The use of physical documents is cumbersome, and the world is moving towards the use of digital documents.
Digital documents are convenient to manage but proving their authenticity is often complicated. Indeed, as there is no common protocol for validating and verifying digitised documents, the process of analysing them in private or government institutions is difficult.
To address this issue, blockchain-based mechanisms are emerging to verify the authenticity and content of digital documents. Known for its immutability, this technology seems to be an excellent solution.
ORIGIN OF BLOCKCHAIN
It all began in 1991 with the work of researchers Stuart Haber and W. Scott who envisaged using blockchain to prevent the falsification of time-stamped documents.
It was not until much later in 2009 that Satoshi Nakamoto (pseudonym of the alleged developer(s) Dorian Nakamoto and/or Craig Wright) invented the first concrete application of the blockchain, the most famous and first crypto-currency, bitcoin.
At the time, the process was revolutionary. Thanks to the certifying nature of the blockchain, it was now possible to issue virtual currencies that could not be falsified and were 100% verified, qualifiers previously reserved for currencies minted by States.
Then in 2014, blockchain 2.0 technology was born and with it, the field of possibilities suddenly expanded. Indeed, its enormous potential began to interest players outside the financial sector who wanted to take advantage of its unfalsifiable traceability. New uses rapidly emerged, particularly in the pharmaceutical, raw materials and even luxury industries.
Finally, in 2020, a new revolution took place with the launch of Ethereum 2.0, a major update of the Ethereum protocol (Bitcoin’s competitor), which aims mainly to move from the principle of proof of work to proof of stake. The latter, which is much less energy-intensive, should reduce the electricity consumed by the blockchain by more than 90%, but has been considerably delayed and should only be finalised in the coming months.
PRINCIPLES OF BLOCKCHAIN
In essence, the blockchain is a shared database or registry that allows information to be stored and transmitted securely. The database is tamper-proof and its data is verifiable.
The users of the blockchain are interconnected in a network. They all have simultaneous access to a register containing the data in the database. Every future change in the register is visible to all users.
Decentralised in nature, the blockchain operates without a central controlling body and is controlled by its own users without any other intermediary.
It has 4 main advantages:
● Independence: Users are not dependent on a third party, a control body or an intermediary such as a bank. It is therefore less vulnerable to manipulation.
● Level of security: A large number of users, scattered all over the world, validate every single change made on the blockchain. It is therefore impossible to falsify any element.
● Transparency: Each user can see the history of changes and exchanges between members and each element of the blockchain is verifiable.
● Efficiency: Blockchain is a cost-effective technology, especially for international money transfers. It is also inexpensive and very fast because its data can be validated in seconds.
To fully understand how blockchain can be used to certify documents, it is first necessary to explain some of the basics.
Any blockchain is composed of blocks that contain :
● The information to be stored (details of a transaction or “fingerprint” of a document for example)
● A hash (a unique sequence of numbers and letters that identifies a block)
● The hash of the previous block
It is thanks to this that all the blocks remain linked together and form an inviolable chain, making it impossible to modify any information without it being detected by other users. Moreover, each hash is calculated when its block is created, and then modified each time the information it stores is changed.
When a user wants to enter new information into the blockchain, such as during a new transaction, a new block is created. It is then up to the members of the network themselves to validate and verify the authenticity of the new information inserted.
As mentioned above, this validation can be done in two ways:
● Proof of work: Based on cryptography, it allows complex calculations to be made to authenticate the information. The block is then made available to all users and cannot be modified. Thus, it renders any potential hacker attack inoperative.
● Proof of stake: The computationally intensive work of the “miners” is here replaced by validating instances holding considerable portions of the blockchain. They are supposed to act in the general interest of the network and receive periodic rewards for their contribution (and rarely penalties for illegal or malicious behaviour).
Finally, the blockchain is an open network and every user has a copy.
Thus, for a new block to be added to the chain, it must be sent to the “network nodes” of computers scattered around the world. It will then be submitted for validation by each of the nodes and added to all copies of the database.
This decentralised network of nodes ensures the validity and authenticity of the blockchain certification. The version with the majority of validations is in principle the one that is considered valid.
It is the combination of these three concepts, the hash, the proof of work (or stake) and the network of nodes, that makes blockchain a secure, forgery-proof and evidential technology.
From a legal point of view, the certification of a digital file on a blockchain constitutes the beginning of a proof, like an email. Thus, two conditions must be respected:
- Guaranteeing the identity of the person who issued the certification
- Keeping a certified version of the file
The certificate established will make it possible to prove before a judge the integrity and anteriority of a data or a digital file.
This makes it possible to obtain an NFT (non-fungible token), which is particularly suitable for the certification and storage of documents.
The process of creating an NFT is called minting. It consists of copying a digital file to a server and then creating a cryptographic token containing a link to that file on a blockchain.
We have mentioned crypto-currencies as the first successful application of blockchain, but many other sectors are likely to benefit from the technology.
Also in finance, Banco Santander, a Spanish bank, is using the Ripple blockchain to automate some international fund transfers for its customers. The number of manual actions is reduced, which saves time and also reduces the cost of each transaction.
In supply chain management, blockchain is also particularly suited to real-time tracking of goods as they move and change hands. For example, it allows newly arrived goods in a port to be allocated to different shipping containers.
Blockchain is also proving popular with healthcare professionals, particularly for storing health data and medical history. It overcomes the effects of large data silos in the sector and protects the privacy of patients who cannot be directly identified.
CERTIFICATION OF OFFICIAL DOCUMENTS
In the banking compliance sector, with the advent of fintechs and their remote entry pathways, the need for certified official documents is becoming increasingly urgent. Indeed, document and identity fraud has exploded in recent years.
In many countries, it is still necessary to use professionals (e.g. notaries) and to travel physically to certify a document. The customer experience is obviously greatly degraded and the system is not perfectly foolproof.
To overcome this problem, many financial institutions prefer to obtain these documents directly from state-run websites such as Infogreffe.fr in France. This is the choice we have made at LinkCy to ensure the highest level of security for our partners. Nevertheless, the process could be even smoother if the entire database relating to companies (addresses, managers, shareholders, etc.) was stored on the blockchain.
In the real estate sector, one could imagine the same thing for property deeds. Buyers of a property would be provided with an NFT at the time of purchase. It would then allow them to prove their ownership status and would also facilitate the transfer process.
This is already the case with the diplomas issued by some schools, which have abandoned the paper format because it is too easily falsified or misplaced. Instead, students receive a digital diploma that includes all their educational information. They can also share it on their CV, social networks or send it directly to recruiters. This is a guarantee of security for students and confidence for companies.
In France, several institutions have already taken the plunge, such as the emlyon business school and the University of Lille.
Finally, a new type of token, inspired by the online game World of Warcraft and supported by the creator of the Ethereum blockchain Vitalik Buterin, could prove promising in this area. This is the Soulbound token (SBT). These are NFTs that act as ‘medals’ in real life, similar to the ones you get in a video game by completing a certain task. Buterin sees them as a compelling way to prove one’s employment history, credentials and other types of skills.
Unlike traditional NFTs, SBTs will not be transferable, so they cannot be acquired through trade, which makes them even more suitable for certifying academic paths. They could also be useful for managing event ticketing or even tracking a person’s credit score.
However, users will be free to revoke them on demand. This is important to prevent them from being used for authoritarian or even dystopian purposes, such as the infamous Chinese social credit system.
The certification of official documents using blockchain therefore has a bright future ahead of it. There are many unexplored areas that could benefit from it, such as digital medical prescriptions or intellectual property management of industrial patents or even designs in the fashion industry.
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