BLOCKCHAINS AND CRYPTOCURRENCIES IN RELATION TO UGANDA.

Blockchain technology has to be one of the biggest innovations of the 21st century given the ripple effect it is having on various sectors from financial to manufacturing as well as education.

Unknown to many is the fact that Blockchain history dates back to the early 1990s. Since its popularity started growing a few years back, a number of applications have cropped up all but underlining the kind of impact it is destined to have as the race for digital economies heats up.

A Blockchain (Block Chain), is a Continuous growing list of records, which is called Blocks, which are linked and secured by using cryptography. In a blockchain, each block contains a hash of the previous blocks known as a cryptographic hash of the previous Blocks, Transaction data, and a timestamp. As we have studied earlier about Timestamp.

A “Blockchain” represents the Second Greatest innovation from Satoshi Nakamoto. As a Distributive ledger, the blockchain is stored locally on the computer hard drive of every single user running a full version of the Bitcoin software.

The work of a Blockchain ledger is to record the history of every transaction which is sent and confirmed in the Bitcoin Network.

Cryptocurrencies are “digital money” that do not physically exist but can be converted to any popular physical currency. Bitcoin, the first digital money, was hatched as an act of defiance. Unleashed in the wake of the Great Recession, the cryptocurrency was touted by its early champions as an antidote to the inequities and corruption of the traditional financial system.

Bitcoin sought to replace the services provided by financial institutions with cryptography and code. When you pay your mortgage, a series of agreements occur in the background between your financial institution and others, enabling money to go from your account to someone else’s.

Bitcoin and other cryptocurrencies replace those background agreements and transactions with software — specifically, a distributed and secure database called a Blockchain. If you could piece together a running tabulation of who held every dollar, then suddenly the physical representations would become unnecessary.

Bitcoin achieved the running tabulation by creating a single, universally accessible digital ledger called a blockchain. Bitcoin’s blockchain, unlike the ledgers maintained by traditional financial institutions, is replicated on networked computers around the globe and is accessible to anyone with a computer and an Internet connection.

A class of participants on this network, called miners, is responsible for detecting transaction requests from users, aggregating them, validating them, and adding them to the blockchain as new blocks. It’s called a chain because changes can be made only by adding new information to the end. Each new addition, or block, contains a set of new transactions — a couple of thousand that reference previous transactions in the source: chain.https://www.researchgate.net/publication/345098872_Introduction_to_Blockchains_and_Cryptocurrencies

Examples and the Benefits and disadvantages of Blockchain technology

Some examples of real-world blockchain applications in use are as follows:

1. Land Ownership and Management: Dubai, USA, UK, Sweden, Ukraine, Georgia and Ghana.
2. Development Aid: Aid Transfer Efficiency, South African Early Childhood Development.
3. Supply Chain Management: Diamond Tracking (De Beers), Food Safety (Walmart), Oil Supply (ADNOC), Agricultural Products Supply (LDC).
4. Renewable Energy: WePower (Estonia), Power Ledger (Australia), Acciona Energy (Spain), The Brooklyn Micro Grid (US), The Sun Exchange (South Africa). · Remittances: Blockchain Wallet, TransferWise, Ripple’s XRP, BitSpark, MoneyFi, Chynge.
5. Digital Identity: Civic, ValidatedID, THEKEY, Trusti, PeerMountain, Edge, BlockAuth, BlockVerify, CryptID, ExistenceID.
6. Agriculture: Food Traceability, Fair Trade Farming, Organic Farming Certifications, Food Safety (Pesticides Use), New Markets, Logistics.
7. Democracy and Governance: Voting, Decentralisation of Services, GovCoin, Democracy.Earth, FollowMyVote, Smart Participation, Liquid Democracy. · Manufacturing and Industrial: Provenance, JioCoin, Hijro, SKUChain, BlockVerify, STORJ.io, RFID Integration, Anti Counterfeiting, Compliance.
8. Health: Modum.io, Gem, SimplyVital Health, MedRec, Electronic Health Records (EHR), Ambr0Sys, Hashed Health, Medical Change, Change Health. among others

?BENEFITS OF BLOCKCHAIN TECHNOLOGY

1. Immutability: Any transaction which is confirmed cannot be changed in the blockchain.

2. Supply Trade and Chain Finance: For the Management of chain supply, blockchain technology offers the advantage of traceability and Cost-effectiveness. Blockchain can be used to track the movement of goods, their origin, and quantity. It brings about a new level of transparency to B2B ecosystems simplifying processes such as ownership transfer, processes such as ownership transfer, payments, and production process assurance.

