How can blockchain technology improve government services?

For some, Blockchain technology gets a bad wrap - in most part due to the dramas and hype caused by cryptocurrencies like Bitcoin. Cryptocurrencies aside, most people still don't understand the underlying technology behind blockchain and perhaps don't realise some of the potential benefits that it could deliver for particular use-cases in the delivery of government services.

In fact, there is a lot of commentary, research and experimentation amongst government agencies and technology companies in Australia and around the world interested in leveraging the potential benefits of blockchain technology for government agencies (check out the resources list at the end of this article for some examples)

This article helps newcomers to blockchain in government agencies understand what it is, how it works, the pros v cons, some existing government case studies and some guidance on how they might consider adopting it within their operations.

What is Blockchain Technology?

'Blockchain'

A 'Blockchain' is a type of shared database that records transactions in a secure and transparent way. It's a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a network. Assets?can be:

• tangible - for example, a house, car, cash, land, or
• intangible - for example intellectual property, patents, copyrights, branding.

Basically anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.

How does blockchain technology work?

A 'blockchain' is a type of distributed ledger that uses cryptographic techniques to link and protect the information in the ledger:

• The information is organised into blocks, which are batches of transactions or data that are verified and added to the ledger.
• Each block contains a unique code, called a hash, that identifies the block and its contents.
• The hash also references the previous block in the chain, creating a link between the blocks.
• This link ensures that the blocks are in chronological order and that any attempt to modify or insert a block would break the chain and be detected by the network.
• Each additional block strengthens the verification of the previous block and hence the entire blockchain. This renders the blockchain tamper-evident, delivering the key strength of immutability. This removes the possibility of tampering by a malicious actor — and builds a ledger of transactions you and other network members can trust.

What is Crypto Mining?

The blocks are created and validated by nodes that participate in the network, using a process called crypto 'mining':

• Mining involves solving a complex mathematical puzzle that requires a lot of computational power and time.
• The puzzle is based on the hash of the previous block and the transactions or data in the current block.
• The first node that solves the puzzle broadcasts the solution and the block to the network.
• The other nodes then verify the solution and the block, and if they agree, they add the block to their copy of the ledger.

This process creates a consensus among the nodes on the state of the ledger, and ensures that the ledger is updated and synchronized across the network.

What are Smart Contracts?

Blockchain technology can also support smart contracts, which are self-executing agreements that are stored and executed on the blockchain. Smart contracts can define the rules and conditions for transactions or interactions between parties, and can automatically enforce them without the need for human intervention or intermediaries. Smart contracts can enable more efficient, secure, and transparent transactions and interactions on the blockchain. Case studies include the management of payroll tax collection, student loan tracking, vaccination tracking and grants management.

How does it relate to 'Digital Identity'?

Blockchain technology can also be used to create a highly trusted mechanism of managing digital identities. With blockchain technology, information about identity is auditable, traceable and verifiable. Individuals can curate their own profiles and control data sharing. Blockchain identity systems enable users to monetize their own data, track how it’s used, and easily share and secure it.

The system makes establishing, tracking and maintaining digital identities more efficient, user friendly, secure and less open to fraud. Blockchain technology allows for users to create and manage digital identities through the combination of decentralised identifiers, identity management, and embedded encryption.

What are the pros v cons?

Pros:

• Greater trust - Blockchain technology can enhance trust and security by creating an immutable and verifiable record of transactions that can be accessed by authorized parties. This can prevent fraud, corruption, and tampering, and increase confidence in the data and operations that utilise the technology.
• Less time, money and resources - Blockchain technology can streamline processes and reduce costs by eliminating intermediaries, paper-based systems, and manual errors. This can save time, money, and resources, and improve the quality and speed of service delivery.
• Data sharing - Blockchain technology can enable innovation and collaboration by facilitating data sharing, interoperability, and co-creation among different stakeholders, such as citizens, businesses, and other government agencies. This can foster new solutions, partnerships, and opportunities, and enhance the government’s responsiveness and agility.

