The government is mandated to provide fair and efficient services to the community. Unfortunately, ensuring transparency and accountability often results in lower efficiency and effectiveness, or vice versa.
The government is mandated to provide fair and efficient services to the community. Unfortunately, ensuring transparency and accountability often results in lower efficiency and effectiveness, or vice versa. Governments are usually forced to choose to improve one at the expense of the other. Rarely does technology emerge that enables governments to increase equity and efficiency. The transition from paper to computer databases is one such technology. The internet is different. The next blockchain. Like the internet before it, blockchain will not only increase public interaction with government services, but also have far-reaching economic and social consequences.
Blockchain will have far-reaching and diverse effects on public services. Here are some promising examples.
Identity is the cornerstone of interaction with government services, but the current system is flawed in many ways. Let's look at two. First, identity requires extensive and expensive infrastructure. While developed countries enjoy the benefits of strong national identification, many developing countries struggle for stable identification. The World Bank estimates that about 1 billion people do not have a legal identity. Second, the current identity system is not secure. For example, India's biometric authentication system, known as aadhaar, is vulnerable to various frauds, including those related to land transfers, obtaining passports, obtaining credit, voting, and more. The strengths of the blockchain are perfectly balanced to mitigate the aforementioned weaknesses. The decentralized blockchain design makes its implementation and coordination much cheaper than centralized projects. Its unreliable nature makes it more secure.
Decentralized identity is a feature of blockchain technology that provides real, immediate benefits to consumers, allowing them to benefit from things like easier registration, faster credit checks, and an overall smoother online experience. The proliferation of websites, e-commerce hubs, and social media platforms means that we all have huge databases of logins, passwords and usernames to remember. As the use of password managers has become more commonplace (as has the use of one-time passwords and two-factor authentication) to enable websites and services to effectively re-verify our identities. The result is that the end user now faces almost limitless hurdles if he loses his password or two-factor authentication app or access to his smartphone. The whole process of online transactions has become much more complicated. However, with the advent of blockchain, companies are now in a much stronger position to provide their customers and end users with a much more streamlined authentication process that removes many barriers and has the added benefit of not harming consumers with confidentiality or data breaches.
It is clear that data breaches and privacy concerns will not go away. Unfortunately, as more people use smartphones, computers and laptops by 2025, and the estimated use of social media increases to 4.4 billion, there will be many opportunities for malicious actors and hackers to download more personal information and compromise everyone's identity. Blockchain can and does offer a solution for this. We expect DID to become a major blockchain application within the next five years, and we believe this is the perfect opportunity for technology to show that its time has come. Plus, it's a safer, faster, and less centralized alternative to the status quo.
In 2013, 29% of government spending in OECD countries was used for public procurement. Disloyalty and lack of transparency in the public procurement cycle opens the door to corruption. The OECD estimates that up to a third of investment in publicly financed construction projects can be lost to corruption. Blockchain-based solutions have the potential to impact almost every aspect of the procurement cycle, such as major reforms regarding transparency and stakeholder participation. The pilot project concluded that “despite the challenges, blockchain-based e-procurement systems offer unique advantages in terms of procedural transparency, sustainable records and fair disclosure”.
Despite the advent of the digital age, paper voting remains the dominant electoral process. This is understandable given the importance of elections for the democratic process. However, paper systems run into cost, time, and integrity issues. Paper-based substitutes, known as Electronic Direct Recording Machines (DRE), have had mixed success. Brazil introduced DRE in 1996, but safety concerns persist. DRE in America started in 2001; However, progress and adoption have slowed as accidents with DRE engines continue to occur. As a newer technology, blockchain is not yet ready to replace the current voting system, but it is already strengthening the current system. For example, our company, in collaboration with the University of Indonesia, has set up a blockchain-based independent verification system to secure the April 2019 election results in Indonesia on paper. The project managed to count 25 million votes from polling stations within hours of its completion. Official results, however, were not published until a few weeks later.
Governments experimenting with blockchain are starting to see it as a critical infrastructure. You begin to understand that blockchain infrastructure is important for the development of economic activity. Governments seek to have a say in developing standards that will eventually be adopted worldwide. China and the European Union are two such leaders, and both are developing blockchain initiatives. The Chinese leadership is very active in supporting blockchain initiatives. In December 2016, blockchain was named in the country's 13th five-year plan along with artificial intelligence as a technology of strategic importance. Dozens of local governments followed suit, running application engineering pilot projects ranging from smart city initiatives to environmental protection. In October 2019, China tested the national blockchain service network (BSN), known as "Blockchain Internet", which was officially launched in April 2020.
Thanks to its size and support power, BSN is poised to become the largest blockchain ecosystem in the world. In China, BSN should be the basis for improving coordination between business and the public sector. Internationally, the attraction to BSN is also quite large. There are concerns that BSN could be controlled and monitored by the Chinese government, but those concerns can be ignored by organizations seeking closer access and integration into the Chinese economy. On the other hand, the profit motive can be overcome by fears of Chinese influence, especially if a viable alternative global blockchain infrastructure is available.
Efforts in the European Union to support blockchain initiatives have been proactive, similar to China's, albeit to a lesser extent and at a slower pace. The EU Blockchain Observatory and Forum was founded in February 2018, leading to the formation of the European Blockchain Partnership (EBP). In 2019, EPB created the European Blockchain Infrastructure (EBSI), a network of distributed nodes across Europe. EBSI has seven specific use cases for public service development. The International Association for Trusted Blockchain Applications (INATBA) was established to promote public-private cooperation. It brings together providers and users of blockchain solutions with representatives of government organizations and standardization bodies from around the world. While Europe's approach to supporting and promoting blockchain adoption is at a lower level and at an earlier stage of progress than China's BSN, its commitment to openness, transparency and inclusion means that international organizations may be more inclined to adopt the framework developed.
“The fact that China is working on a digital yuan is proof that it has value for digital assets and the core technology of blockchain. The main purpose of the introduction of digital currencies by central banks is to protect monetary sovereignty from fears that Bitcoin and other cryptocurrencies could have an impact. DCEP will also increase the efficiency of the payment system and the convenience of RMB payments. The blockchain itself is a combination of many existing mature technologies such as asymmetric cryptography, consensus algorithms, time pressure and many more.
DCEP is integrated with asymmetric cryptography, idle transactions (UTXO) and smart contracts. The digital yuan uses a two-tier system of issuance and distribution – the central bank issues DCEPs to banks or other financial institutions, and these institutions then distribute the digital currency further to the public. While DCEP output is centralized, circulation can be based on a traditional financial account system or blockchain. If DCEP transactions occur on a public blockchain, it will likely help internationalize the yuan. China's central bank previously announced that the DCEP pilot scenario includes venues for the Winter Olympics. Foreign companies can easily open a DCEP wallet to make cross-border transactions because the requirements for opening a DCEP wallet are much lower than opening a deposit account in yuan. Peer-to-peer transactions can be initiated between two DCEP portfolios.
Blockchain technology is now taking its place as the basic infrastructure for forward-thinking governments. This technology has achieved the highest national strategic importance, as demonstrated by the efforts of China and Europe to build blockchain infrastructure. While it is impossible to predict exactly what the global blockchain infrastructure will look like, it is certain that the technology is on the rise.