Governments usually end up on the receiving end of criticism for not handling most of their processes with efficiency but new technologies such as blockchain have the potential to usher in drastic changes to the situation through blockchain solutions for governments. “Blockchain Governments” might be something that will be a reality in the next few years as governments start adopting this technology.
Blockchain technology has been taunted as one of the most transformative technologies of our time with the most obvious use cases being the application in the cryptocurrency space. It is the same technology on which cryptocurrencies are based but it has many other applications. Blockchain can be described as a highly secure and decentralized ledger system on which information can be stored but cannot be altered.
Rather than storing data on servers as we have gotten used to through cloud storage, blockchain focuses on the use of a network of computers which store and verify data. The computers in a particular network can be distributed all over the world and the network is not controlled centrally.
Blockchain Government Transformation Infographic
The benefits of blockchain application for governments
Governments are tasked with facilitating transparency especially in governance, distribution of resources and achieving greater efficiencies among other things. For these reasons, the governments of many countries have expressed interest in the technology.
Blockchain applications for governments might be the missing link towards helping governments to become fully digitized. The world has been on the path of digitization as has been seen with many industries such as retail and entertainment among others. Governments have also been feeling pressure to also pursue the same route but it is easier said than done. One of the biggest hurdles that have stood in the way of digitization for many governments is the issue of security.
Bringing personal data of millions of people onto digital platforms presents a huge risk in the event that the system is hacked. However, blockchain has been advertised as unhackable due to its structure and this means that it could offer a viable solution that can help governments to finally go digital. The fact that blockchain is virtually unhackable makes it more appealing for developing digital systems for governments. However, this is just the tip of the proverbial iceberg compared to what blockchain based government services can achieve.
Governments, especially in developed countries, usually have a hard time trying to earn the trust of their citizens especially when it comes to evidence of service delivery and improving on already existing services. In developing countries, blockchain applications for governments would come in handy towards eliminating some major issues such as corruption while also ensuring more effective deployment and distribution of resources. The adoption of such technologies might also help to facilitate better utilization of resources.
Blockchain for government use cases
There are very key uses of blockchain in governments and here are some of the situations in which the technology can be applied to make things better.
- Blockchain can be used to facilitate legal enforcement
Governments can use data from public blockchains to track the financial dealings similar to how fiat money transactions are monitored to make sure that the system does not facilitate illegal dealings. The implementation of blockchain for a government can be a key tool towards making sure that financial transactions in the digital domain remain legal.
A good example is Bitcoin’s public network which allows researchers to track any Bitcoin transactions meaning they can determine the amount stored in a crypto wallet at any given time. This can be handy towards curbing illegal dealings such as drug trafficking and money laundering.
- Fixing the taxation problem
Taxation is also one of the major issues that have been heavily talked about when it comes to cryptocurrencies especially due to the use of digital currencies to avoid taxation. While that can be controlled through the use of public blockchains and non-private coins, Blockchain can help governments to take things a notch higher. Blockchain could be the long-awaited solution for fixing double taxation.
Since decentralized ledger technologies have the capacity to foster more transparency in financial transactions. Governments can use blockchain technology to deploy protocols that can be used to reduce VAT deficits and reduce the tax burden by eliminating double taxation.
- Governments can use blockchain to protect vital government infrastructure
Blockchain applications in the public sector can help governments to ensure better protection over their critical infrastructure, thus keeping cyber attacks at bay. Most of the critical systems used by governments all over the world to facilitate service delivery are connected to the internet. This stresses the importance of security for critical systems and since blockchain cannot be hacked, then it is potentially the best solution. A decentralized ledger can also be developed such that it is able to keep track of the integrity of government systems. This would significantly reduce the chances of attacks and data tampering.
- Blockchain technology can be used to boost the efficiency of welfare distribution
Decentralized ledger technology can significantly improve the process of registration as well as payment thus allowing governments to handle matters related to welfare with more efficiency. Blockchain can, therefore, be used to deploy faster service delivery allowing citizens to benefit directly.
Blockchain-powered government payment system would drastically reduce the amount of money that is lost or wasted along the way, thus also saving more money for the taxpayer since overpaying will be reduced by huge margins. Such systems would also be more efficient in getting more people out of poverty. Additionally, blockchain technology can be used to facilitate proper allocation of funds to government projects.
Examples of blockchain applications by governments
There are quite a number of countries that have already started adopting blockchain technologies and here is a look at the different approaches taken in different countries.
Dubai is one of the countries that have fully embraced new technologies especially those that have a lot of potential for the future. For example, the country is determined to have self-driving vehicles, robot police, and flying cars in the future and decentralized ledger technologies will most likely be integrated into the systems used to run those projects.
