Blockchain is Changing the Public Services of the Future

Editorial
08.02.2016

The times when the distributed ledger technology, or, when applied to bitcoin specifically, the blockchain technology, was a scarecrow for big entities, have gone forever. Nowadays, blockchain has become a buzzword for major banks, stock exchanges, and even government institutions. The prospect of using an immutable set of data, which essentially may be anything, has put a light to the lamps over the stakeholders’ heads.

The emergence of the new technology, which most of them characterize as disruptive or revolutionary, has occurred so rapidly one cannot keep a finger on the news pulse. Banks create consortiums to research the technology’s opportunities, worldwide exchanges like Nasdaq gradually implement the technology at their own premises, and heads of central banks around the world praise the most promising innovation of our times.

Applicability of the blockchain goes beyond just financial transactions. As data in the blocks may be literally anything, provided it’s digitized, the opportunities it may provide are more or less incalculable. For that reason, governments and their associated red-tape machine pay as much attention to the blockchain as banks and financial services providers.

How Could A Blockchain System Help To Fight Corruption?

Highlighted in the list of the most promising features of the blockchain technology is its extreme usefulness in fighting one of the most enduring evils of our time, the corruption. Due to its immutable nature, the blockchain is capable of making property fraud or forcible takeovers way more unlikely. In addition, if any government action or financial transaction is put onto a completely transparent and unchangeable ledger of data, no government member will be capable of concealing their unlawful deeds, if there are any.

A notable example was proposed as an explanation on Quora, where an anonymous expert presented a thought experiment. In the experiment, a highly corrupted country, where the government brazenly spends budgetary funds on personal desires, is somehow forced to replace local fiat money with a cryptocurrency. Any transaction is therefore recorded on the blockchain, which makes the government’s spending totally transparent. Any account in this situation might be associated with a particular ID. Thus, a taxpayer would be able to track down every bit of his or her taxes.

Any budget expenses would be visible to anyone, and no misuse of public funds would be possible. In addition to that, the expert suggested that multisignatures could completely eliminate the risk of misconduct by a politician who doesn’t care about his or her reputation. In the example, any budget use shall be confirmed with keys held by a president, an independent auditor, and a representative of an opposition (provided there is any in a completely corrupted society).

Further Applications in Public Service

An average democratic nation might find at least several pretty attractive options of the blockchain.

According to Govtech.com, experts think of a blockchain as a game-changer for:

  • Contracts
  • Electronic voting
  • Health care
  • Land use
  • Motor vehicles
  • Patents
  • Purchasing
  • Social services
  • Taxes

With the technology, a government may maintain transparent elections, as well as transparent taxation, secure payments, make property rights indisputable, make evidences of whatever as clear as day, and, most importantly, significantly reduce involved expenses.

Blockchain-based solutions for ensuring 100% transparency of the government are successfully devised. However, there is no government around the globe to have actually implemented any of those as it requires a great deal of political will. Authorities in corrupted countries will hardly vote aye when it would come to establishing a system targeted at preventing them from corrupt practices. Unwillingness of a government to adopt the transparency-ensuring technology may become a cause for suspecting it is unreliable.

Conceptualizing Blockchain for Governments

Some of those ideas must have come across the minds of those dwelling in the echelons of power. For instance, while preparing to meet with Silicon Valley companies in order to discuss digital government-related issue, British Cabinet Minister Matthew Hancock MP told Wired:

“Unless ‘gov tech’ keeps pace with every other area of technology, government services will become more and more difficult.”

“I don’t see a great clash [between tech and government]. I don’t really mind who does the things that need to be done. What I care about is getting the right results,” he added.

Additionally, there is a smart contracts concept, which is also based on blockchain technology. Wayne Vaughan, CEO at Tierion, notes that use cases of smart contracts in public service are meant “to replace the government as a source of authority and as a counterparty for transactions”. He described two of such use cases:

1. Verifiable Public Data. Politicians are famous for making promises and then obfuscating the results. Imagine if various government agencies published data in a way that could be verified against the blockchain. This is a natural extension of http://opengovernmentdata.org.

2.Municipal governments could issue digital assets to raise money for projects (stadiums, bridges, etc.) as a replacement for selling bonds. These digital assets could pay a dividend to those who invested in the project. This could be done today, but the cost might be too high.

Notably, such things may become a part of so-called DAO (Decentralized Autonomous Organization), a concept proposed by Ethereum mastermind Vitalik Buterin. Based on a complex system of smart contracts, such organization may require just a minor human supervision and responsibility, essentially performing most tasks currently covered by as complex red-tape apparatus.

There are several advantages in organizing public services as a DAO, which basically correlate with those of a blockchain as a foundation. They are increased efficiency of the whole system, transparency and corruption immunity due to recording of anything happening within the blockchain, immutability against any external actions, and easy scalability to cover more participants and expand its functionality.

However, while it all looks great in theory, the actual implementation of such technology lags far behind the wildest dreams. There are still several governments interested in introducing the innovation to their public services.

What Do Governments Actually Do?

Estonia. For instance, in 2015, the government of Estonia cooperated with blockchain initiative BitNation to establish so-called e-Residency program. The program allows anyone to obtain an official identity issued by the government in order to register a business regulated by local legislation. However, it does not promise actual residency for participating foreigners. The Bitnation project claims to expand the cryptocurrency philosophy to identity and statehood issues.