3. Quality assurance purpose: This makes it easy for a business to carry out investigations and execute the necessary actions.

4. Accounting: Recording Transactions through blockchain virtually eliminates human error and protects data from possible tampering. But remember that the records are verified every single time they are passed on from one blockchain node to the next. To the guaranteed accuracy of your records, such a process will also leave a high audit trail.

5. Smart Contracts: Blockchain-based smart contracts are those that can be executed partially or fully or enforced without human interactions. Some blockchain implementations could enable the coding of contracts that will execute when specified conditions are met. The main Object of the smart contract is automated escrow. 6. Blockchain technology can be used in various areas.

DISAVANTAGES

1. A Researcher N.Hampton pointed out that there is no need of 51 Percent attack on the private blockchain, as the private blockchain already controls 100 Percent of the creation of all block. He also said that there is no race within a private blockchain also there is no motive to use more power or discover blocks faster than the competitors.

2. Bitcoin is not user-friendly. Most of the software to control and transact in bitcoin is complex and difficult to use.

3. Third Party Software and solution can simplify this use involve entrusting bitcoin to third party user.

4. The Bitcoin network is open access. The opening of an account with regulated exchanges require laundering of anti-money and know your client verification and account funding that makes difficult for a new user to acquire bitcoin quickly.

5. Lack of protection against mistakes. Unlike other traditional payments, bitcoin transaction can`t be reversed and no any administrator can restore the transaction. As a wrong bitcoin transaction will result in loss of funds.

IN RELATION TO UGANDA

However in Uganda BOU has warned all licensed entities under the National Payment Systems Act, 2020 to desist from facilitating crypto currency transactions.

Bank of Uganda shall not hesitate to invoke its powers under Section 13(l) (b) & (f) of the NPS Act, 2020 for any licensees that will be found in breach of the above directive

In 2019, Finance minister Matia Kasaija said : “The government of Uganda does not recognize cryptocurrency as the legal tender in Uganda and has not licensed any organization in Uganda to sell cryptocurrencies or to facilitate trade in cryptocurrencies.”

He added that the government has not licensed any organization in Uganda to sell cryptocurrencies or to facilitate the trade in cryptocurrencies and so these organizations are not regulated by the Government or any of its agencies.

“As such, unlike other owners of financial assets who are protected by government regulation, holders of cryptocurrencies in Uganda do not enjoy any consumer protection should they lose the value assigned to their holdings of cryptocurrencies, or should the organization facilitating the use, holding or trading of cryptocurrencies fail for whatever reason to deliver the services or value they have promised,” he said.

According to him, most crypto-currencies such as Bitcoin and Ethereum are not backed by assets or government guarantees, therefore holders of these crypto-currencies are fully exposed to the risk of loss or diminishing value as the issuers are not obliged to exchange them for legal currency or other value.

BUT HOW DOES BLOCKCHAIN TECHNOLOGY WORK

Understanding the below points which will help to understand how blockchain blocks:-

1. To send or receive bitcoin, a bitcoin user must do a transaction and the user broadcasts it to every part of the Bitcoin Network.

2. For a successful transaction, the user must be added to the public digital ledger i.e. Blockchain. The network of nodes validates the transaction.

3. Transaction data is collected and verified by the use of “Miners” against the existing blockchain ledger and it solves a cryptographic puzzle that allows them to add a recent transaction block to the blockchain.

4. It helps to ensure each sequential block of the public ledger is accurate because of the fact that so many users have the same records and they are many to confirm the same transactions.

5. A new block that is created is added to the existing blockchain as mentioned earlier. Once a block is added to the blockchain it is there forever and becomes a public record.

6. The transaction is completed?