How to Combat Fraud with Blockchain in the Philippines

CRYPTODAY 151

I’ll get right to the point: blockchain can’t prevent fraud within the Philippine government.

The blockchain industry has never been able to prevent fraud within its own ranks, and there is no evidence that it could do so when applied at the scale of a national budget. Over the last decade, there has been widescale fraud at the level of centralized blockchain platforms (FTX, Celsius, MtGOX), at the level of smart-contracts (the decentralized pyramid scheme Forsage and all its clones), at the token level (OneCoin, Bitconnect, EthereumMax), and at the level of blockchains themselves (Bitcoin Satoshi’s Vision). All blockchain advocates are aware of these stories so I won’t go back and explain each one.

But it’s fun to talk about this stuff, and I did have a few silly ideas on how you could use some existing blockchain tech to combat fraud. (Note that I’m saying “combat” instead of “prevent.”)

So without further ado, here are a few free silly ideas:

1. Mint every budget document as a 1/1 NFT and transfer them as soulbound tokens to EVM-based wallets representing the various departments and agencies.
   
   Why NFTs? Minting an NFT is so trivially simple now that there are multiple Wordpress plug-ins that allow you to do it. The idea here is to turn these public documents into NFTs so that they can be viewable by all compatible tools, including your Metamask wallet. It would allow watchdog groups to review what’s happening and could establish a timeline of approval and utilization.

   
   Why soul-bound? Because we don’t want the department or agency to be able to destroy evidence, so we need to make the NFTs non-transferable once it’s been received.

   
   The biggest problem with this idea? The fact that an NFT is simply a pointer to an external resource, so if you were clever enough to swap out the underlying binaries (a PDF, for example) then you could alter the document it was pointing to. This was a constant problem back when NFTart was super popular, and as far as I know, there’s no real fix for it other than trusting the benevolence of the issuers.

   
   Cost of Implementation: Less than P10,000,000
   Fraud Prevention Level: Minimal, but a fun exercise for academics
   

2. Force high-ranking officials and decisionmakers to convert their personal assets into stablecoins and stake them for the duration of their public service.
   
   Why stake? Because public trust is at an all-time-low and the only way you win it back at this point is with painful, over-corrective transparency. Note that staking doesn’t mean freezing — they are still free to withdraw some or all of their assets as needed, but everyone will see it happening on Etherscan and Nansen.
   
   Additionally, it generates as much as 12% annual yield for them (also fully withdrawable) and is a win-win for both the staker and the industry at large! Who says you can’t get rich from politics, right? 🤪
   
   The biggest problem with this idea? You can’t guarantee that all of their personal assets were actually declared … which is a nice segue to my final free idea below.
   
   Cost of Implementation: Nothing, and is actually revenue-generating
   Fraud Prevention Level: Debatable, but will really put blockchain in the spotlight
   

3. Force the entire country to shift to a peso stablecoin, and make all cash-based transactions illegal or heavily discouraged (e.g., with P500,000 cash withdrawal limits at banks).
   
   This is the real nuclear option. It will make every transaction — be it legitimate or illegitimate — potentially censorable. Most people don’t know that established stablecoins like USDT and USDC can arbitrarily freeze the funds and wallets of their holders, and they do so quite regularly based on law enforcement requests.
   
   A peso stablecoin would enable that same level of censorship, and under this truly dystopian system, the government wouldn’t need to send orders to the banks and mobile wallets to freeze a wayward politician’s accounts. The programmability of stablecoins would allow them to freeze or seize the actual units of money that that person holds. (This is great if you’re thinking about criminals, but it’s not so great if you’re thinking about the free press.)

   
   In case it’s not obvious, I’M NOT ADVOCATING FOR THIS IDEA. I’m simply illustrating the level of integration that blockchain would have to have if you want to fight fraud and have a chance of winning. We would have to place our entire economy on top of a blockchain, and abdicate all control over our money to the very entity that we are finding so hard to trust.
   
   Cost of Implementation: your freedom
   Fraud Prevention Level: theoretically quite high, but it also prevents everything else :-(
   

CONCLUSIONS

I wrote this article as a way to highlight that blockchain technology doesn’t really work in the way that many people think it does. The biggest misunderstanding stems from the idea that blockchains are marketed as a “source of truth” by a lot of crypto founders and advocates.

That is NOT true in most cases, and is ONLY true in the narrowest sense.

The Bitcoin blockchain is a “source of truth” for its own native token, Bitcoin, and we can trust that it can truthfully account for every satoshi ever mined and every wallet it has ever generated. Why? Because all that information was borne from within that chain itself.

As soon as we start attempting to bring in data from the outside world (public documents, art, music, etc.), we run into the classic “data oracle” problem. This problem means that although the blockchain can preserve data well, it can not verify the data it receives from outside, and must therefore blindly trust a data oracle.

We know that the data oracle problem has NOT been solved at scale.

As a recent example, bettors in the popular blockchain prediction market Polymarket have been shown to override the real-world results of their bets by tampering with the oracle. All that was necessary was a running bet larger than the economic value of the oracle itself.

Apply that to the Philippine context: how powerful must your oracle be if the national budget is in excess of $100B?

In the current meatspace regime, multiple bribes need to be made in order to facilitate ghost projects. With a blockchain oracle, you would only need one bribe. (Let it never be said that blockchains aren’t efficient.)

Blockchains are powerful in a self-contained vacuum but they are no more trustworthy than a PostgreSQL database when the data is coming from outside. All you’re doing is spending a lot of money on a tech implementation that will become a convenient scapegoat when things inevitably go awry.

Stay safe out there, cryptofam!