Well to fully understand the question we need to know what fraud is, which I think all of us know, but just to be on the same page let me quote it's definition as taken from legaldictionary.net
Definition of Fraud: Noun
- Wrongful deception with the intent to gain personally or financially 2. Intentional deception in order to persuade another person to part with something of value 3. A person who pretends to be something or someone he is not.
Not to mention the impact that fraud can bring to a company. If you see the types of fraud that is beautifully listed in the link here, It will be clear that a system with a central authority to control and manage will automatically render itself to fraud. Human involvement makes any system vulnerable and when topped with a central authority to process & validate. Fraud is more likely to be in systems where the linkage of products is across many industries.
Let me highlight a use case to explain my point. Let us say, Hafeez, own a famous restaurant that serves meat products that he promises is outsourced organically with no animal trafficking coming into the picture and no illegally sourced meat from unlicensed vendors. As he also promises that all the food products are hygienic and fresh. But to fulfill his promise and the serve the meat outsourced from vendors with confidence the following needs to be ensured in the supply of meat.
Say Jassi, animal farm owner along with 5 others vendors supply to Hafeez for different types of meat required in his restaurant. Before reaching restaurant the meats are transported to processing plants where they are processed and packed and also checked by the authority to verify & certify that it is from legal farm & condition of it is safe to be processed and delivered in the market. In all this process the temperature is a parameter which should be constantly maintained and logged at each step so that the meat is safe to consume.
The above example of a supply chain problem is prone to fraud at many stages. Starting from the first step, the meat can be given to processing plant from unregistered slaughterhouse or animal farm. Well, a smart contract enabled from blockchain technology will be of good use here. Here a smart contract can be made so that it records some necessary details about the meat supplier like name, business id & meat quantity and temperature stored at before leaving the animal farm. This data is checked with the contract conditions and if the supplier is like Jassi who is certified business, then the transaction is recorded on blockchain network.
Now let's say a Logistics company is involved in providing pickup and drop meat from producer to processing plant. Here the main pain point is to ensure that the meats are always under maximum allowed temperature so that it is not spoilt. Traditional IOT technology does help us to monitor temperature, track delivery real-time, but trust is an issue here as logistics companies can tamper with data before pushing it to customers. A blockchain enabled network will not only ensure transparency as it is peer to peer network, the data points created while in transit will be immutable too. Also, an app on Hafeez end can be made to check the delivery details and all notifications/information regarding the shipment. These data will be accessible to authorized people involved in each stage of supply chain and will be auditable.
The above example can be extended to further our discussion. Now processed meat which is packed will bear some information like date and serial number, preservatives used, best before and storing condition specification. Again immutability, transparency which makes data auditable increase trust in the system.
At the end of the supply chain when meat is received by Hafeez, he being part of the network, he can trace the provenance of the meat and be confident while serving it.
From the above classic problem of the supply chain, It is clear that blockchain provides a trustable, fast, auditable and immutable system that is more resistant to fraud and even if fraud occurs, it gives easy traceability of culprit.
The above example can be replaced with many use case scenarios.
- Cultivation of Opium for Medical industry and pharmaceutical industry.
- Exam conduction in a transparent way.
- Traceability and credibility of diamonds & related gemstone industry.
- Tenders and process of awarding the contract through blockchain.
- Judicial proceedings using Distributed ledger technology.
- Ownership and transfer of assets like cars, land, even cash (fiat currency)
Well, the list is endless and you can cite your favorite use case not mentioned here in comments.Basically, all the processes where people are involved, and central authority to keep a check, fraud is rampant, due to a slow paper-based system and very hard to audit and even when audited and a case of fraud is detected, proving the culprit is very tricky. These inherent drawbacks of the traditional system & corresponding advantages of Blockchain make it defacto system of future in every field where forgery is a big problem.
