It's Time for Governments to Embrace Blockchain

Marie Wieck is general manager at IBM Blockchain, where she focuses on driving ecosystem growth around the Hyperledger Project and delivering enterprise blockchain solutions.

This article is an exclusive contribution to CoinDesk's 2017 in Review opinion series.

Governments are custodians of their citizens' most precious information – their Social Security numbers, their tax information, their votes, their identities.

Now, a new technology is emerging that supports open government initiatives focused on unleashing innovation in the public sector. Using blockchain, governments can address the dual challenges of trust and transparency, and the need for data protection and privacy.

Citizens increasingly expect the same ease, efficiency and innovation from public services that they currently enjoy in the private sector. Conflicting data formats, longstanding interoperability challenges and a need to balance the benefits of openness against a need to protect privacy have made it difficult for governments to unleash the full potential of their data – until now.

Blockchain provides an immutable, transparent record of the truth, and it is changing how organizations carry out trusted transactions. Governments around the world are already exploring blockchain. For example, the U.S. state of Delaware is using blockchain to help companies incorporate.

Sweden is using the technology to test a land registry where property buyers and sellers, their banks and land registry authorities can all view and approve transactions on a blockchain in real time.

Dubai has set the ambitious goal of running its entire government on blockchain by 2020, digitizing all public documents onto this ledger to speed and increase capacity for new transactions.

Estonia has been heralded as the first government to embrace blockchain, initially with a focus on cybersecurity, but now also for citizen services like e-voting.

China put a ban on initial coin offerings (ICOs) and has been questioning the use of blockchain with respect to cryptocurrencies, but is more positive about its other, non-currency, use cases.

Japan has sanctioned the use of bitcoin and is looking at the opportunity for its own digital currency while Venezuela recently launched a crytopcurrency in an attempt to circumvent financial blockades.

The U.S. has convened a summit on the subject of blockchain, and the recent approval of the defense spending bill includes provisions for modernizing government technology specifically allowing for the exploration of blockchain.

Tip of the iceberg

These examples, however, are just the beginning.

2018, IBM believes, will be the year blockchain becomes an accepted and appreciated innovation for government, a year when the global public sector begins to look closely at this technology and a year when citizens begin to see its effects on the issues that affect them.

The fact is, blockchain is coming to the public sector.

This is revealed in a survey conducted by the IBM Institute for Business Value of more than 200 regulators in 16 countries focused on building trust in government and reducing bureaucracy. Among those regulators, 14 percent surveyed were already "explorers" with blockchain pilots in progress, and a full 90 percent had plans to do so in 2018.

The top use cases that interested regulators most were not around cryptocurrencies. They were interested in using blockchain to increase collaboration and innovation. Top projects included asset management, digital identity services and reducing the costs of regulatory compliance and citizen services like e-voting.

This amplifies the notion of open government initiatives as an area where blockchain is particularly well suited, such as protecting sensitive data while facilitating approved access where needed.

Pressing questions

With the onslaught of government regulators set to initiate blockchain pilots in the coming year, here are three questions they should consider:

1) What type of permission do government blockchain networks require?

Most of the questions on which blockchain technology to use center on a debate of whether they are public or private blockchains. The better question to ask is whether these are permissioned or anonymous blockchain networks. In permissioned networks, members are known and assigned various levels of permission based on their role in the network.

Contrast this to anonymous blockchain networks where participants are unknown and access is completely open. Most governments and other organizations clearly need a permissioned system that requires consent for use of the information on the network.

2) What’s the best way to get started? Don't wait for new policies to be introduced, set the policy through experience with initial pilots. Blockchain is still an emerging technology.

Understand how smart contracts work and the role they can play in helping with regulatory compliance. Explore key participants in the network and how their roles differ. How can regulators, auditors, service providers, the private sector and other agencies engage?

Picking a starting point and pivoting quickly on feedback from participants is essential. This will also build skills in the expanding blockchain ecosystem.

3) How does the circle of trust expand? The value of blockchain networks increases as they expand. A key question for regulators is how that value might expand beyond geographic boundaries. Most commercial networks cannot be constrained by national borders.

Rather than fight for data locality and data sovereignty, are there broader benefits that come from sharing data with others? Addressing critical global issues like refugee aid efforts, tracking data on potential health epidemics, or combating terrorism, would all benefit from international standards and cooperation.

The time is now

Blockchain’s potential to support trust and transparency, data protection and privacy has been well established in 2017. While we've already seen positive benefits from blockchain, the opportunity is even greater when expanded to open government.

IBM believes that one day, just as the internet became the business standard of communication, blockchain will be how all of us share and verify data.

Government can – and should – help lead that revolution.

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