Blockchain is the technology of the future that governments around the world should adopt. The problem for many decision-makers is that there are not enough role models to guide them. That is why the EU Commission is working on the creation of a “European Blockchain Services Infrastructure” (EBSI) as part of the European Blockchain Partnership. In this article, we will look at the use of blockchain in the public sector.
And if you need help in developing a project to integrate blockchain into government processes, you can contact KLONA.
Blockchain and the public sector
Blockchain is a distributed decentralized ledger (sometimes also called a database) that stores transactions in chronological order in an unchanged form and links them together. Today, many transactions do not take place directly between individual participants, but through the mediation of a controlling body(the so-called intermediary). For example, the bank checks whether the sender of the transfer has enough money and whether the recipient exists, and ensures that the money arrives at the recipient and is debited from the sender at the same time. Such intermediaries are found not only in the financial sector, but also in the public sector, where the transfer of value (for example, money, and property rights) takes place.
People who work in the public sector are aware of the full potential of blockchain technology. Current government applications and blockchain-based projects confirm this:
- Malta Business Registry
- Land registry in Sweden
- Land registry in the United Arab Emirates
- Identification system in Argentina and Ethiopia
- First certificates in Germany
The lack of blockchain regulation is considered to be the biggest barrier to the adoption of this technology. In addition, the public and government officials around the planet still lack knowledge about the blockchain. Also, blockchain technology is struggling with a certain “dirty” image, which is often formed under the influence of the media. They cover the situation on the market with individual cryptocurrencies and simply equate them with the blockchain. And this negatively affects the reputation of technology.
Examples of Blockchain Applications in the Public Sector
There are 4 promising and practical use cases for blockchain in the public sector:
- Elections and voting. Many governments are interested in taking advantage of blockchain technology in voting. Sierra Leone is a leader in integrating blockchain into public elections. Ukraine has also carried out several pilot projects to use blockchain for regional elections, and Brazil plans to hold national referendums using blockchain.
- Government registries. Many governments have announced plans to store and manage registries using blockchain technology. The US states of Vermont and Delaware, as well as the city of Dubai, are leaders in the use of blockchain in the government sector. They store mainly ownership records as well as permits. The transition of land cadastres to the blockchain is also an example of the application of blockchain in government registries. Such a project is actively developing in Georgia.
- Personal Identification. Blockchain-based identity management and personal document access applications offer alternative methods of building trust and stability without relying on a centralized infrastructure. For example, Canada has created a digital customer identity network. With the help of the application, people can easily identify themselves, for example, when they want to sign a new contract or rent an apartment.
- Improving the efficiency of interagency transactions. Decentralized applications (dApps) are software applications that allow peer-to-peer network members to collaborate and conduct transactions without intermediaries. The US Food and Drug Administration (USFDA) has completed pilot projects to safely and effectively share medical data from clinical trials with hospitals.
With the blockchain integration strategy adopted in the fall of 2019, the German federal government presented an initial framework for action and development. The strategy document outlines 44 measures to implement blockchain in 5 areas of the public sector. In the field of digital administrative services, 10 measures are prescribed. All of them are already being implemented.
The current coalition agreement mentions blockchain 8 times, including a section on cryptocurrency applications. So, among other things, the need to order a feasibility study to study the possibilities and advantages of a land cadastre based on the blockchain is spelled out.
Read also: “Real estate tokenization: does it have a future?”
Research on the Use of Blockchain Technology in the Public Sector
As part of the BDO Blockchain Initiative, an international survey was conducted on the use of blockchain technology in the public sector. The study interviewed a large number of leaders in public administration, local government, health, and welfare.
According to the survey, 56% of respondents believe that the public sector will definitely adopt blockchain technology. At the same time, 44% of respondents said they feel a lot of uncertainty around the technology itself.
In Estonia, for example, blockchain is the backbone of the e-Estonia program, which brings government services together through a single digital platform.
