Like other major companies, governments have difficulty coordinating processes among various stakeholders. On the other hand, governments need to give greater transparency, impartiality, and accountability to the public than most other institutions. Data management is a major difficulty that government entities must surmount to succeed in these undertakings, particularly in the digital era.
Regrettably, traditional centralized data management systems are inadequate to tackle governmental issues. The single point of failure in the traditional client-server approach compromises data security, and transparency is difficult to achieve if government databases are centralized. The result gets delayed, inefficient, and opaque operations for everything from property title registration to voting for most governments.
That result is part of the reason government entities are not as timely and efficient as anyone would like.
Because blockchain ensures high service availability and data integrity, any industry that relies on a trusted third party or requires a solid guarantee of security and governments around the world should consider using blockchain solutions.
This research looks at how blockchain can help with some of the most pressing concerns in government services.
Table of Contents
What Blockchain can do in the Government
Blockchain technology ensures that every copy of data is always accessible, verifiable, and trustworthy. In terms of data dispersion, it works similarly to an old photocopying machine in that it can make copies of any object available to everyone who uses it. Moreover, it functions more like a notary public in terms of the trust, ensuring that any copy of data is genuine and that the copies cannot be forgotten or counterfeited. Finally, it works like a general ledger in transaction processing, requiring transactions to get recorded in the same order.
A set of replicated servers known as nodes gets used in handling data exchange, transaction processing, and validation. Each node uses a consensus mechanism to reach an agreement with all other nodes regarding a particular transaction without the need for human intervention.
The primary purpose of such a system is to leverage replication to offer security, notably availability and integrity, while also allowing distributed servers to act as a centralized decision-maker.
Blockchain Use Cases in the Government
The main use cases show how to use blockchain technology to remedy flaws in current government processes. These use cases also emphasize the significance of a multi-faceted and complete approach to blockchain-based governance.
They frequently mention important restrictions and drawbacks to using this unique technology. While technology improvements may help overcome these restrictions, governments must assess the costs and benefits of blockchain-based governance systems.
Here are some of the most notable blockchain use cases in the government.
Land Title Registries
Several governments have begun experimenting with land title registers based on blockchain technology. Some initiatives, such as those in Sweden, are driven to improve efficiency in a transaction-heavy business. Others, such as those in Honduras and India, are working to strengthen property rights and increase transparency in a process that is prone to corruption.
Individuals might verify their land rights via blockchain-based land registries, safe, decentralized, publicly verifiable, and unchangeable records. These characteristics decrease the potential for self-interested land rights manipulation and strengthen the overall resilience of land ownership.
Government Contracting or Public Procurement
Government contracting, also known as public procurement, is the world’s largest marketplace for government spending and the leading source of official corruption. This government process is a hotbed of corruption in high-income and low-income countries due to various causes.
Vendor selection is a complicated and opaque process that requires a great deal of human judgment. These inefficiencies waste a lot of money, distort market prices, impede healthy competition, and frequently result in inferior goods and useless services.
By facilitating third-party oversight of tamper-evident transactions and enabling greater objectivity and uniformity through automated smart contracts, a blockchain-based process can directly address procurement’s corruption-risk factors, improving the transparency and accountability of transactions and actors.
Electronic Voting
Concerns about election security, voter registration integrity, poll accessibility, and voter turnout have prompted countries to look into blockchain-based voting platforms as a way to boost trust and participation in critical democratic processes.
In this regard, the decentralized, transparent, immutable, and encrypted properties could help reduce election interference and increase poll accessibility.
Registries of Beneficial Corporate Ownership
Concerns over opaque or undeclared beneficial company ownership have risen in the wake of recent corruption scandals worldwide. As it stands right now, anyone with the right connections and enough money can use gray-area firms for laundering money, bribing individuals, or lobbying government officials in an illegal way.
To better track conflicts of interest and illegal conduct, many governments are beginning to build a central registry for beneficial business ownership. Blockchain-based registries that are tamper-proof and widely accessible could provide much-needed transparency and disclosure.
Critical Infrastructures such as the Energy Sector
Energy, food and agriculture, and transportation are among the 16 key infrastructures identified by the US Department of Homeland Security. Moreover, security and resilience establish a national policy to strengthen and sustain secure, functional, and resilient critical infrastructure.
