Blockchain Tech Brings Change to the Way Governments Operate

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Blockchain Tech Brings Change to the Way Governments Operate
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Blockchain and cryptocurrency enthusiasts often complain that governments hold new technologies back through restrictive legislation and stifling bureaucracy, creating obstacles for innovation. And yet blockchains offer valuable opportunities to governments that cannot be underestimated. Governments from Singapore and South Korea to Dubai and Estonia provide illustrative examples of the ways blockchains can be used to protect sensitive data, increase efficiency, lower costs, and improve public trust.

Top Challenges that Governments Wrestle with Today

Tracing the history of public administration, it becomes clear that the trend towards increasing bureaucratization in industrialized countries intensified towards the 19th – 20th centuries, despite brief backlashes against perceptions of the “big government” in the 1980s. To this day, governments in almost every corner of the world remain centralized, hierarchical, bureaucratic and opaque, creating many challenges.

Because of their archaic systems, governments have proven unable to provide records security. Regrettably, the online centralized databases most governments still use to collect private data are not very secure, and are prone to hackers and fraudulent activities. Numerous government entities have been hacked in the last decade or so, and the Federal Security Risk Determination Report from 2018 shows that 74 percent of federal offices remain at risk or high risk of cyberattacks.

Bureaucracy and hierarchy have also created unnecessary distance between governments and their citizens, slowing down processes. Within traditional government bureaucracy, multiple parties are involved in oversight of transactions and decision-making. Today, a myriad of government decisions and operations have to be overseen and approved by multiple parties, creating waste and inefficiency and increasing associated costs.

The complex nature of government programs as well as lack of transparency and public insight into governments’ inner workings often result in real or perceived abuse of power structures, corruption, and fraudulent activities – another set of challenges for governments around the globe. Restricted databases and transfer systems make it hard to examine doubtful transactions and decisions made within governments.

Governments Need to Think Like Business

According to a Harvard Business School Review Article from the fall of 2018, bureaucracy has also been on the rise for years in corporations. Although it may have provided greater oversight and management in the past, in the age of digital transformation, bureaucracy slows down productivity and is not the right choice for either businesses or governments. To succeed in the rapidly changing 21st century world, businesses strive to become flatter, more responsive and transparent. Governments need to do the same: shed their legacy systems and outdated mentalities in order to keep up with and satisfy the needs and requirements of modern day citizens.

Blockchain Tech Offers Solutions to Governments

Although we often think of blockchain as enabling the recording of financial transactions, blockchain technology can really record any type of data. Luckily for government operations and the type of services governments usually provide, the possibilities are unlimited. Blockchain can record anything from birth, death and marriage licenses, property deeds and titles of ownership, educational certificates, financial accounts, medical procedures, insurance claims, to votes.

Blockchain-based decentralized databases are safe. The data is distributed over a large amount of nodes, eliminating a single point of failure like in a centralized database, and making it impossible for hackers and fraudsters to exploit the database.

The new technology can help governments become less bureaucratic, eliminating expensive, labor-intensive management systems. Blockchain-based databases, along with smart contracts combined with transparency of the ledger, are able to store all transactions in an open, accountable fashion, allowing governments to become more flexible, open, and less labor-intensive. Using blockchain-based systems, smart contracts and automated processes, the need for multiple layers of oversight and control will be eliminated, thus reducing excessive personnel and operational costs.

Experts believe that because it of its openness and accountability, blockchain can dramatically reduce the potential for corruption and abuse. That means there are opportunities in areas like welfare and social services. Blockchain tech can help improve public trust in government transparency, improving often troubled relationships with some or all citizens.

Blockchain Solutions for Governments Work: Here is Proof

From Singapore and South Korea to Russia, Republic of Georgia, and Dubai, some governments are more entrepreneurial than others, and are already capitalizing on the use of the new technology. Estonia has been one of the first countries to benefit from the opportunities offered by the blockchain tech. In 2012, Estonia’s government introduced so called ID-Kaarts – a blockchain-based national identity system. Since blockchain databases are less prone to hacking, the system allows for the protection of the sensitive data of Estonia’s citizens. The new technology also eliminated previous overlap in oversight from various government departments, reducing bureaucracy and allowing citizens to obtain services from this database faster than ever before, which has resulted in higher satisfaction with government transactions.

United Russia party launched a blockchain-based e-voting platform. Image courtesy of United Russia party website.

Singapore is working to launch a system that would allow its residents to use a single blockchain-based digital identity to access services across both government and private sectors. The country’s citizens will be able to use their SingPass mobile app to scan a QR code instead of entering their details manually when the tool is launched in December, as part of the government’s smart nation program – an attempt to transform the nation though technology. Singapore has also developed a blockchain-based platform that will enable employers to verify the educational qualifications of employees and job candidates who have graduated from local universities and other educational institutions.

Image courtesy of Singapore government website

The managers of the two largest Dutch pension funds – PGGM and APG – are using a blockchain based system to simplify administering pensions and make it cheaper. Together, the two fund managers are responsible for more than 600 billion euros in pension assets for Dutch government and healthcare workers.

The Republic of Georgia uses blockchain technology for its land registry, with a goal to provide security for digital certificates that are stored in the National Agency of Public Registry’s land title database.

Dubai is another example. The country’s government is working on a new blockchain based platform that will allow it to use blockchains to settle license, payment and immigrant visa related issues. By doing so, Dubai plans to save vast amounts of money via circumvention of bureaucratic processes, and the elimination of the paper driven transaction system.

Text by Contributor @lordcatoshi and Maria Birger