March 17th, 2017, Deloitte Ukraine’s spokespersons Sergei Bondarenko and Dmitri Pavlenko presented their new project DocSensus at BlockchainUA conference in Kyiv. The next day, the project team came in second at the second edition of the All-Ukrainian Blockchain Hackathon.
DocSensus is a blockchain-based ledger of corporate documentation protecting papers from unauthorized changes, falsifying and losses while enabling third parties to verify them with digital original copies.
ForkLog talked with the project’s creators.
FL: What is the current stage of the project?
D. P.: We’re working on solving a problem around a great dissatisfaction in businesses and the society, which is about needing an efficient, fast and comprehensive document flow control and legal security. As our legal status completely relies on documents, we need said documents to be protected against counterfeiting, stealing, or losing.
FL: How do you apply blockchain for that purpose?
D. P.: I’m a legal expert, not a technology one, yet, having found out about blockchain, I was amazed at how the technology can cover operational and legal needs of businesses.
S. B.: We use blockchain for two basic purposes, which are (1) distributed and cryptographically secure storage of documents; and (2) verification of the paper’s belonging to a certain legal/natural person. We intend to use smart contracts managing documents’ life cycle, and multisignatures for documents authorized by a group of people.
FL: So, this is the solution for major companies requiring their document flow to be systematized, right?
S. B.: First of all, they require to protect their document flow. We still live in the asset-grabbing era, and lots of problems occur because of plain counterfeiting of papers. So, speaking of major companies, they obviously should be interested in that.
FL: How do you prove the nation state that something was an illegal takeover? How do you prove blockchain is a real thing? Will it actually work?
D. P.: We assume that blockchain, in plain terms, is a very reliable storage solution, not a new regulation or a legal property of a document. According to the law, a document may be electronic and signed with a digital signature.
FL: So, you mean that the government will have no claims, and everything will be understood, transparent, and accepted?
D. P.: Living in our country, I just have no right ti say it won’t have claims or misunderstanding. There certainly will be some questions, but we’ll be ready.
S. B.: On the other hand, we see the government’s emerging interest in blockchain, as well as a bunch of challenges that blockchain brings about.
FL: If your system works, how do you prove it is efficient to a government entity?
S. B.: The project has been developed in accordance with regulations regarding to a document. In Ukraine, technological innovations usually get stuck because laws aren’t in line with them as proved by the system of electronic public tenders Prozorro: first there were technologies, and laws followed in their wake.
When it comes to document flow control, everything is different. Ukrainian legislation is way ahead of the technological advancement. For instance, there’s a provision stating that all copies of a digital document in a distributed storage are digital original copies. If a document was e-mailed to numerous users, legally it’s all the same original one. The provision came to be back in 2003, when there was no blockchain. Now, when we record a paper on a blockchain, it’s simultaneously located in all nodes of a network while remaining in Ukrainian legal terrain. Neither of those documents can be considered a secondary. They’re all originals.
FL: You need blockchain to prove there had been no changes to the base?
S. B.: Yes. And also, such documents can’t be destroyed. There have been some cases in precedent when documents used as exhibits were destroyed right in the courtroom. People were just eating them. It would be hard to eat up digital proofs protected with blockchain. It will change the rules, and they’ll have to deal with that.
D. P.: I’ve seen instances of destruction of entire cases in my legal practice. Once, a counterparty’s representative came to the court to read the trial contents, gave someone else’s passport to the bailiff as a security, and just got away with all the papers. No papers, no problem. Paper-based archives of companies tend to suffer from ‘acts of god,’ which relieves many from any responsibility.
S. B.: A paper-based document is a physical item, therefore one has to wait when somebody brings it somewhere. A chain of events doesn’t occur unless the paper is there. A courier might fail to deliver it, for instance. If it’s a tender documents, you might just fail it because of ill timing. When it goes digital, once a paper is published, it’s available to all users anywhere, which is a great advantage.