Cons:

• Managing Change - as is the case with any new technology innovation, there will be organisational change challenges faced by organisations looking to adopt new new mindsets, skills, and practices among the staff and stakeholders. This can entail challenges such as how to create awareness and understanding of ledger technology, how to foster collaboration and coordination across silos, and how to address the potential resistance and barriers to change.
• Complexity - as is the case with any new technology innovation, Blockchain technology can add technical and operational complexity by adding a new technology element that requires its own design, development, and maintenance, requiring a robust and scalable system that can handle large volumes of data and transactions. This can pose challenges such as how to select the appropriate type and architecture of ledger technology, how to ensure the security and reliability of the system, and how to manage the costs and risks of implementation.
• Environmental Sustainability - given the large demand placed upon compute power, solution architects of a blockchain solution should be required to consider the environmental sustainability ratings of their choice of compute. Large crypto mining operations will have a lower environmental impact when choosing data centre/cloud hosting options with higher efficiency and environmental footprint ratings.

How have government agencies used Blockchain technology?

Blockchain technology has been used for various purposes, such as cryptocurrencies, supply chain management, and digital identity.

Some government agencies have also experimented with ledger technology to improve their efficiency, accountability, and service delivery. Some examples include:

• The Australian Taxation Office ran a hackathon to increase transparency around Luxury Car Tax compliance and used blockchain to validate the dealer history of cars.
• The National Disability Insurance Scheme trialed combining blockchain with the New Payments Platform to create smart money.
• The Dubai Electricity and Water Authority implemented a blockchain-based solution to automate the billing and settlement of energy transactions with other entities.
• The Estonian Government used blockchain to secure the digital identity and health records of its citizens, as well as to enable e-voting and e-residency.
• The United Nations World Food Programme used blockchain to provide cash assistance to refugees in Jordan, reducing transaction costs and enhancing data security.

What should government agencies take into account before adopting blockchain technology?

To significantly increase the adoption of blockchain technology into their operations, government agencies need to consider several factors, such as:

Purpose and Scope

Government agencies should identify the specific problems or opportunities that blockchain technology can address, and the expected outcomes and impacts of using it. They should also define the scope and boundaries of the blockchain system, such as the type and architecture of the blockchain, the data and transactions to be recorded, and the stakeholders and users to be involved.

Readiness and Capability

Government agencies should assess the readiness and capability of the government and the ecosystem to adopt and use blockchain technology. This includes the availability and accessibility of the infrastructure, resources, and skills needed to design, develop, and maintain the blockchain system, as well as the legal, regulatory, and ethical frameworks and standards that govern the use of blockchain technology.

Engagement and Collaboration

Government agencies should engage and collaborate with the stakeholders and users of the blockchain system, such as citizens, businesses, and other government agencies. This involves communicating the vision and value proposition of using blockchain technology, soliciting feedback and input, building trust and transparency, and fostering co-creation and innovation.

Go or No-Go?

Well, it's up to you. If you're asking me, then I would say that it should at least be considered. I am positive that under the circumstances where an agency can support the change impacts well and have well-thought through the operational and inter-agency impacts and most importantly the citizen benefits, then this would be the right combination of things to introduce this kind of innovation. However, it really must be the right solution under the circumstances and it should always be compared to other technology methods and case studies that aim to achieve the same outcome but in a different way with different implications. And if after all the comparisons, you still believe its the right solution, then I would advise that you adopt an agile/lean approach (preferably SAFe) and run small experiments to get early wins and accumulate positive momentum and build up towards successful adoption with minimal detriment.

Resources

• Blockchain overview: Australian Government guide | Digital Transformation Agency (dta.gov.au)
• Blockchain | Digital Transformation Agency (dta.gov.au)
• Australia’s Blockchain Roadmap | Australian Government Department of Foreign Affairs and Trade (dfat.gov.au)
• Understanding the basics of blockchain in government | Deloitte Insights
• Blockchain for Government - IBM Blockchain | IBM
• How governments can harness the potential of blockchain (mckinsey.com)
• Blockchain in Government and the Public Sector | Real World Blockchain Use Cases | Consensys
• Blockchains for Government: Use Cases and Challenges (acm.org)
• Blockchain technology has the potential to transform government, but first we need to build trust (worldbank.org)