain, that would execute itself autonomously based on programmed conditions. This will reduce the opportunities for fiddling with the process and increase the speed of transactions. Read more from ssir.org…

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