How Blockchain could Improve Government Processes and Procedures
The relationship between the people and the government is built on trust. The citizens of a country give the government power over every aspect of their lives. A crucial responsibility of the government is to maintain information about individuals, organizations, activities, and assets. Government agencies issue birth certificates, death certificates, marriage certificates, driver’s licenses, passports, business licenses, property deeds, and more. These agencies are trusted to maintain and safeguard the information of every citizen.
Naturally, government agencies are always on the lookout for tools and technology that can help them better manage the trusted information. It’s a complicated task. They are looking for tools that will be secure, efficient and fast. Recently, governments all over the world are looking at blockchain as a potential solution. More and more countries are running pilots, tests, and trials using blockchain as a core technology to improve their governments.
Blockchain: A Digital Ledger for Transactions
Most leaders in the government are aware of blockchain technology. They might not have studied it in depth but they have a bird’s eye view of what the technology entails. However, due to its close association with cryptocurrencies like Bitcoin and Ether, the information they consumed might be confusing to them. Let’s discuss blockchain independent of cryptocurrency, so we can have a broader understanding of the technology implications.
Blockchains record transactions. It’s basically a digital ledger that keeps track of information. Before the advent of computers, government and businesses used to keep physical paper ledgers. Today most records are maintained in databases. Both paper ledgers and databases have one thing in common: they have to be safeguarded against manipulation. People with ill intent can manipulate paper ledgers or databases to gain unfair advantages. Locking up ledgers and access control on databases are centralized ways of maintaining data integrity and trust.
Blockchains are decentralized systems. The trust is built into the technology. Each transaction record is considered a block. These records are tied to each other on the blockchain using cryptography. Adding each block takes a lot of computational power and depends on all the previous records in the chain. So as the chain becomes longer, it becomes impossible for any one party to manipulate the records. If somebody changes a single record in the chain, the mathematical calculations instantly show that the ledger has been corrupted. Multiple copies of the digital ledger are maintained on the network. So corrupted ledgers can be easily replaced.
Some of the important characteristics of blockchain are:
? Decentralized: Multiple copies of the ledger is distributed throughout the network. So there is redundancy already in place. Also, the verification of the blocks is computationally expensive. But the whole network shares the work.
? Immutable: The transactions recorded on the digital ledger use cryptography to validate. The mathematics behind it ensures that each and every record is immutable. Nobody can change a single record without affecting the whole blockchain.
? Near Real-time: Updating paper ledgers or database records require third-party interventions. The third-party is responsible for checking the identity of the people or organizations who are making the transaction. In blockchain, the authenticity of the involved people or organizations is already built-in. So transactions are almost real-time.
Value of Blockchain for Governments
Governments have a complex web of rules, regulations, and processes. The term “red tape” is a necessary evil of government business. Blockchain can help improve current processes and provide value in multiple areas like:
Data Sharing: Governments have to share data between different organizations inside and outside of the country. Centralized systems are expensive and inefficient. Distributed and decentralized blockchains can make information sharing faster and more efficient.
Improved Trust: Whether it’s a passport or a driver's license, a government document can be faked. Blockchain has in-built safeguards that help improve trust in government-generated documents.
Auditability: Blockchain transactions are immutable. It makes it easy to trace any transaction through the whole chain. Governments can audit blockchain to figure out any anomaly in financial or business transactions. Criminals and fraudsters have less opportunity to hide their illegal activities.
Automation: The trusted nature of blockchain means that a lot of current manual record verification can be automated. There will be no need for wasting human time and energy on menial tasks of figuring out conflicts in data entry and information sharing.
Smart Contract: Smart contracts are programmed code on the blockchain that executes when all the conditions of the code are met. It can take automation to the next level where complex tasks currently executed by trained professionals like lawyers and accountants can be achieved through the blockchain.
Areas of Applications in Government
Governments deal with a lot of data every day. So the opportunities to improve are many. However, government agencies should look into individual areas and try to figure out if applying blockchain technology will provide a return on investment. Here are some government application areas that seem ready for investment:
Identity Management
Governments are in the business of identity management. Whether the government is recognizing a person or a car, it needs ways to capture and store digital information. Databases are not the best solution. They are prone to hacker attacks. As data size increases, the database performance deteriorates.
Also, there are problems of data interoperability. The various agencies struggle to keep the identification information in sync. The Internal Revenue Service (IRS), the Department of Homeland Security and the Department of Motor Vehicles (DMV) have different identification numbers for the same person.
Identity management through blockchains can bring all of these disparate records together. Also, the immutable and audible nature of transactions makes identity management on blockchain seem like a great opportunity for security improvements.
Because of distribution and encryption, people can also get back control over their own personal data if the governments are willing to put the proper checks and balances in place.
Digital Property Ownership
Transferring ownership of any kind of property (land, copyright, trademark or assets) requires a lot of paperwork. Governments have large departments that deal with various aspects of property ownership.
Blockchain seems like a logical solution to improving the processes of these departments. Sweden is already putting their land registry on a blockchain. Other countries will soon follow.
Also, blockchain can help with intellectual property (IP) ownership issues. The immutability of blockchain records makes it a perfect solution. Smart contracts can help automate complex financial, property or royalty transactions.
Smart Incorporation
Entire companies can be incorporated on the blockchain. Smart contracts can help companies execute all their functions without using any paper trail.
Delaware in the United States is already experimenting with a blockchain-based incorporation service that will rely on smart contracts. Investment and financial details of companies can be handled through the blockchain. If governments can successfully implement such a system, it could mean that auditing corporate taxes and regulatory compliance can be easier.
Voting
Every democratic country has to spend a lot of money ensuring a fair and just voting system. Even with all the precautions, there is always the possibility of fraud.
Blockchain-based voting applications can lead to a transparent and auditable system. A system where votes are tied to immutable identity records seems like a more secure process. Also, it will allow remote voting which can significantly bring the costs down.
Understanding the Risks and Challenges
Government agencies that want to adopt blockchain to improve their processes need to understand the risk factors. Here are a few:
Lack of Standardization: Blockchain is a new and fast-evolving technology that doesn’t have an ecosystem of established rules and regulations. It can be a hurdle for government agencies that require stringent adherence to guidelines.
Lack of Enterprise-Level Expertise: Most blockchain companies are small startups. They are the pioneers who are changing the world. But they are new to the game and inexperienced in dealing with scalability issues. Government agencies with large databases and information need to be aware of the lack of expertise and make sure there are contingency plans.
Privacy Issues: Blockchain is open by its nature. Healthcare or financial information with privacy requirements need to take a closer look at blockchain-base solutions to figure out if the legal requirements will be met.
Examples of Government Experimentation
Governments all around the world are already experimenting with blockchain. Here are some highlights:
? Land Registry: Sweden is putting its land registry on a blockchain. The Swedish government is working with blockchain company Chromaway to achieve this.
? Governance: Dubai is trying to make its economy blockchain-based. They want the first blockchain powered government by 2020.
? Healthcare Records: Estonia has managed to already move a million healthcare records to a blockchain with the help of Guardtime, a cybersecurity provider with blockchain expertise.
? Corporate Transactions: The State of Delaware in the United States has created a new financial instrument called “distributed ledger shares” based on blockchain to improve their corporate trade and transaction clearing process.
Thoughts for the Future
Government leaders have tough decisions ahead. Even though blockchain is a promising technology, it is new and volatile. Leaders have to navigate through all the bombastic claims and figure out what can really benefit their particular organization.