Blockchain technology has the potential to transform government, but first we need to build trust


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Researchers and practitioners have demonstrated that the benefits of blockchain and distributed ledgers aren’t limited to cryptocurrencies such as Bitcoin.  The technology, including blockchain, also has the potential to transform government activities by offering new ways of organizing processes and handling information.

Over the past few years, governments in several countries have been experimenting with the application of this novel technology to a wide variety of functions and services, including land registration, educational credentialing, health care, procurement, food supply chains and identity management. But despite blockchain’s potential, experiments and studies suggest it still has a way to go before it can achieve significant government transformation.

So, what is the key to unlocking the transformative power of blockchain and distributed ledgers in digital government? The answer isn’t simply a matter of technology but also involves human and institutional factors 

Satoshi Nakamoto, the inventor of blockchain technology, didn’t start off by thinking about how the technology could improve transaction or information processing efficiency. Instead, he considered a very human concern: trust. Improving trust is, in fact, blockchain’s superpower and its relative advantage over other tools and technologies used in transaction and information processing. Blockchain’s unique combination of cryptography and distributed networking allows a tamper resistant, append-only and immutable ledger that contains confirmed and validated transactions and provides a foundation for governments, citizens and businesses to trust one another. 

In the 1970s, the Nobel prize-winning economist Kenneth Arrow observed that lack of mutual trust represents a distinct loss to economic systems, which require such confidence for the success of collective undertakings.  “Virtually every commercial transaction,” he wrote, “has within itself an element of trust, certainly any transaction conducted over a period of time.” 

Perceived trustworthiness—the basis of trust, Arrow posits—lowers monitoring and transaction costs. Financial transactions do not occur easily without trust: contract monitoring can be ineffective, sanctioning for contractual breaches can be difficult and transaction costs can increase -- all of which undermine the foundations of financial exchange and production. This explains why implementation of blockchain technology has been found in some cases to not only promote trust but also improve process efficiency: Trust reduces translation costs, making transactions more efficient. 

Developing sustainable solutions for the public sector also requires a clear understanding of the blockchain technology stack. Finding a solution must take into account information about the distributed ledger technology protocols (e.g., Ethereum, Hyperledger, Corda, Quorum and others), network options (e.g., public, private, hybrid or consortium), governance mechanisms, security, and cost/duration indications (initial investment and annual operating costs).

Realizing the potential of blockchain technology in 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.  Then, officials should consider what information needs to be captured and stored in the blockchain (and, equally, what should not be captured and stored there) to support the goal of trust, followed by consideration of the blockchain protocols, architectures and other technical considerations that deliver the necessary capabilities.

This approach requires a new “Three Layer” design and implementation paradigm comprised of a Social layer (human actors and social aspects such as user incentives and motivations, culture, levels of digital literacy, access to technology, etc.); a Data layer (the ledger itself as an ”immutable” store of transactional data/records, including considerations of data usability, privacy, and security, authenticity, reliability, integrity, etc.); and a Technical layer (the technology stack, including distributed ledger protocols, consensus mechanisms, architectures, peer-to-peer networks, data storage, etc.). Adopting this approach encourages consideration of important design trade-offs among the layers that could help avoid potential misalignments between the technology and its intended area of application, as well as encourage faster adoption and more transformative outcomes for governments. 

Three boxes show text - left box, social layer. middle box, data layer, right box, technical layer

Source: V. L. Lemieux, C. Feng (eds.), Building Decentralized Trust   |!ApjREsRt9AFvfl_Pp_cmmvCcXoc


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Deploying Blockchain and Distributed Ledger Technology for Government Digital Transformation: Overcoming Barriers to Adoption



Cem Dener

Lead Governance Specialist

Join the Conversation

Dr.Zuhair Alkayed
December 09, 2021

Absolutely correct

Cheryl cross
March 03, 2022

Is this system already being integrated in any local or federal governments, within the United States, without the knowledge of civilians, as some sort of beta test? What would be the legalities in a case where this is happening at local levels of particular state governments? What would the ramifications be, if a whistleblower went public about this?

David Dzidzikashvili
April 05, 2022

They key point is to keep the blockchain & crypto space with minimum regulation and maximum decentralization. Decentralization is the primary reason these projects have become so popular. Not your keys – not your crypto! Decentralized finance is the best example of completely free market Capitalism. However, due to its fast adaptation and growth the crypto world is under the governments’ watch and radar. Various governments and their regulatory agencies are still trying to determine where do the crypto assets falls, how to regulate them and what type of legal framework to adapt. I hope they won’t create these laws and regulations without the input from the crypto project leaders and individuals like Dr Gavin Wood and Vitalik Buterin…

June 08, 2022

This is a great blog post - So clear and easy to follow. All your hard work is so much appreciated.

John Stuart
July 14, 2022

How about some actual examples? For example, here in South Africa we have a high incidence of people falsifying their academic records. DLTs could be used to store academic transcripts in a universal format and with access to bona fide employment agencies

anju sharma
October 13, 2022

Your post is really informative. Blockchain is about decentralization and I believe that this is the reason it is creating the hype among people. There is one blockchain protocol named Slice Ledger which is based purely on the concept of decentralization. Do check it.