D. P.: I wouldn’t be too optimistic when it comes to the governmental acceptance of e-documents. It’s an issue of legal and technical savviness, or even advancement of legal consciousness. The letter of attorney we were demonstrating at the presentation is in fact a double-purpose document. Its original copy is digital, signed with a digital signature and stored on the blockchain. However, I couldn’t take this letter to a tax authority, or a courtroom, or even a superintendent today.
For that reason, I still have to make a paper copy complete with all regular details. However, it contains info that its original copy had been signed with a digital signature and stored on a blockchain, which is important. It carries a QR code one may use to see a digital original copy at our website and on the blockchain.
FL: Are you going to create a universal system applicable anywhere in the world?
D. P.: Before entering the market, we decided to give ourselves the needle first, like a good doctor. We chose a small part of our internal corporate document flow, which is letters of attorney. There are about 10 to 15 of them issued over a year, and now they’re going to be executed with blockchain. This is our new corporate policy. We’re going to gradually scale it up.
FL: Let’s say, a major company creating thousands of papers a day uses your service. How could it operate it all? Is there a search engine?
S. B.: Of course we’re thinking about that. First of all, we’d like to use the IT systems employed to create and process documents nowadays. We’re most likely going to create some API’s that could enable signing and sending a paper into blockchain instead of stamping it.
FL: In your opinion, how long will it take the need in paper document flow to wither away?
D. P.: We believe that digital advantages and blockchain will get us rid of papers. I see the evolution like that. Today I enter a courtroom with a classical letter of attorney carrying a corporate logo, blue stamp and somebody’s scribbling. Our first e-letter of attorney is signed with a digital signature and stored. One may see it in the blockchain using the qr code.
The court will see this information. First they won’t understand what’s it all about, but next they’ll realize it’s no less than a way of additional validation. I believe that someday a court will start asking questions if a document doesn’t refer to an electronic original copy. At the next stage, people will start to avoid making decisions on the basis of a piece of paper, so it won’t be of need anymore.
FL: Which blockchain does your service use?
S. B.: It’s Emercoin. It’s quite possible that we’ll use other blockchains to enhance security. We like IPFS-based distributed storage solutions enabling one to store bodies of big documents there while specifying key data and references thereto in the blockchain.
There’s a market of e-documents, it’s all centralized for now. However, we see no problem in building a decentralized system for documents exchange between organizations and people. It could render paper obsolete. All the projects we come up with use paper-free processes: all users are authorized with a digital signature, and all their further actions are formed right away, with no paper involved. It’s quite convenient. If needed, we always can get a paper version as a derivative or a copy. A digital original copy is easier trace: it’s stored in a multitude of copies and reserved on a blockchain.
FL: How much will the service cost?
S. B.: Paper is so ‘long-lasting’ because it’s a cheap and convenient item. Everybody loves it, and no special technologies are required here. People have mastered printing and paper-making long ago, but the forests suffer. We’d love it if Ukraine spent less paper on this nonsense. That’s why we compete with paper for prices. EDI technology, for instance, allows for doubling the rate of cost reduction.
We can’t be specific about the price right now. We’re using design thinking, so we’ll just test it with our clients. Together, we’ll estimate the economic effect. I concede that it could not be as attractive as we’d like at early phases. The first steam engine was expensive yet it proved to be a promising technology. As a business, we’re seeking to make the service affordable and efficient.
FL: So, the basic advantages for a company are in saving money and accelerating document circulation, aren’t they?
S. B.: Yes, our customers will pay for the services, which are to be cheaper than maintaining a paper-based document flow. The prime cost of an A4 paper-based document in Ukraine comprises around 12 hryvnias (45 cents) in average, while going electronic cuts the expenses by a half. It includes employee salaries, printers, cartridges, electric power, couriers. I’m sure that blockchain can make it even cheaper if we take a systemic approach.