Blockchain for Government

11 Aug 2016 - OB Insights

Governments across the world are looking at how blockchain could be harnessed in place of the traditional database, in a movement which could showcase the technology’s potential use cases for transferring data and digital assets.

What is blockchain?

A blockchain is basically a database which is distributed between its entire network of users in order to track a certain asset - the original use case for blockchain was Bitcoin.

Each new set of Bitcoin transactions is verified, made into a new block and added to the chain. To verify the authenticity of a new block, mathematical problems are solved by the blockchain ‘mining’ community in return for bitcoins - as network transactions grow, the maths gets harder and the mining tools more powerful, with miners upgrading from standard computer processors to graphics cards and now application specific mining hardware.

The more the user-base grows, the more faith we can have in the immutable truth of the data - if one user is dishonest the vast majority of accurate ledgers will prove the corrupted ledger to be out of sync - a ‘consensus of truth’ with no single point of failure.

A very visual example of consensual data was made by, UK Minister Matt Hancock, drawing a parallel to the old-fashioned carbon copy - held in multiple places with each copy being mutually supportive of the next, ensuring data isn’t tampered with and is provably accurate.

But that’s where the comparison to the carbon copy ends - because the ledger is constantly changing and distributed, the computational power required to run Bitcoin is estimated at around 1GW - broadly equivalent to the electricity consumption of Ireland.

Why it’s revolutionary

As well as the potential for cryptocurrencies to rewrite the economic model with direct peer-to-peer transfers, the blockchain has a revolutionary capacity all of its own.

A distributed ledger enhances the asset tracking abilities of any organisation, adding speed and visibility to transactions, without the friction of relying on multiparty reconciliations, centralised intermediaries or middlemen.

The financial clearing house used by the banking network, is a current example of a laborious information network where payments and asset swaps are settled centrally and then confirmed across a vast network of participating institutions.

This kind of ‘intermediation’ slows the flow of capital, increases cost, and decreases the efficiency of the settlement process, which involves several reconciliations between different systems.

Other sectors such as enterprise, media and government are also waking up to the added transparency, auditability and speed that blockchain provides for asset transfers. Any company wishing to streamline back-office operations could find the distributed ledger playing an increasing role alongside the traditional database.

How can it be adapted for government usage

Government administrations appear to have a lot to gain from blockchain in terms of potential efficiencies and service improvements, which is why Blockchain-as-a-Service was included in the UK public procurement framework known as G-Cloud 8.

A permissioned government blockchain with centralised authority over control and access, would function very differently from the ‘permissionless’ Bitcoin ledger.

Nevertheless, it could allow government administration to be disintermediated from transactions where convenient, whilst bringing greater control in other areas through enhanced data-tracking.

Very practically supply chains could be coordinated and made visible across departments; and looking to the future, a citizen’s state obligations could be fulfilled in executable code - a smart contract - rather than a written contractual agreement.

The latter potentialities give rise to a host of central ethical questions of whether a centralised private blockchain could heighten political control over our day-to-day activities - such as controlling a benefit claimant’s spending through rules embedded in the ledger.

Alternatively, there’s the view that it’s a technology which could potentially erode centralised authority and begin to give us back control of our digital identities, whilst promoting transparency, and financial inclusion.

The most practical question for government IT planners right now though, is whether a permissioned blockchain is appropriate instead of a conventional database.

Finding the ‘right fit’ for his type of technology and taking into account all of the possible social implications should be highest on the agenda; a fact that the UK Government’s Office for Science seems to be very aware of, encouraging the role of demonstrator type projects which could later be rolled-out at national level.

Use cases

Voting: Making electoral results completely auditable could be a long term goal for blockchain. The organisation known as Followmyvote propose using blockchain to allow people to post their vote and follow election results in real-time, with the option of switching the vote to another party at any point during the process - this negates the fear of wasting your vote on an unlikely third party in a two party system.

The Australian ‘Flux Party’ are looking to use blockchain as the controlling mechanism for their party’s policy decisions, taking representative politics to a new level. Elected senators are completely subservient to the will of the Flux membership who use a smartphone app to poll opinion on a multitude of single issues.

Tax collection and welfare distribution: Blockchain could be used to provide a tamper proof digital declaration of your personal assets, which could be combined with smart contracts so that tax is calculated and collected automatically, and welfare is distributed with less means testing.

Joined-up services: Government data could be shared across services from one agency to the next, making property rights and land registry easily accessible and coordinating local council services with those of central government.

This could allow citizens to conduct easier transactions with their own data, without the need for lawyers and middlemen.

Regulatory technology: Compliance and auditability is a big issue in modern government - contracts executed in part legal code part computer code could ease the compliance burden through automation.

Final thoughts

As a composition of interdependent agencies which need to be perfectly transparent in their actions, government administration is a prime candidate for the distributed ledger.

With that said, public institutions need to contend with the sensitivities of how they treat any new technology, and blockchain is no different due to its profound implications for our relationship with the state and our personal data.

Blockchain could transform society by making the worst examples of centralised power harder to sustain, and in a society where P2P types of transaction are becoming ever more popular, it could become an era defining technology.

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