According to IBTimes, the project’s CEO and founder Susanne Templehof said:

“We have made a deal with Estonia, and the ultimate goal is to gain recognition for Bitnation as a sovereign entity, thus creating a precedent for open source protocol to be considered as sovereign jurisdictions.”

The project seeks to provide “world citizenship ID on the blockchain” and issues certificates, land titles, and other documents normally requiring notarial certification. For instance, speaking about illegality of gay marriage in many countries around the world, the project’s head said: “Blockchain doesn’t give a shit about that.”

Odessa, Ukraine. A project from Odessa, Ukraine, develops a blockchain-based system for state-owned property auctions seeking to bring more transparency to the system. The project’s representatives Lasha Antadze and David Kiziria stated that the essential goal of the system is to maintain transparency and equal opportunities for state property leasing/selling market players. Among other aims of the project they cited removal of corruption components in state assets management. According to the project’s spokespersons, the system is set to employ smart contracts.

Vyshgorod, Ukraine. Another government-backed blockchain project in Ukraine is dedicated to providing public services to the country’s citizens. As for now, the project is under its test run in the town of Vyshgorod 10 miles away from the country’s capital, Kyiv. Speaking at Blockchain Incredible Party conference in Ukrainian city of Lviv, Oleksiy Konashevych, a spokesman to the electronic democracy reforming group of the Ukrainian NGO “Reanimation Package of Reforms”, stated that state services platform would employ a blockchain-based voting system. The electronic democracy reforming group has signed a memorandum with the town’s mayor, and calls for everyone interested to participate.

Tunisia. Meanwhile in North Africa, Tunisian government is transferring operations with electronic version of its national currency onto the blockchain. The platform was developed by a private company Monetas, and employs modified version of bitcoin’s blockchain.

“We are delighted to be working in partnership with the Tunisian Government, National Post, and DigitUs to increase financial inclusion with an open mobile money platform that is able to operate across mobile networks. This is an important first step towards a freer and more prosperous world,” Johann Gevers, Founder and CEO at Monetas, stated.

“La Poste is a very important and trusted institution and is at the heart of financial inclusion efforts in Tunisia. At La Poste we are on a transformation journey to modernize our services with innovative technologies and power the digital economy. Digital, Mobile, and Internet, are all key components in this transformation. Monetas and Digitus help us to bring these ingredients to the table,” M. Moez Chakchouk, CEO at La Poste Tunisienne, declared.

Isle of Man. Department for Economic Development of the Isle of Man announced in 2015 it would be running a blockchain-based state ledger of companies. With protocol dubbed Credits developed by local startup Pythia, the department created a test-mode ledger of cryptocurrency companies operating on the island. There are 25 such companies registered on the island. All of them have to comply with local AML law enacted in April 2015.

United States. Some officials are also interested in implementing the blockchain advantages. Thus, the governor of the state of Vermont Peter Shumlin requested to consider the blockchain technology as a basis for establishing a state records management system. However, it has not gone any further than the governor’s request, and the state’s government officials openly told they preferred to act slowly in this regard. Eventually, the government specialists compiled a report, whose general finding was in the fact that the state didn’t need any blockchain to be implemented. Citing scarcity of possible benefits and “the likely significant costs” for setting up a state-operated distributed ledger, the report concluded that blockchain technology would be “of limited value” for public services.

“In light of the very limited possible benefits and the likely significant costs for either entering into a private or public blockchain or setting up a state-operated blockchain, at this time, blockchain technology would be of limited value in conducting state business,” report reads.

The report’s results raised some doubts as for the motives and the expertise of those government specialists within the community. Some commenters even claimed that only Proof-of-Work mechanism has been reviewed, while Proof-of-Stake remained ignored.

However, it would be unfair to blame governments only for slow propagation of the blockchain technology in the troubled realms of public services.

Honduras. In 2015, US-based company Factom issued a press release stating they would cooperate with Honduran government in establishing blockchain-based system for registering public lands. However, while the negotiations were actually underway, the press bandied about in a way suggesting the contract had been already executed. Factom, however, retweeted several headlines like that without any comments, which established a common misconception of the actual situation. The Honduran government eventually stated that it indeed engaged in negotiations with Factom, but there was no contract as yet, and actually expressed its unwillingness to launch the project right away. Moreover, following a media fuss around those wrongful notions, Factom’s CEO Peter Kirby experienced heavy criticism from his colleagues, which everyone may check out in a published log of their Skype chat.

China. There are also good news for the Factom company as it has recently partnered with iSoftStone to develop software infrastructure for smart cities – the new project to supplement Chinese rapid urban growth. This time the news seem to be true.

Ye Yuping, executive VP & CTO at iSoftStone, commented:

“By applying Factom blockchain technology to our financial services, smart cities big data services, and construction of data exchange, we will drive more innovation in China. By leveraging the advantages of both parties, we look forward to seeing a brighter future. We are sure that the integration of Factom and smart cities will bring more development opportunities for both sides.”

What’s important in all of those projects, is that in case they prove successful, governments around the world will follow their lead. Introduction of blockchain-based technologies could result in emergence of a different system of interaction between people and a state, with greater transparency, reliability, and responsibility.

However, as blockchain implementation is still at its early stages, and some controversies still remain, there probably will be much more companies or governments to hear from in the years to follow. The community, in its turn, may only hope that the disruptive technology will eventually unlock its potential, or possibly find new use cases beyond today’s imagination.

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