The application of blockchain in critical infrastructures has gotten extensively researched due to the nature of critical infrastructures. Other disciplines, like the energy sector, are under study by governments worldwide, in addition to the financial and healthcare industries, which are both considered essential infrastructures. For example, to establish the “Energy Internet,” the Department of Energy has granted various projects to industry and academia.
The goal is to provide an advanced management system for distributed energy resources that will enable peer-to-peer communication that is quick, scalable, and secure.
Ultimately, the energy sector can use blockchain in various ways, from energy trade to IoT device management and energy resource management.
Conclusion
Blockchains have progressed beyond cryptocurrencies to serve a broader purpose that you may apply to a wide range of applications, especially those that require high service availability and data integrity.
Nevertheless, blockchain has valuable properties, notably tamper-evident and permanent databases and record-keeping, that could improve transparency, accountability, and public engagement in sectors that significantly impact democratic governance and global development.
Web3 describes a version of the internet where data will be interconnected in a decentralized way. Web3 is an umbrella that comprises various fields like semantic web, AR/VR, AI at scale, blockchain technologies, and decentralization. The core idea of Web3 moves along the lines of enabling decentralized ownership on the web.
A blockchain protocol is a set of underlying rules that define how a blockchain will work. Based on the underlying rules of the protocol it’s possible to build a business ecosystem. Usually, protocol’s rules comprise everything from how tokens can be issued, how value is created, and how interactions happen on top of the protocol.
In software engineering, a fork consists of a “split” of a project, as developers take the source code to start independently developing on it. Software protocols (the set of rules underlying the software) usually fork as a group decision-making process. All developers have to agree on the new course and direction of the software protocol. A fork can be “soft” when an alteration to the software protocol keeps it backward compatible or “hard” where a divergence of the new chain is permanent. Forks are critical to the development and evolution of Blockchain protocols.
A Merkle tree is a data structure encoding blockchain data more efficiently and securely. The Merkle tree is one of the foundational components of a Blockchain protocol.
The nothing-at-stake problem argues that validators on a blockchain with a financial incentive to mine on each fork are disruptive to consensus. Potentially, this makes the system more vulnerable to attack. This is a key problem that makes possible underlying blockchain protocols, based on core mechanisms like a proof-of-stake consensus, a key consensus system, that together the proof-of-work make up key protocols like Bitcoin and Ethereum.
A 51% Attack is an attack on the blockchain network by an entity or organization. The primary goal of such an attack is the exclusion or modification of blockchain transactions. A 51% attack is carried out by a miner or group of miners endeavoring to control more than half of a network’s mining power, hash rate, or computing power. For this reason, it is sometimes called a majority attack. This can corrupt a blockchain protocol that malicious attackers would take over.
A Proof of Work is a form of consensus algorithm used to achieve agreement across a distributed network. In a Proof of Work, miners compete to complete transactions on the network, by commuting hard mathematical problems (i.e. hashes functions) and as a result they get rewarded in coins.
An Application Binary Interface (ABI) is the interface between two binary program modules that work together. An ABI is a contract between pieces of binary code defining the mechanisms by which functions are invoked and how parameters are passed between the caller and callee. ABIs have become critical in the development of applications leveraging smart contracts, on Blockchain protocols like Ethereum.
A Proof of Stake (PoS) is a form of consensus algorithm used to achieve agreement across a distributed network. As such it is, together with Proof of Work, among the key consensus algorithms for Blockchain protocols (like the Ethereum’s Casper protocol). Proof of Stake has the advantage of security, reduced risk of centralization, and energy efficiency.
Proof-of-Activity (PoA) is a blockchain consensus algorithm that facilitates genuine transactions and consensus amongst miners. That is a consensus algorithm combining proof-of-work and proof-of-stake. This consensus algorithm is designed to prevent attacks on the underlying Blockchain.
According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum).
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
Blockchain companies use sharding to partition databases and increase scalability, allowing them to process more transactions per second. Sharding is a key mechanism underneath the Ethereum Blockchain and one of its critical components. Indeed, sharding enables Blockchain protocols to overcome the Scalability Trilemma (as a Blockchain grows, it stays scalable, secure, and decentralized).
