The practical reality of blockchain in government

The practical reality of blockchain in government

Blockchain has been the subject of widespread interest and experimentation in government in recent years. The breadth of potential uses parallels the breadth of government missions and functions, writes Rick Holgate.

No other sector has such a broad and diverse portfolio of services. Accordingly, blockchain-enabled opportunities in government have seemed boundless. But that boundless enthusiasm has shown signs of subsiding, replaced with a greater sense of realism informed by experience.

Rick Holgate

This cooling reflects a more reasoned and rational approach to blockchain in government. The wave of executive leadership directed exploration, out of fascination or fear of missing out, has ebbed, replaced with more deliberate and informed experimentation.

Government departments should focus on practical uses of blockchain with discipline, pragmatism and awareness of risks. Address the desired business outcome rather than the technology.

Initiatives with promise

There are four blockchain initiative types that have managed to gain traction and survive beyond initial experimentation.

Record keeping – Many governments have announced an intent to store and manage government records on blockchain. Record keeping uses are seen as valuable for their ability to deliver promised transparency and immutability, and as a means to restore or rebuild trust among constituents.

Efficiency plays – Initiatives are predicated on the idea that decentralised, multi-party transactions can be streamlined through the use of blockchain to facilitate resolution of transactions. Interest is generally motivated by a desire to decrease friction in inherently disconnected processes, interactions or transactions.

Digital asset markets – These are effectively ecosystems of participation that enable disintermediated trading of purely digital assets or digital representations of physical assets. Interest is motivated by governments acting as the market infrastructure provider for industries, especially in regulated areas such as insurance, mining and utilities. They also act as a service provider in collaboration with both private and public sector partners.

Blockchain disruptors – Interest in creating a new blockchain-based business model is somewhat intuitive: an opportunity to disintermediate services; shift more responsibility and control outside of centralised authority; deliver ecosystem-enabled services in a more assured manner; and streamline services on a global scale. In general, they fall into two broad categories: global aspirations such as The United Nation’s ID2020 Alliance digital identity system, and voting.

The most promising and mature uses for government revolve around efficiencies and record keeping, provided that they are predicated on services that are ecosystem-delivered, as opposed to centralised. Digital asset markets also hold promise, but scalability and adoption remain obstacles.

More ambitious uses — many around global interoperability, such as the United Nation’s ID2020 — have the potential to disrupt and disintermediate government services. But most remain visionary ambitions, contingent on development of consortia and data standards.

 Getting started

If you’re looking to deploy blockchain, the following four steps will get you started:

Evaluate options for storing data or records

For government records with retention requirements, a storage strategy is essential to enable expiration – deletion, erasure – of records. Evaluate blockchain as an option for storing data or records where the current controls to ensure immutability and manage access are expensive. Explore data storage options for record keeping uses, particularly for those with retention policies, privacy implications or large data volumes.

Factor in scalability, security and true decentralisation

Efficiency-based initiatives have shown substantial promise, but also some potential pitfalls or shortfalls. Make sure you have planned for and factored in scalability, security and true decentralisation when aiming for efficiency gains through blockchain.

Evaluate different participation options

Creation of digital asset markets only succeeds if they are thought through beyond the pilot stage. Evaluate different participation options in the context of digital asset markets. For example, consider what models, incentives and populations to target and plan for to achieve viability.

Apply realism

Apply realism when assessing the potential disruptive effects of individual blockchain uses. Is blockchain truly needed? Have all the non-blockchain issues been anticipated and addressed, such as governance, data standards and the relationship of physical things with their digital representation? Has the design accommodated the scale of the intended implementation?


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