Blockchain technology enables the recording of data that makes it harder for the data to be changed, hijacked, or manipulated. In short, a blockchain is a distributed ledger that duplicates and distributes transactions across the network of computers taking part within the blockchain. Each transaction in this digital ledger is
permitted by the digital signature of the owner, which validates the transaction and guards it from being tampered with. Hence, the data the digital ledger contains is extremely secure. Of note, blockchains have been widely adopted across 81 of the top 100 companies in the world. In turn, seeing how beneficial the use of blockchain is to global companies, governments have also adopted the use of blockchain technology for innovation for better government tech.
How do blockchains benefit the government and the public sector?
Governments and the public sector have adopted blockchain technology in their day-to-day activities and development as a way to drive greater efficiency for public organisations. According to the roadmapfor data and digital by Central Digital and DataOffice for the UK government, the benefits digital transformation holds for both the public and the government is a core reason for adopting blockchain technology to drive this digital transformation. Examples include:
· Smart cities: a smart city makes use of information technology and data to combine and control physical, social, and enterprise infrastructures, whereby streamlining services to residents all the while ensuring efficient and most
fulfilling usage of available resources. In combination with technologies (cloud computing, IoT and blockchain technology), governments can provide more creative services to the residents and local municipalities. Blockchains can offer the mechanism to create a safe infrastructure to manage those functions so offering a safe, interoperable infrastructure that permits all smart city services and functions. An example of how blockchain technology is being harnessed by city planners is the smart city initiative in Dubai. Elsewhere in the Middle East, Qatar has issued a consultation paper - the National BlockchainBlueprint for Qatar - as it looks to embrace blockchain technology in a drive to create a smarter Qatar.
· Banking: real-time gross settlement (RTGS) is the continuous process of settling inter-bank payments in financial institution records with settlement between the banks taking place at the end of every working day. Blockchain technology potentially enables a major increase in transaction volume and network resilience that enables central banks to process RTGSs at a quicker pace, in a more secure manner. The issuance of the first bond in Spain to be listed on a regulated market using blockchain technology by the banks BME, BBVA, IDB is an example of how institutions are beginning to use blockchain technology in the banking sector. The quest to improve the efficiency of transferring money has encouraged central bankers to explore the use of central bank digital currencies CBDCs) across various jurisdictions around the world. Another example of where blockchains are being used is the Singapore banking authority has already adopted blockchain as a means of regulating banking operations in the country.
· Public procurement: public procurement corruption is a very common problem in governments and public sectors. Fighting against such corruption is an area where blockchains have been introduced and shows a very promising future for expansion as a solution to public procurement corruption. To an increasing degree, governments contract-out services in the hopes of increasing the efficacy and accountability of public spending. This rise in outsourcing has, in turn, created more opportunities for corruption. The World Economic Forum
(WEF) initiated the Unlocking Government Transparency with Blockchain Project to cutback corruption and supply an efficient mechanism in vendor choice in the public procurement process.
· Public finance: government expenditures can also be placed on a blockchain. Governments disperse large sums for various causes in an often convoluted and inefficient process, causing the government to lose money due to potentially corrupt banking, brokerage, and financial distractions. Blockchains can be used to build public trust in such systems, with an example being the Brazilian Blockchain Network (RBB) leveraging the decentralised nature of blockchain technology to fight the corruption of public expenses. Taxation is another area where governments have progressed in implementing blockchain-based solutions. Given the shadow economy varies between 12% to39%, governments face an ongoing challenge to tackle those of their citizens who avoid paying taxes. Efficiency in taxation depends on the identification of citizens and their taxable activities and assets. Thanks to fraud and corruption, inefficiencies also are challenges in taxation. Small-scale applications have shown some promise within the tax realm. Taxation is elaborate, because there are taxes on income, assets, businesses, and transactions although there are exemptions for non-profits. Blockchain has not yet been put to work across the spectrum of taxation, although for certain categories of transactions it has had a successful implementation.
The use of blockchain technology in the public sector
Globally, blockchain technology is being used by governments and public sector organizations in various jurisdictions and can be seen as just another tool to help governments control data and information as
society becomes ever more digitised. The public sector systems and procedures have largely been built on paper-based, analogue structures which are neither as efficient nor able to cope with the demands from those local residents and local authorities who are looking for information and services in real-time, and ‘on-line’. Estoniais an example of a country that has embraced blockchain technology in offering its citizens services and access to data, including in the healthcare sector, a digital property and land registry, e-court, surveillance/ tracking information system, and official state announcements. However, as the World Bank has highlighted: “Realising the potential of blockchain technology in the public sector, digital transformation requires a framework for technology design and implementation that begins by thinking first about areas where there is a need to improve social trust”. Once again, the word ‘trust' is key. Given that blockchains ability to offer greater transparency and so engender greater trust it is likely that, going forward, we will see governments and the public sector increasingly use blockchain technology.