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[Blockchain] Smart contract in developing countries and Indonesia's potential

N. Kshetri, "The Economics of Blockchain-Based Supply Chain Traceability in Developing Countries" in Computer, vol. 54, no. 08, pp. 98-103, 2021.
doi: 10.1109/MC.2021.3082835
keywords: {blockchain;security;supply chains;economics;artificial intelligence;developing countries;social factors;human factors}

After reading about how blockchain is used in developing countries, written by Professor Nir Kshetri, I become confident in Indonesia's potential. Let me explain about it.

In market research conducted last year on the use of blockchain for major brands, the biggest use case was traceability. Once the information is in the blockchain, nobody can rewrite it, so a company can be transparent about how the materials used in their products from extracted raw material, production process, and delivery to the consumer. In developing countries, blockchain offers a more critical solution than in developed countries. In developed countries, the law is concerned chiefly with whether companies legally purchase and process raw materials. In developed countries, the benefit of blockchain and smart contracts, the automation of contracts, is the cost savings because this new tech can eliminate this complex legal process.

In developing countries, the law is often impossible to use as a "working" governance tool because the procedures to ensure that the law is properly measured and enforced are not functioning. Therefore, the introduction of blockchain and smart contracts will allow supply chains to be built in developing countries in a way that is in line with the standards of developed countries. In other words, in developing countries, blockchain and smart contracts are not just a way to reduce costs but a "functioning governance tool" that does not exist today. For example, BMW has stopped buying cobalt, the raw material for lithium-ion, from the Republic of Congo. The cancellation is because local law cannot ensure cobalt mining companies operating according to developed countries' social and environmental protection standards.

Instead, Circulor, a UK-based company, is in the business of using blockchain and smart contracts to provide traceability of whether cobalt is produced in line with the standards of developed countries. The company has recently received funding from Volvo to use remote sensing (imagery from satellites) to provide a system that can measure whether workers are being treated properly in the mines. Blockchain and smart contracts, together with new technologies such as remote sensing and AI, will first allow developing countries to measure whether contracts are carried out in line with the standards of developed countries.

Professor Kshetri cited poor literacy rates and low smartphone penetration in rural areas as challenges to doing blockchain in developing countries. In Cambodia, which the professor used as an example, 10% to 20% of people in rural areas will be using smartphones in 2019.

When I read this part, I thought that Indonesia has a lot of potentials. In Indonesia, the literacy rate is almost 100% even in rural areas, and the smartphone penetration rate in 2019 is 55% even in rural areas. This rate has doubled over the last ten years, so it should already be over 60% by now. The farmers we work with have smartphones. We want to connect our biogas to the blockchain together with these smartphones.

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