Dubai’s government also hopes to become the first government that is powered by blockchain technology by 2020. This means that the government plans on integrating blockchain solutions into all its services including visa applications, payment of bills and renewal of licenses among other services. The aim is to bring blockchain applications in the public sector to improve government services.
The middle-eastern country is one of the most prominent global destinations for tourists from all over the world. Dubai estimates that it could save as much as $1.5 billion every year by a paperless transaction system powered by blockchain.
The government of Estonia was one of the first to become a “blockchain government” by venturing into the technology. The country has been involved in blockchain development for quite a number of years now in its pursuits to come up with ideal solutions for most of its activities. The European country started working on blockchain development for various government services since 2012.
Estonia initially implemented the decentralized ledger technology in its registry database across various sectors including health, security, and legislative sectors. The Estonian government also developed a blockchain-based national identity management system called ID-kaarts. The latter has helped to significantly reduce the time that it takes for the government to deliver services to the country’s citizens.
Despite initially taking an aggressive stance against cryptocurrencies, China has been quite open and positive about blockchain development. Even the country’s President Xi Jinping described Blockchain as a breakthrough in a statement earlier this year. Although the Asian country has been opposed to cryptocurrencies and ICOs, it has been eager to support the development of blockchain. China recognizes that the technology can potentially usher in massive developments within various sectors in which it can be applied.
- The UK
Some member countries of the United Kingdom such as England have shown interest in decentralized ledger technology, particularly with regards to the potential blockchain applications in the public sector. More countries are also shifting towards blockchain because of the efficiency that it promises to vital areas such as banking and government.
Arun Jaitley, the Minister of Finance in India revealed that the country has plans to carry out research on the proactive use of blockchain technology. NASSCOM which is the technology industry association of India plans to work together with the Blockchain Research Institute (BRI) of Canada. The partnership will work towards determining how blockchain technology can be used in businesses, government administration, and academic institutions.
- The United States
In the U.S, blockchain adoption is happening at both the Federal level and also at the local level.
Blockchain in the Federal government
Some of the agencies of the Federal Government in the U.S have demonstrated a lot of interest in blockchain developments. DARPA and the Pentagon are reportedly working on coming up with strong security protocols using blockchain technology.
The U.S Federal government has also been working on developments aimed at improving trust, efficiency, and transparency in various sectors. Some of those sectors include procurement, appropriated funds, IT asset and supply chain management, financial management, Federal personnel workforce data, Government services such as birth certificates and visas among others, and also Federal assistance & foreign aid delivery among others.
The U.S Department of Treasury has been working on implementing blockchain technology in supply chain management to achieve more efficiencies and faster processing times. Meanwhile, the U.S State Department has been encouraging private sector players to collaborate with government agencies to on blockchain development. The U.S Department of Homeland Security recently started offering grants to businesses that can develop blockchain solutions that can improve border security.
NASA is also funding a University of Akron research program that seeks to develop artificial intelligence and deep-learning networks that are based on the Ethereum (ETH) blockchain network. The U.S Department of Defense has also expressed interest in decentralized ledger systems. This increased interest in blockchain in Federal government organizations should be a key indicator into the direction that blockchain will take in the future.
Blockchain and local governments
Many local governments in the U.S are also taking initiatives through which they plan on leveraging the power of blockchain technology. Last year, the State of Illinois unveiled the Illinois Blockchain Initiative, a program through which county agencies would team up to work towards blockchain-powered innovations. The aim of the state is to use the technology to facilitate the better delivery of private and public services.
Most of the states in the U.S have been working towards promoting blockchain and also coming up with regulations for cryptocurrencies. Colorado introduced a bipartisan bill in April this year with the initial goal of promoting the use of decentralized ledger technology to store and manage government records. Just as is the case with the Federal government’s pursuit with the technology, blockchain for local government will soon become a common thing.
The risks of government blockchain transformation
One of the biggest concerns about blockchain technology for many governments is that the adoption of the technology might end up putting some government services at risk. For example, the use of blockchain means centralized services such as clearing houses will be rendered obsolete and such, governments might lose their grip on the financial sector.
Although blockchain is believed to be unhackable, governments are still worried that systems backed by the technology could end up being vulnerable to fraud. This concern is perhaps on account of the many malicious hacks that have reportedly affected many cryptocurrency exchanges and even led to the theft of digital currencies worth millions. This means that despite the claims, there are some aspects that could still leave governments exposed to malicious attacks.
The blockchain revolution is taking place at a time when people are losing faith in governments and this new decentralized technology seems to be giving people new hope. Such a situation means governments are starting to be less relevant, especially since blockchain seems to be taking on the role of providing better service delivery.
