BLOCK-CHAINED AS ONE

The block-chain technology (BCT) stirs up the minds of many these days - from ordinary citizens to the largest banks, international institutions and government agencies. So, what exactly is block-chain? Where and how is it possible to use this technology? Most importantly, should we take swift measures to introduce this technology in Azerbaijan?

Network nodes

In layman terms, block-chain is a decentralized database not linked to a central server. In centralized databases, there is one server containing all information even if it is connected to different computers. Block-chain, however, does not have a main server. Any computer connected to this network is called a node, which has a small copy of information stored on that machine. If this piece of information is changed on one of the computers, it is changed on the rest of the nodes as well. This is expected to guarantee the high level of security of block-chains: if one changes information on a block-chain computer, everyone will immediately know about the change.

Many people confuse the concepts of block-chain and bitcoin and even identify them as one. This is not true. In order to understand the difference, it is necessary to know that block-chain is a technology used to create bitcoins, but it has taken a huge step forward outgrowing this functionality.

Bitcoin is just a layer, or rather, the first layer or level of the block-chain, used to transfer material value only. It is followed by the second layer (level), Smart Contract platform, when the technology is also used to make decisions on the transfer of material values. How does this work? Let us say you want to sell a car. You have documents for the car, and here is a buyer who is ready to pay for it. You conclude a smart contract allowing the seller to send his documents for the car, and the buyer to send his money. You do not know each other and you can distrust each other. The contract itself checks the validity of documents and the amount paid. If both data is correct, it simply replaces them sending money to the seller, and documents to the buyer. In case of an error, all the original data is returned to the owners: money goes to the buyer, and documents go to the seller. Such smart contracts can be concluded in any environment.

Today, the developers are trying to create a platform that will allow the transfer of intangible values like​- emotions, various sentiments and so on. In other words, block-chain technology will allow us to transfer the final value of tangible or intangible goods and services.

Illegal but interesting

Where can you apply this technology? Today, block-chaining is used in almost every sphere, even where it is not necessary. The main application of this technology is the database. The transparency of this technology makes it possible to use it in elections, as, for example, in Italy. In addition to transparency, BCT also allows for prompt counting of votes: since all the votes are immediately registered in block-chain, the voting results become available within a minute after the voting.

Introduction of BCT in international cargo transportation sounds interesting as well. Consolidated cargo information may significantly reduce time for customs clearance and verification, as all information arrives in advance at the checkpoints. In addition, after passing one customs point, information will immediately go to the next one, where the second customs control can be performed many times faster.

As for financial sector, BTC is used mainly as a database. In addition, private BCT is also popular, where only a certain number of people have access. This type of block-chaining is more suitable for financial corporations and banks that have classified information.

Some countries are already seriously considering the use of BCT and studying the possible areas of its use. Thus, a number of U.S. federal agencies are considering several potential applications for BCT. Such as state support and the delivery of subventions to foreign countries; supply of appropriations; issuance of documents, such as passports, social security numbers, birth certificates; IT assets and network security; state procurements; royalty; patents, trademarks and copyright; financial management, as well as data from government personnel. Some institutions such as the State Department and the Department of Health are considering the possible use of BCT to provide public services.

But is everything so simple? Although many people compare the revolutionary nature of BCT with the creation of the Internet, there are also complications. Firstly, for BCT implementation, it is necessary to rebuild large systems with a large number of participants. Each system seeks to retain its properties and structure, resisting change. Therefore, it is easier to start from implementing a small-scaled BCT such as the one introduced by the Swedish government to translate slowly but steadily the land cadastre into a block-chain database.

Secondly, BCT has no regulatory base and is still far from it. This causes a lack of confidence in technology, as in the case of bitcoin and other crypto-currencies, which they already want to ban in some countries. The creation of a regulatory framework in this case is a necessity.

First steps in Azerbaijan

In Azerbaijan, BCT has not yet found proper areas of application, as the country lacks programmers working with similar technologies. But a number of banks, stock exchange and other institutions have already shown interest to the technology. According to Etibar Pirverdiyev, President of Azerenerji OJSC, his organization is also preparing for the use of this technology. PWC and Microsoft organized a seminar on BCT for the Ministry of Taxes of Azerbaijan trying to introduce the technology in the country.

In addition, Azerbaijan plans to introduce its own crypto currency, AzCoin, which has a dedicated website azcoin.az operating since September 30, 2017. It is the only resource for creating crypto currency. The site will also develop various projects to promote and convert e-currency.

The developers of the website note that AzCoin is intended as an experimental version and will be available in the future with all the necessary technical support mechanisms.

"AzCoin is one of the key tools for rapid integration into the global digital world. With its help, we will be able to access unlimited new time, speed up payment transactions in the home zone, access electronic and optical networks at local and global levels, and also technically justify and standardize working protocols in this area. Undoubtedly, the development of block-chain technology in the country and the training of young specialists in transactions are also our main goal," say the creators of AzCoin. They also named spheres in which the use of national crypto-currency is planned: agriculture, industry and production, education and medicine, tourism, a variety of public sectors, as well as local and international transfers. The Central Bank of the country will act as the regulator.

But some believe that it is not enough to just copy the codes of the block-chain (e.g. lightcoin) giving it another name. According to IT specialist Orkhan Ahmedov, BCT is much more important than creating a crypto currency. According to him, the project should be built on BCT, then, to support it from the users and raise money based on the same BCT project, create a crypto currency. "Times when the crypto-currencies were created simply to transfer money have passed. From now on, crypto-currencies are created exclusively for the project itself. Therefore, it is pointless to create what is already there, and call it a new coin," said Ahmedov.

How can we apply BCT in Azerbaijan? Apparently, it is desirable to use BCT as a database, to learn how it works and to understand all pros and cons. In addition, the implementation of BCT as a database does not require special regulation by the government or contradict any laws.

After that, it is necessary to create a regulatory framework. Only then this technology will inspire confidence in state and private institutions. It is possible to use the experience of other countries that have already applied this technology to create regulatory framework, as well as invite foreign experts specializing in this field.

If Azerbaijan seriously thinks about the implementation of BCT, it should be done now, as the technology does not stand still and develops every day. Perhaps it is the moment when BCT is tested as a technology of common use to be introduced in the most important branches of life. It is safe to assume that even more BCT applications will be created soon. New projects will be based on the main advantages of BCT such as openness, security and safety. That is why BCT will assist any services where the users have previously worried about possible fraud or security of data.