Benefit of Blockchain in government service

Benefit of Blockchain in government service

Blockchain and its many benefits

The fall of 2008 marked the beginning of a new tech era when a new technology showed up on the technological landscape. Although it was created to facilitate the development and minting of bitcoins, with time, its applause-worthy benefits caught the eye of who’s who of the industrial sector. Blockchain, with its ability to create verifiable transactions and ensure complete data storage filled the gaps left by other technologies. Blockchain technology runs on a consensus algorithm issued by nodes. In addition, it has cryptography and complicated encryption working at the base that masks the true identity of data, thereby making it almost impossible to hack. Another distinctive feature that clinches the deal is the tolerance of the distributed ledger technology to Byzantine faults. It means that nodes in the blockchain network will function in a perfect synchronisation verifying process or a transaction by reaching a consensus regardless of the failure of a few nodes or they being hostile and instigating wrong information. Then, of course, blockchain’s transparent and immutable nature is enough to attract potential users, both from the private and public sectors.

Why government should consider implementing blockchains 

The potential benefits of blockchain technology are endless. It is, in many ways, a truly disruptive technology. The technology is being applied across industries and sectors, from financial services to supply chain management. At its core, blockchain is a reliable technology that creates credible services in a treacherous ecosystem. Essentially, this technology guarantees that any data stored will be verifiable, transparent, immutable, and secured. Seeing how it has benefited various industries, governments worldwide have also joined the bandwagon. They are exploring blockchain and its use cases in the government sector to strengthen operational infrastructure while ensuring data integrity. 

Governments stand to benefit from blockchain mainly in the public services sector and how its implementation will affect the following benefactors.

  1. Government
  2. Civil services agents
  3. Citizens of the country

Governments also need to review the costs and the limitations while integrating blockchain into their operational systems.

Blockchain Use cases in Government and public sector

But first, let us understand the reasons why countries worldwide need to implement blockchain technology in the government and public sector and that too on a larger scale.

Reignite trust among citizens of the country: The public trust in their government is based on the current government policies’ implementation and effectiveness, political ideologies, economic security, bureaucratic red tapes, and most crucial of all, corruption levels.

Unfortunately, public trust in governments is at an all-time low the world over. To what extent the factors mentioned above may influence public opinion to differ from country to country? However, it has been observed that corruption is the biggest factor that generates public distrust.

The public ledger system is a perfect solution for governments to store their data and prevent corruption. Moreover, using blockchain in public policy formulation synced with a country’s legal system and core operational structure will help in the development of a robust system within the government in the following ways: 

  • Creation of a secure, immutable, and transparent database
  • Mobilisation and tracking real-time, limpid, and secure transactions
  • Initiation of commercial and public contracts through smart contracts
  • Furthermore, a blockchain-based system can allow citizens to track how their government spends its money

Here are the main pain points in government services where corruption is rampant and can be rectified through blockchain to enthuse public trust in government.

Voting systems: Each time, elections in India create controversy due to the faultiness of the current EVM system (electronic voting machines). Additionally, voters’ identity cannot always be justified in this huge country with its billion-plus population. Such issues are not just limited to India, but many countries’ voting systems are affected by such faulty and ambiguous mechanisms. Therefore many governments are mulling over switching to blockchain-based decentralised and tamper-proof voting platforms that will bring about more transparency and authenticity to the entire voting procedure hindered by deficient mechanisms. Although Sierra Leone was the first country to start blockchain-based voting systems, other countries like USA, Russia, and Japan followed suit and have developed voting systems based on DLT (distributed ledger technology). As for India, the Election Commission, which is a constitutional body in charge of conducting elections, is developing a blockchain-based e-voting system with IIT Madras.