A decentralized autonomous organization (DAO) operates autonomously on blockchain protocol under rules governed by smart contracts. DAO is among the most important innovations that Blockchain has brought to the business world, which can create “super entities” or large entities that do not have a central authority but are instead managed in a decentralized manner.
Smart contracts are protocols designed to facilitate, verify, or enforce digital contracts without the need for a credible third party. These contracts work on an “if/when-then” principle and have some similarities to modern escrow services but without a third party involved in guaranteeing the transaction. Instead, it uses blockchain technology to verify the information and increase trust between the transaction participants.
Non-fungible tokens (NFTs) are cryptographic tokens that represent something unique. Non-fungible assets are those that are not mutually interchangeable. Non-fungible tokens contain identifying information that makes them unique. Unlike Bitcoin – which has a supply of 21 million identical coins – they cannot be exchanged like for like.
Decentralized finance (DeFi) refers to an ecosystem of financial products that do not rely on traditional financial intermediaries such as banks and exchanges. Central to the success of decentralized finance is smart contracts, which are deployed on Ethereum (contracts that two parties can deploy without an intermediary). DeFi also gave rise to dApps (decentralized apps), giving developers the ability to build applications on top of the Ethereum blockchain.
The history of Bitcoin starts before the 2008 White Paper by Satoshi Nakamoto. In 1989 first and 1991, David Chaum created DigiCash, and various cryptographers tried to solve the “double spending” problem. By 1998 Nick Szabo began working on a decentralized digital currency called “bit gold.” By 2008 the Bitcoin White Paper got published. And from there, by 2014, the Blockchain 2.0 (beyond the money use case) sprouted out.
An altcoin is a general term describing any cryptocurrency other than Bitcoin. Indeed, as Bitcoin started to evolve since its inception, back in 2009, many other cryptocurrencies sprouted due to philosophical differences with the Bitcoin protocol but also to cover wider use cases that the Bitcoin protocol could enable.
Ethereum was launched in 2015 with its cryptocurrency, Ether, as an open-source, blockchain-based, decentralized platform software. Smart contracts are enabled, and Distributed Applications (dApps) get built without downtime or third-party disturbance. It also helps developers build and publish applications as it is also a programming language running on a blockchain.
An imaginary flywheel of the development of a crypto ecosystem, and more, in particular, the Ethereum ecosystem. As developers join in and the community strengthens, more use cases are built, which attract more and more users. As users grow exponentially, businesses become interested in the underlying ecosystem, thus investing more in it. These resources are invested back in the protocol to make it more scalable, thus reducing gas fees for developers and users, facilitating the adoption of the whole business platform.
Solana is a blockchain network with a focus on high performance and rapid transactions. To boost speed, it employs a one-of-a-kind approach to transaction sequencing. Users can use SOL, the network’s native cryptocurrency, to cover transaction costs and engage with smart contracts.
In essence, Polkadot is a cryptocurrency project created as an effort to transform and power a decentralized internet, Web 3.0, in the future. Polkadot is a decentralized platform, which makes it interoperable with other blockchains.
Launched in October 2020, Filecoin protocol is based on a “useful work” consensus, where the miners are rewarded as they perform useful work for the network (provide storage and retrieve data). Filecoin (⨎) is an open-source, public cryptocurrency and digital payment system. Built on the InterPlanetary File System.
BAT or Basic Attention Token is a utility token aiming to provide privacy-based web tools for advertisers and users to monetize attention on the web in a decentralized way via Blockchain-based technologies. Therefore, the BAT ecosystem moves around a browser (Brave), a privacy-based search engine (Brave Search), and a utility token (BAT). Users can opt-in to advertising, thus making money based on their attention to ads as they browse the web.
Uniswap is a renowned decentralized crypto exchange created in 2018 and based on the Ethereum blockchain, to provide liquidity to the system. As a cryptocurrency exchange technology that operates on a decentralized basis. The Uniswap protocol inherited its namesake from the business that created it — Uniswap. Through smart contracts, the Uniswap protocol automates transactions between cryptocurrency tokens on the Ethereum blockchain.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