Governments are also concerned that blockchain technology and cryptocurrencies are facilitating social evils such as money laundering, funding criminal activities, and tax evasion. However, it is worth noting that the advantages of blockchain technology far outweigh the risks or downsides of the technology. Also, decentralized ledger technologies are still in their early stages which means that they are still being developed and will most likely get better with time.
How governments are using blockchain technology
Although banking and governance are the sectors most likely to benefit from blockchain technology, it is worth noting that there are very many other applications of decentralized ledger technologies. Here are some of the other potential uses of blockchain.
- Land Registry
Processes such as title deed issuance and land registry usually involve a lot of paperwork and the transfer process can be quite lengthy. However, governments can use blockchain to develop solutions that will make the whole process more straightforward, transparent and also digitize it.
- Real estate
The real estate market could leverage blockchain technologies such as smart contracts to facilitate property transactions without the need for middlemen. In fact, there are blockchain startups that are already developing such solutions. Governments can use blockchain to make the property market more accessible to more people by digitizing the process while also speeding up the whole process.
Governments can leverage blockchain technology to bring significant improvements to the healthcare sectors of their countries. For example, blockchain can be used to develop healthcare systems that deliver more efficiency, especially when handling and storing medical data. Such systems have already been developed in some countries by companies such as MedRec in the U.S.
- Border control
Governments can achieve better border control through the adoption of blockchain to create a system that can be used by customs agents to record and safely store passenger data.
Energy management can be daunting to governments especially with old systems that are constantly overwhelmed as population and industries grow, thus resulting in the demand for more power. However, governments can circumvent some of the issues revolving around the property by coming up with efficient energy management systems that are based on the blockchain.
Tourism is a very important sector for many countries and as such, they need to be up to date with new technologies in order to remain attractive. Countries like Hawaii have been looking for ways to develop blockchain solutions that can make it easier for tourists to enjoy what they have to offer. For example, the use of cryptocurrencies can make it easier for tourists to spend their money without having to worry about exchange rates. Additionally, hotel management systems can incorporate blockchain technology to deliver a better experience to tourists.
- Protection of endangered species
Governments can use blockchain technology to facilitate the protection of endangered species by keeping track of rare wildlife.
- Waste management
Governments leverage blockchain technology to facilitate better waste management. For example, China has already developed RFID technology that is built on a blockchchain network to handle waste management data.
As pointed out earlier, governments can use decentralized ledger technologies to achieve more efficiency in its tax management systems through the integration of systems to track finances and eliminate double spending. People have also continued to adopt digital currencies as they become more popular for purchases and also as trading instruments.
New Blockchain for government services infographic
Blockchain application in the public sector
Blockchain has the potential to drastically transform the public sector. For example, the technology is the ideal solution for improving the management of data in the public sector. As pointed out earlier, blockchain can be used to digitize and vastly improve the delivery of public sector services such as the issuance of title deeds, birth certificates, property transfers, business licensing and marital licenses among others.
Management and storage of such data is usually complicated and daunting especially in cases where the data exists in paper form. However, blockchain can be used to facilitate the delivery of the same services digitally while also doing it at a faster and more efficient rate and also with more secure storage.
Decentralized ledger technology can also be adopted by governments as the technology through which they launch their pilot projects. The technology can also be used to bring old data records into the digital domain. Blockchain technology is also ideal for digital voting systems especially because transparency is one of its strong suites. It can make voting so much easier by even allowing people to vote through their digital devices such as handsets and tablets especially for those that live in remote areas where voting centers are far away.
Blockchain can also be used to streamline administrative processes in the government by eliminating third parties such as agents, for example, those that have to be included in legally-binding contracts. This can be achieved through the use of smart contracts to facilitate the digital transactions such as the transfer of value without necessitating trust.
For example, some blockchain solutions already exist where people can make real estate purchases and all the transaction processes will be handled on a blockchain network. The good thing about it is significantly more affordable since there are no middlemen to introduce markups and the processes are executed quickly as long as all parties fulfill their obligations.
Blockchain has been identified as the most suitable technology for digital migration. Officials in Delaware have already started using smart contracts and blockchain technology to shift away from processes that involve paperwork. This makes so much sense because blockchain allows easier retrieval of data, better storage and faster delivery of the services involved. Such a digital approach can bring significant improvements to companies.
There are many companies and banking institutions that have been carrying out research on blockchain technology with the aim of adopting the technology to achieve more efficiency. This has played a role in encouraging governments to also try out blockchain solutions. The adoption of blockchain by the finance and corporate sectors is an indicator that decentralized ledger solutions are here to stay and that they have a lot to offer. This is why governments cannot afford to brush blockchain aside because that means they would miss out on one of the most critical technological evolution of the 21st century. We are going to see more and more blockchain government transformations.