Allocating grants: Each year, governments worldwide allocate various grants to aid education, social issues, healthcare, charitable institutions, unique startups, etc. These grants don’t always reach the grantees or else get tangled into complications caused due to inefficient systems and high banking fees. More often than grants, amounts don’t reach as allocated due to intermediaries and blatant corruption in the bureaucracy. Blockchain can put a stop to such inefficiencies by taking intermediaries out of the equation and simplifying the entire process of grant dispersion. Recently, the UN Women partnered up with the UN world food program  administered a pilot project to Jordan to send cash transfers to Syrian refugees to ensure transparency and avoid cash siphoning incidents at minimum transfer costs.

Land registries: Corruption in land registries is a big cross borne by the real estate sector and governments worldwide. Claims over land are made using incomplete, falsified, or manipulated documents. Government still largely depends on the hard copies, which only add to the chaos and lead to unchecked corruption. Land documents lost due to natural causes are even more difficult to sort. Storing such land records and creating an immutable and transparent database on a blockchain can cut down the possibility of fraud and help establish a legal right over land. Based on the blockchain database, genuine land registries could root out suspicion over faulty and manipulated records and facilitate transparent and irrefutable land sale transactions. 

Government contracts: Corruption is rampant and blatant at all levels of bureaucracy and government when it comes to government contracts. The process through which companies get contracts is impaired, intricate, and complex. Such a liable system results in financial scams, market prices disruption, and selection of corrupt vendors. These inconsistencies lead to the production of inferior quality goods and services. The ultimate sufferers in the grand scheme of things are the country’s citizens. Initiating deals via smart contracts executed on a blockchain between parties involved can considerably bring down ambiguities in contract signing and establishing legal rights. Transparency in the system will also allow healthy competition between qualified vendors by tightening the leash on corrupt individuals and establishing accountability. 

Cost reduction : Governments’ finances are inundated with both calculated and unfactored possibilities that, more often than not, create cost inefficiencies. Governments globally struggle to maintain economic growth with scarce resources and tight, limited financial budgets. So integrating cost-effective solutions remains on the high priority list of any government. Blockchain in various government and public sectors will ensure data security, optimise auditing and operational processes, streamline, encourage transparency and maintain data coherence. This blockchain use case will ultimately reduce costs by eliminating redundant expenses and minimising resource wastage.

Boost public data management : Governments store a humongous amount of data pertaining to their citizens, public sector activities, economic and social activities, government officials, civil servants, and ad infinitum. However, this data is scattered, siloed, and strictly bound to centralised systems of various government departments. Also, maintaining highly sensitive data privacy is a costly affair. Moreover, public and government data are prone to cyber-attacks and leaks even with the current technologies. Leaked data creates opportunities for identity theft and can have serious implications on national security as well. 

Blockchain is a perfect solution to counter these issues, and many governments have already engineered a few programs in this direction. For instance, the Australian government has introduced a pilot project called BaaS (blockchain as a service), also known as cloud-based blockchain solutions, that allows the Australian government officials in various departments to manage a secure and permanent record of their digitised credentials. Another prominent example of blockchain use in government services to store public data is the Indian government reverting to biometric technology and blockchain for Aadhaar, the National Unique Digital Identity system. Aadhaar is a system that creates a unique digital identity for the citizens of the country. Through hash codes and Ethereum based smart contracts, the system keeps sensitive public information secure, making it unbreachable. 

Improve government Efficiency : Governments worldwide need to improve their efficiency to keep up with the ever-changing and constantly evolving global economic landscape. Upgrading to distributed ledger technology allows them to do so with ease, cost-effectively, and in the shortest time possible. The following are the areas where blockchain technology can be used to improve the efficiency and efficacy of government services and systems.

  • Cut down red tapes for smooth functioning 
  • Reduce frauds
  • Preventing counterfeit goods
  • Protecting intellectual property
  • Launching blockchain-enabled public policies public welfare schemes 

Blockchain adoption challenges in the government sector

Blockchain use in government services has undoubted, undisputed, and innumerable benefits. A few countries have either initiated or already executed blockchain-based projects, while many are at the research and development stage of integrating blockchains in their systems. One way or the other, governments worldwide acknowledge that blockchain is the answer to all their problems. However, there are several legal and technical difficulties in the smooth and flawless integration of blockchain, which are as follows.

