Why Governments Can’t Stay Away from Blockchain

“The blockchain cannot be described just as a revolution. It is a tsunami-like phenomenon, slowly advancing and gradually enveloping everything along its way by the force of its progression.” In these words, William Mougayar, one of the greatest proponents of blockchain, praises the colossal impact of the decentralized ledger on everything. 

Indeed, by now, the use of blockchain has extended far beyond its first widely known application in cryptocurrencies. The technology stack powers innovation in industries such as banking and insurance, healthcare, entertainment, IoT, and real estate. 

Our blockchain developers at Itransition believe blockchain-based solutions can enable secure deals and agreements and automate commercial transactions for top-level organizations. Today, we bring together our experience to discuss the applications—and implications—of blockchain in the public sector.

Public Services Set Their Sights on Blockchain

According to the Observatory of Public Sector Innovation, in 2018 there were 202 government blockchain initiatives in 45 countries globally. As commercial use of blockchain deepens, federal and state agencies are gaining confidence in distributed ledger technologies as a means to ensure secure, transparent and efficient information sharing. 

The most popular types of blockchain projects among governments include research and strategy, identity management (passports, visas, birth certificates), personal records, and economic development. Apart from these common applications, blockchain finds a way into the public sector in procurement, compliance, patents and trademarks, and benefits and entitlements. 

Realizing the Blockchain Promise

Through blockchain, governments can redesign their administrative processes to streamline services, making them more secure and readily available for the users. The inherent design of the technology makes it especially relevant for public sector institutions in the following contexts:

Enabling secure storage and exchange of data to gain citizens’ trust

Security enhancement provides the key benefit of blockchain. The distributed ledger stores records of transactions in a chain of digital blocks with a unique hash that acts as a digital fingerprint, uniquely identifying each block. Those blocks are spread across a network of devices instead of being committed to one server. 

The lack of a central repository means blockchain has no single point of failure, which makes it extremely difficult to hack. Moreover, all transactions are recorded and secured with encryption to further prevent data from being manipulated.

Facilitating transparency of all operations to reduce opportunities for corruption and ensure accountability

In blockchain, all data is replicated across all network participants who get equal access to transaction records and share the same documentation. As a result, at any given point, either side of a blockchain-driven process can review the transaction history. 

Furthermore, the trustless nature of the technology eliminates the need for a trusted third-party to participate in the transfer of information or assets between the parties. This further simplifies all the procedures, provides greater transparency, and enables accountability.

Providing data immutability to help mitigate fraud and impede data abuse

For a transaction to be added or updated in a blockchain, it has to be collectively agreed upon by all the peers of that blockchain. There’s no single user who could independently alter a specific transaction. 

To make any changes, the involved parties must reach a consensus. Any attempt at bypassing this route and modifying a transaction without validation by the entire blockchain community would enforce alteration of all subsequent records, which wouldn’t go unnoticed by the parties bound by the transaction.

Inspiring Examples of Blockchain Use by Public Services

The decentralized way of securing data offers governments and public services a unique opportunity to restore trust among citizens and safeguard processes around contracts, procurement, and payments. By relying on secure, transparent and collaborative blockchain networks, state and federal agencies can improve tax collection, implement secure online voting systems, improve citizen authentication and registration, and enhance dozens of other administrative procedures. 

One state that sets an example of how blockchain can uniquely benefit the public sector is Estonia; 99% of its government services in the country are available online. Estonia uses blockchain as the backbone for an all-embracing digital platform that provides citizens with access to e-voting, tax returns, health records, and more. Those services are extended via mandatory PKI smart ID cards, which use a blockchain-based authentication system that allows holders to log in only once to access more than 1,000 electronic government services. 

While most countries still have much catching-up to do before their level of blockchain adoption will come anywhere near the one of Estonia, the following use cases bespeak the increasing interest of public services in the technology on a global scale:

• Back in 2017, the US Food and Drug Administration joined forces with IBM to explore the use of blockchain to share oncology patient data securely. Earlier this year, the same agency launched a pilot scheme for the pharmaceutical industry, geared to track the provenance of drugs to prevent counterfeiting and illegal trade. 
• Last year, the UK Food Standards Agency completed a pilot program to validate blockchain as a tool to trace meat from a slaughterhouse down the entire supply chain. Similar food traceability projects have launched in the USA and China.
• GrantSolutions, a service for grant administration run by the Administration for Children and Families in the US Department of Health, leverages blockchain to reduce the submission and reporting burden for grant applicants and agencies by providing them with easy and open access to grant information. 
• The US Customs and Border Protection works in close collaboration with the Department of Homeland Security on the evaluation of several blockchain-based projects. The agencies are examining blockchain’s ability to support customs officers in identifying and intercepting counterfeit products, and are determining how the technology can augment their existing shipment tracking system.
• An interesting application of blockchain comes from the Government of Canada. A few months ago, the government announced a scheme where project-based officers will receive a sort of a blockchain-enabled digital CV, a secure and trusted record of their skills and professional experience. The project aims to be the testing ground for the introduction of a new flexible workforce model in public services.

Blockchain Is the Way to Go for Governments

Examples such as that of Estonia prove that decentralized ledger technologies create an enticing path for governments and public agencies to advance their missions. Blockchain offers governments a new way of deploying their services to citizens, the one that is transparent, paperless, and auditable. 

For now, it’s too early to speak of the widespread use of blockchain in the public sector. However, as time goes by, we will continue to see more governments and institutions adopt blockchain solutions to bring transparency, privacy, security, and speed to their practices. Where should they start?

“Government leaders should get up to speed on the blockchain by understanding it first and committing to exploring its potential,” again, William Mougayar has some answers.