Governments are responsible for providing fair and efficient services to the public. Unfortunately, ensuring transparency and accountability often results in reduced efficiency and effectiveness or vice versa. Governments are usually forced to choose to improve one over the other. On rare occasions, technology arrives that allows governments to improve equity and Efficiency.
One such technology was the shift from paper-based record keeping to computer databases. The Internet was another. Blockchain is next. Like the internet before it, blockchain will not only improve the way the public interacts with government services, it will have broad economic and social implications.
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How the government can use blockchain
Blockchain will have a wide and varied impact on government services. Here we explore some promising examples.
Identity is the cornerstone of interacting with government services, but today’s systems are flawed in many ways. Let’s look at two. First, identity requires extensive and expensive infrastructure. While developed countries enjoy the benefits of strong national identification, many developing countries struggle to provide strong identification. The World Bank estimates around 1 billion people do not have official identity documents. Second, today’s identity systems are not secure. For example, the Indian biometric authentication number system, known as Aadhaar, is vulnerable to a wide range of frauds, including those involving land transfers, obtaining passports, obtaining loans, exercising votes and more.
The strengths of blockchain align remarkably well to alleviate the weaknesses mentioned above. Blockchain’s decentralized design makes its deployment and coordination much less expensive than centralized designs. Its trustless nature makes it more secure.
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Public markets counted for 29% of general government expenditure in OECD countries in 2013. Injustice and lack of transparency in the procurement cycle open the door to corruption. The OECD estimates that up to a third of investments in publicly funded construction projects could be lost due to corruption.
Blockchain-based solutions have the potential to affect almost every aspect of the procurement cycle, such as major reforms around transparency and stakeholder engagement. This pilot project concluded that despite the challenges, “blockchain-based electronic procurement systems offer unique advantages related to procedural transparency, ongoing record keeping and honest disclosure.”
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Despite the advent of the digital age, paper voting remains the dominant voting system. This is understandable, given the importance of elections for the democratic process. Yet paper-based systems suffer from cost, time and integrity issues. The replacement of paper voting, known as Direct Recording Electronic Voting Machines (DRE), has met with mixed success. Brazil introduced the DRE in 1996, but security concerns persist. DRE in America started in 2001; however, progress and adoption has slowed as incidents with DRE machines continue to occur.
As an even newer technology, blockchain is not yet ready to replace current voting systems, but it is already strengthening current systems. For example, our company, in collaboration with the University of Indonesia, has implemented an independent blockchain-based verification system for secured April 2019 election results on paper in Indonesia. The project was able to garner 25 million votes in the hours following the closing of the polling stations. In contrast, the official results only became public after weeks.
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Beyond government services
Governments experimenting with blockchain are starting to see it as critical infrastructure. They are starting to understand that having a blockchain infrastructure is important to unlock economic activity. Governments are eager to have a say in the development of standards that will ultimately be adopted globally. China and the European Union are two such leaders, and both are developing blockchain initiatives.
Chinese leaders have been extremely proactive in supporting blockchain initiatives. In December 2016, blockchain was mentioned in the country’s 13th five-year plan as a strategically important technology on par with artificial intelligence. This was followed by dozens of local governments leading pilot projects using the technology for applications ranging from smart city initiatives to environmental protection. In October 2019, China tested its National Blockchain Services Network (BSN), described as “the internet of blockchains,” which it officially launched in April 2020.
BSN, due to the scale and power of its funders, is fast becoming the largest blockchain ecosystem in the world. In China, the BSN is likely to form the basis for better coordination between companies and the public sector. Even internationally, the attraction for BSN is likely to be significant. There are fears that BSN could potentially be controlled and monitored by the Chinese government, but these concerns can be ignored by organizations seeking closer access and integration with Chinese companies. On the other hand, the profit motive may be overtaken by fears of Chinese influence, especially if a viable alternative global blockchain infrastructure is available.
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Efforts within the European Union to support blockchain initiatives have been proactive in a manner similar to those in China, albeit on a lesser scale and at a slower pace. The EU Blockchain Observatory and Forum was established in February 2018, leading to the formation of the European Blockchain Partnership (EBP). In 2019, the EPB created the European Blockchain Services Infrastructure (EBSI), a network of nodes distributed across Europe. EBSI has seven specific use cases for development government services. To promote public-private cooperation, the International Association for Trusted Blockchain Applications (INATBA) was created. It brings together providers and users of blockchain solutions with representatives from government organizations and standards bodies around the world.
While Europe’s approach to supporting and encouraging blockchain adoption is on a smaller scale and at an earlier stage of progress than the Chinese BSN, its commitment to openness, transparency and inclusion means that international organizations may feel more willing to embrace the frameworks developed.
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Blockchain technologies are now taking their place as a fundamental infrastructure for forward-thinking governments. The technology has reached the highest levels of national strategic importance, as evidenced by the efforts of China and Europe to build blockchain infrastructure. While it’s impossible to predict exactly what shape the global blockchain infrastructure will take, what is certain is that the technology is on the rise.
The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Matthieu Van Niekerk is co-founder and CEO of SettleMint – a low-code platform for enterprise blockchain development – and Databroker – a decentralized marketplace for data. He holds a BA with Distinction from the University of Western Ontario in Canada and an International MBA from Vlerick Business School in Belgium. Matthew has been working in fintech innovation since 2006.