  • Creating an infrastructure to integrate blockchain in existing systems while ensuring scalability
  • Understanding blockchain technology at its core by the policymakers to create the said infrastructure
  • Designing domain-associated protocols for blockchain usage with the help of academic research
  • Creating and enforcing faultless smart contracts 
  • Ensuring interoperability between blockchains
  • Designing a policy framework for cryptocurrencies for mainstream adoption

Other challenges

There are other challenges for governments and policymakers when it comes to blockchain. Firstly, implementing blockchain requires a lot of complex computing, immensely powerful nodes, and expansive storage space. This means that the government would need to invest heavily in hardware and software, which may prove costly for the majority of governments, especially in developing or underdeveloped countries. Additionally, time for transactions to be confirmed on the blockchain network can cause transparency and accountability problems if transactions are not being monitored closely.

Another disadvantage is undiscovered cash transactions, especially when it comes to land dealings and under the table bureaucracy. They are hard to track as there are no official records. There is no digitised record maintained either. It will be a big challenge for the government to identify and eliminate such cash dealings.

There are innumerable blockchain use cases in the government and public sector, but there are also many disadvantages associated with this technology as well. It will take profound research, a deep understanding of blockchain technology, and efficient legal and technical policies and frameworks, respectively, for streamlined use of blockchains.

Understanding CBDTs and their role as legalised digital currencies

Recently, when India announced its budget, the finance minister of India spoke about cryptocurrencies at length. Although she refused to acknowledge crypto money as legal tender, she did announce that India will soon release their own digital currency, which is also called CBDC (Central Bank Digital Currencies), on the blockchain. 

CBDCs are digital tokens issued by the Central Bank and are equivalent to the value of a country’s fiat currency. Many countries have issued CBDCs, and others are racing to issue them. According to the IMF, at least 9 countries, the latest being Nigeria, have already developed CBDCs and are using them in the mainstream financial setup. While CBDCs are either in pilot or development stages in 31 countries, including India, China, Russia, Latin American countries, Canada, Australia and others. 

Although CBDCs are similar in concept, they are not the same as cryptocurrencies or stablecoins. Still, governments all around the world are looking to develop them despite the presence of crypto money. It is because currencies like Bitcoin, Ether, Dogecoin, etc., are difficult to track as they are developed on fully decentralised platforms. They are unregulated as there is no central authority tracking their movement, and it is almost impossible to trace international transfers. Therefore, policymakers are wary of cryptocurrencies and looking to develop a digital currency that could be regulated, monitored, and traced. The benefits of CBDCs are enormous as they enable cost efficiency and have low transaction costs. Most importantly, CBDCs have better chances to be mainstreamed and get inducted into traditional centralised financial institutions than unregulated digital currencies. Moreover, it will be easier to identify fraudulent activities when digital currencies are created within the legal framework of a country.

Roadmaps of blockchains use case in e-governance

MietY (Ministry of Electronics and Information Technology, Government of India) released a report in 2021 outlining their vision, mission, objectives and scope regarding blockchain technology highlighting various blockchain models and presenting a roadmap for adopting blockchain technology in the next 5 years. 

After initial apprehension, the Communist Party of China recognised the potential use case of blockchain. They soon released a white paper published in 2018, stressing blockchain becoming a geopolitical and economic asset for the country with proper ‘guidance’.

Benefits of blockchain in government service and how through various Sofocle’s services we can impart blockchain solutions in the government sector

We have already encapsulated blockchain use cases in the government sector and how this blossoming technology can make the entire ecosystem robust and optimise the fundamental framework within which any government operates. Moreover, we have developed and deployed various blockchain solutions to our clients. With years of experience and a qualified team of blockchain experts, Sofcole guarantees to provide the model and well-optimised blockchain solutions tailored to government requirements.

To know more about our previous projects and our blockchain services, we have a team of experts at your disposal who would be more than glad to answer any or all questions you might have regarding our services and delivery timings. We are just a phone call away.