Despite these promising developments, very few organizations today have hands-on experience with blockchain and are instead using other digital technologies that seem more accessible to them.
In the wake of the COVID-19 pandemic, many public sector organizations are rethinking their digital strategy. Researchers believe that the choice between blockchain and other technologies will play an important role in the development of the public sector of each country.
Key findings from the BDO Blockchain Initiative study:
- Blockchain technology has huge potential for the public sector.
- The rapid growth of blockchain technology can play a decisive role in the development of the public sector.
- 64% of respondents demonstrate openness to innovative solutions, and 57% of respondents believe that the public sector will definitely use the potential of blockchain technology.
- Government teams around the world are already allocating budgets to test the use of blockchain in the public sector.
- The positive trend in the use of blockchain in the public sector is evidenced by the increased percentage of use cases and the general attitude toward the technology.
- More than 70% of respondents are confident that blockchain will improve data traceability in the public sector.
- Researchers believe that blockchain opens the way to a whole new level of information sharing both within and between departments.
- 80% of respondents believe that the lack of regulation of blockchain technology is the biggest barrier to adoption.
Blockchain technology has undergone significant development and is no longer limited to cryptocurrencies. Today, there are many real examples of the use of blockchain in government.
What specific measures should national governments take to benefit from blockchain?
Pilot projects are important for gaining experience with the technology and building know-how. However, a holistic approach is needed to achieve real added value for citizens.
Systematically check the capacity of government agencies
As the BAMF example shows, blockchain solutions can be useful where seamless cooperation between authorities is needed. The government should analyze the cooperation of ministries in the field of information technology and systematically identify where there is room for improvement.
At the same time, it is necessary to analyze the interaction between authorities and citizens at all levels. International blockchain case studies can serve as an example of what needs to be achieved. As we mentioned earlier, Estonia has developed its own blockchain solution that provides verification of the integrity of government data. This has enabled even more digitization of not only intergovernmental data exchange but also areas that use sensitive citizen data, such as the healthcare sector or law enforcement.
Look for strategic projects with the widest possible application
States lack comprehensive and strategic blockchain integration projects that would lay the foundation for the digital society of tomorrow.
For example, blockchain can be used to develop systems that give citizens complete control over their personal data. Since the data is not stored in a centralized place, but with the citizen himself, protection against identity theft will be at the highest level. The blockchain-based solution will have the same characteristics as a physical ID – only digital and more secure. In the long term, such solutions can become the basis for a highly digital society.
The Bundesdruckerei is taking the first step towards such a solution and is working with a blockchain startup on a feasibility study for such a digital ID card.
Take action and increase the experience of implementing blockchain solutions
It is not enough to define strategic projects. It also requires the ability to implement them. To do this, the government must use and consolidate existing IT companies. For example, in early 2021, ten government IT service providers founded Govdigital, a blockchain cooperative that aims to develop blockchain solutions for the public sector.
Such organizations should be systematically promoted and expanded so that the government can use their valuable experience in implementing blockchain technology when necessary. The government should strive for even greater rapprochement with young IT companies. Startups are already offering the first blockchain-ready products for the market, and their experience can be adopted.
Conclusion: general blockchain development trends within states
There is a slow but steady interest of states in further accumulating knowledge and transferring it to blockchain-based applications. For example, in 2021, the Lower Saxony Ministry of Economics, Labour, Transport, and Digitalization organized an idea contest for blockchain applications.
“Since blockchain technology is only slowly entering the free economy and the necessary know-how is not available in many companies, and the potential of the technology is not yet well known, the competition was looking for practical examples that make the possibilities of the technology tangible so that it can be further disseminated in the economy of Lower Saxony” – Minister of Economy and Digitalization of Lower Saxony Bernd Altusmann.
There is no doubt that this technology will revolutionize the public sector. Blockchain can help governments replace outdated processes and unnecessary documentation. Technology will also help governments innovate faster and work more efficiently.
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