Blockchain for Governance

Distributed systems in the governance field can potentially transform the public sector significantly. The first and most famous use case of blockchain technology is Bitcoin; however, it has now found applications in various areas.

Basics

There are multiple reasons why government entities should contemplate the adoption of blockchain technology. The potential advantages of using this technology in governance include increased decentralization, data integrity, and transparency. In addition, it can provide better efficiency and reduce operational costs.

Decentralization and Data Integrity 

Blockchain technology offers several benefits for governments, including increased decentralization and data integrity. All blockchain systems are distributed, which means they rely on multiple nodes working together to validate and verify data. This process ensures a unique version of the truth, making blockchain highly immutable. The framework can be customized to restrict access to information and limit modifications to authorized parties, which reduces the likelihood of data tampering and fraud.

Blockchain's decentralized system can involve different governing agencies, non-governmental organizations, universities, and citizens as validating nodes, resulting in a higher level of decentralization. Additionally, this verification process can prevent data entry errors and mistakes.

Blockchain can also play a significant role in ensuring fair and open elections. Its high level of immutability makes it an excellent solution for preventing vote tampering. Blockchain has the potential to make secure online voting a reality. The state of West Virginia piloted such a system during the 2018 United States midterm election.

Transparency 

Blockchain technology can be used to store and protect government records in a way that makes it harder for anyone to manipulate or hide information. Unlike the current model, where most governmental data is stored in centralized databases, which are controlled directly by the authorities, a blockchain can distribute the process of verifying and storing data to multiple parties, effectively decentralizing power.

This makes blockchains ideal for creating transparent databases that decrease (or remove) the need for trust between governmental bodies and civilians. European authorities are exploring blockchain-based registries to diminish the occurrence of property disputes. In this model, both governmental agencies and citizens can access and verify the distributed system, securely holding a copy of the official documents and claims.

Decentralized blockchains can also offer permanent access to records that law enforcement officials and watchdog organizations might need to uncover corruption or abuses of power. By reducing or eliminating the need for intermediaries in data sharing and financial transactions, blockchain systems could make it difficult for government officials to obfuscate wrongdoing by routing funds through a series of opaque private entities.

Increased Efficiency 

Blockchain technology can potentially improve national institutions' efficiency, reduce operational costs, and increase citizens' trust in government. One of the main benefits of using blockchain in governance is the ability to automate tasks and workflows through smart contracts. This would reduce the time and money spent on bureaucratic processes, resulting in greater efficiency and cost savings. By reducing operational costs, governments can invest more in other areas, such as education, security, and public health, leading to higher approval ratings of governing bodies.

Tax collection is another area where blockchain technology could be applied. Blockchain-based ledgers could simplify the process of moving funds between parties based on preset conditions, resulting in significant administrative cost savings associated with collecting and distributing tax money and enforcing tax laws. By storing records and processing returns on private blockchains, tax collection agencies could also provide improved security to protect individual taxpayers from fraud or identity theft.

Limitations 

Blockchain technology presents several advantages when used in the public sector, such as improving data integrity, transparency, and efficiency. However, there are limitations that need to be considered.

One potential disadvantage of blockchain is its immutability, which means that records must be entered accurately before validation. While some implementations may be more flexible, requiring the consensus of most validating nodes to change data could cause questions about the decentralization of the system. Private blockchains could address this issue.

Privacy concerns are also an issue since records added to a blockchain remain permanently available to anyone with access. This could conflict with procedures like criminal record expungement or a digital right to be forgotten. Solutions such as burn functions and cryptographic techniques like zk-SNARKs could be employed.

Finally, governments themselves may present obstacles to adoption, with some not understanding the value of blockchain technology, while others may resist its adoption to protect the interests of their officials in corrupt regimes.

Conclusion

Despite their potential disadvantages, blockchain systems have several possible benefits in governance. These distributed networks can enhance transparency, streamline tax collection processes, and build trust between governments and their citizens. Many countries are already experimenting with blockchain technology in various ways.

It's worth noting that digitalized governance systems existed before the advent of blockchain technology. For instance, Estonia introduced its digital identity program in 2002 and became the first country to hold Internet elections in 2005. In 2014, Estonia launched the e-Residency program, which mentions the use of blockchain technology for managing and securing digital data.