The technology can potentially save money, improve processes and enhance security.
Blockchain is not a new concept, but like most emerging tech, it’s slowly gaining interest and exploration in the public sector. Though the tech sits behind the scenes, a new report shows it has visible cost savings, security and service efficiency benefits for government.
This distributed ledger technology is known for its innovation of the digital cryptocurrency network Bitcoin. But according to a Deloitte report, “Will blockchain transform the public sector?” published Sept. 11, blockchain is also “readily applicable to public sector organizations.”
The report found government leaders are already piloting blockchain as a basis for service provision and procurement, and are developing individual blockchain-based applications for internal use. They’re interested in its potential to slash resource burdens and accelerate transactions, lower costs of current processes, reduce regulatory compliance burdens, present record-keeping efficiency and ultimately, smooth government operations.
“The first applications we’re seeing are stuff we’ve already done, but better, cheaper, faster,” Mark White, technology services principal at Deloitte, told GovernmentCIO Magazine. The tools, techniques and methods for deploying blockchain protocols are still very new, so what’s seen in government so far is small-scale production implementations — such as land record management and voter registration. So far, there are not many proven successes at scale to soothe government’s risk-avoidances, and the marketplace of tools, methods and providers are emergent.
Still, there are prominent blockchain characteristics particularly interesting to the public sector. Its decentralized nature prevents there from being a single point of failure, creating an unbroken record of events. The transactions are also append-only, so once a transaction is confirmed by cryptographic protocols, they are permanently time stamped and immutable. Transactions are then verified in minutes rather than days, making it a near real-time tool for value transfer.
The challenge is, however, identifying those use cases where blockchain has the most value. According to the report, it lies within record-keeping, value transfer and smart contracts.
For a group of people, companies or organizations working together in a marketplace or ecosystem with imperfect trust but a need for shared record-keeping systems, blockchain creates the source of truth. This could be particularly useful for state or local record-keeping of birth certificates, land records, car registrations and marriage licenses. Blockchain provides a record of transaction history and digital accessibility.
“Those are going to be the ones [the government] adopts first,” White said.
Value transfer refers to exchanging actual value within that shared system of record, like Bitcoin. This is less commonly a government function, and while it may or may not be a place with substantial early government adoption, “it will be where we will see significant initial government examination, regulation and maybe even legislation,” White said.
Smart contracting or contract automation is popular in the commercial space, and White said it will be of interest for government, too. It allows users to not only write a ledger entry into the blockchain record, but also a program into the blockchain that goes through the same validation, identity and encryption process. That program can then operate based on the contents of the blockchain, making the blockchain the trusted intermediary, disenfranchising its users. This could come in handy for government’s enforcement of contract law. It’s trustworthier and more transparent than human-based brokerage or exchange agencies, for example.
“I think there will be applications for the government internally for doing business and government processes better,” White said, “and for the government externally as they find out what the next horizon is for the inherent government function of enforcing contract law.”
The report outlined areas in which government’s current interest in blockchain leverages both blockchain use cases and its business values. Using digital identity enhances security and gives individual explicit control over which identity elements are shared for which purposes.
In terms of land registration, such as the license and registry process, blockchain provides that decentralized and standardized system for land records. This could reduce the number of intermediaries needed, increase trust in identity of transacting parties, and reduce time and cost to process. Voting also has high costs related to ballot printing and electronic voting machines, and risks of cyberattacks or voting delays — all of which blockchain-enabled voting could alleviate.
Even with its benefits, blockchain is not applicable to every situation, and developers are still sorting out technological and managerial challenges — like platform scalability, data standardization, system integration and business model transformations. For government to see those transformative effects, the report recommends first learning the basics of the blockchain architecture and how it can bring value to an organization.
According to White, blockchain has the potential to redesign business processes, redesign mission architectures and even redesign the problem spaces. From the report, he says he hopes government readers get “a little demystified, a lot interested and begin to explore those kinds of use cases.”