Economic Development

Blockchain for government: building trust; demolishing bureaucracy

To build trust, governments strive to be as open, transparent and collaborative as possible.  To demolish bureaucracy, they seek to streamline citizen interaction, financial transactions and contract management.  All too often, they fall short of their own ambitions on both counts.

Some fifteen months ago, I published my blog Blockchain for Government.  So much has changed since then!  In our recent IBV Study “Building trust in governmentExploring the potential of blockchain for government” we surveyed 200 government leaders in 16 countries on their experience of, and expectations for blockchain.  We concluded that blockchain offers the opportunity to tackle the trust and bureaucracy challenges head on.  We found a significant percentage of “trailblazer” governments are launching projects that apply blockchain to transform regulatory compliance, contract management, identity management and citizen services.

Blockchain offers a new approach to enhancing transparency and collaboration between governments, business and citizens.  By registering assets and recording ownership changes on a distributed shared ledger, the quest for transparency and right to privacy needn’t be at odds. Important information can be shared widely, seamlessly engendering true openness. Transactions can be verified close to real time and combined with the extensive use of privacy services make fraud and cybercrime very difficult.  Smart contracts – once verified and deployed – will always execute. Reneging on a contract becomes a thing of the past.  This all goes towards amplifying transparency, building trust and breaking down bureaucracy between government, business and citizens.

A common theme raised by the trailblazers is their expectation that blockchain will reduce the Innovation Frictions cited in the recent IBV study Fast forward: Rethinking enterprises, ecosystems and economies with blockchain shown in Figure 1.

Frictions FW

Figure 1 – Frictions framework

Let’s now take these three Innovation Frictions and consider how blockchain can help government address and resolve the underlying issues and blockages.  This analysis is presented in Table 2.

Governments must create, update and enforce regulations, which often cross departmental and national borders.  Once agreed (through consensus), and deployed as smart contracts onto the blockchain, they can be automatically enforced.

Consensus

All relevant departments (cross border where needed) would agree regulation creation, deployment and subsequent changes.

Provenance

There would be a complete audit trail of regulation creation and changes, and which departments approved them.

Immutability

No one could alter the regulations once changes are approved, nor tamper with the change agreement process.

Finality

Regulation disputes would be eliminated or resolved much faster

Governments are often slow to move, bound in bureaucracy.  Blockchain can help overcome this Institutional Inertia by removing friction in key citizen interactions such as changing vehicle or property ownership.  Let’s take this as an example:

Consensus

All relevant organizations – within government & beyond – agree when a change of ownership is valid.

Provenance

There is a complete audit trail of who’s owned what, when.

Immutability

No one can tamper with the ownership record once its agreed and committed to the distributed ledger

Finality

Asset ownership disputes will be virtually eliminated and much quicker to resolve when they occur.

Governments are acutely aware of the consequence of invisible threats such as fraud & cybersecurity. Extensive use of privacy services ensure that blockchain solutions are inherently more secure than traditional transaction processing systems.

Consensus

Since members of the business network must agree to any transaction, the network is more resilient to cybercrime & fraud.

Provenance

If problems occur with a network member, the complete history of transactions eases problem isolation & forensic analysis.

Immutability

Since privacy services are used to bind blocks of transactions together, it’s impossible to corrupt the “history of truth” maintained on the blockchain.

Finality

There is one tamper proof, complete & replicated system of record improving the threat resilience of citizen, government & business transactions.

Table 2 : How blockchain removes innovation frictions

This short analysis shows how blockchain can help governments build trust and demolish bureaucracy.  The full IBV White Paper – with a complete and thorough analysis of survey responses – is available at this link and well worth a read!

More on Government Blockchain?

  1. Blockchain for Government
  2. Proving Provenance with Blockchain
  3. Tackling Tax Evasion in a Digital Economy
  4. Blockchain for Asset Registration
  5. Building a Blockchain Business Network

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