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Can governments use Blockchain to be more efficient and regain public trust?

Posted on Posted in Other, Startups

Governments find it harder to gain public trust, even if they do good work. Primarily that’s because of lack of transparency, lack of public involvement in decision-making, and traditional operation practices. This blog examines the key challenges in governance (at least from public perspective), a technology solution that may help overcome them, and some examples from around the world where that is being experimented.

The key role of a democratic government is to appropriate collect and distribute resources among its citizens (both individual and corporate). This goes beyond the distribution of monetary resources and includes social intangibles such as security, democracy; the conditions for the maintenance of the rule of law; and economic conditions such as the promotion of free markets, keeping inflation low and steady, protecting the rights of private property, guaranteeing contracts, enabling businesses to thrive with ease, investing in infrastructure etc. This distribution in turn is based on an agreement between the citizen and the government on how rules are set and implemented.

However, in most countries, people complain about their governments, attributing to the following few key factors,

  1. Voting process being rigged
  1. Financial challenges. Rich getting richer, corruption, leakage of funds in social welfare schemes
  1. Government promising different agendas during elections, and implementing something different when elected. Lack of transparency in devising policies
  1. Budget allocation not being in best national interests
  1. Poor performance in executing Government policies. Lack of accountability of the local / national government bodies

Technology can be a good enabler to the above problems. Though of course the bigger challenge shall remain in implementation and adoption of such initiatives.

Transparent central systems with appropriate crowd sourcing workflows can also solve the above problems. Its just that trust is harder to gain into such systems if the Government owning the system; has a chance to manipulate it as well.

Blockchain-driven decentralized transparent systems to the rescue?

Blockchain is s distributed and shared database; a digital tool for building trust among people in information creation and sharing collaboratively, using a consensus model. Blockchain may help reinforce the importance of digital technologies, not just for digitizing existing processes but also for transforming the manner in which government services are delivered for the benefit of citizens in a more public and democratic way.

Rather than a single central authority demanding trust and declaring: ‘I say this data is correct,’ you have the distributed consensus of everyone in the chain, saying in unison: ‘we agree that this data is correct”

Blockchain can make governments smarter and more effective. Remember, Government spending in any country is around 35% of the country’s GDP. Imagine if it’s done democratically, transparently, securely and immutably (i.e. old records can’t be changed, deleted or fudged, at least not easily), it can bring back faith into good governance. It will truly be the government for the people, and by the people. A Blockchain for public services could improve efficiency, reduce costs, preserve data security, and increase trust, transparency, and accountability in public offices. It would result in shared value creation for society as a whole. 

Lets observe the key roles and processes within any Government, and which blockchain apps can help achieve them. These are solutions to some problems highlighted earlier.

  1. Elections – can be held immutably voting on blockchain. Elections cannot be rigged on blockchain, if implemented correctly. Starting to elect government through blockchain based voting application is a great potential start to a blockchain driven government. Apps like Follow My Vote have created end-to-end verifiable online voting software that is open-source and truly revolutionary.
  1. Currency management – use digital, secure, transparent Bitcoin.

Bitcoin is the most proven blockchain application. Bitcoin is an online equivalent of cash. Its secure, efficient, digital and tamper proof. Cash is authenticated by its physical appearance and characteristics, and in the case of banknotes by serial numbers and other security devices. But in the case of cash there is no ledger that records transactions and there is a problem with counterfeiting of both coins and notes.

In the case of Bitcoins, the ledger of transactions ensures their authenticity.

Bitcoin created Opportunities

Virtually all non-cash payments are made through a financial intermediary of some kind. Bitcoin eliminates the need for those intermediaries, opening up possibilities for a faster and more cost efficient payment network. Because the barriers to entry for bitcoin distribution are low, there are opportunities to improve financial inclusion globally, though not without a broad-based financial literacy campaign

Improving Efficiency and Cost

Powerful financial intermediaries that process trillions of dollars of transactions annually dominate the global financial system. However, the fee structure within financial markets and between financial intermediaries can vary widely, from virtually free to over 10% in the example of global remittance charges. As a distributed network that dis-intermediates traditional financial transactions, bitcoin holds the potential to dramatically reduce the fees by up to 250 times (refer to this blog Bitcoin reducing cost of money transfer), which would have the potential to disrupt a number of industries in the process.

Promoting Financial Inclusion

Today, the global financial system is walled away from many of the world’s inhabitants, particularly in the developing world. In the banking industry of the developed world, these customers would not be considered profitable. Bitcoin transactions cost very little to conduct and can range in size from very large to tiny (fractions of a rupee, theoretically), making them viable for even the smallest financial participant and for uses previously unforeseen, such as metering Wi-Fi hotspots or monetizing digital content. Bitcoin transactions also have a relatively low barrier to use, being available through mobile apps and basic internet of NFC protocols.

Reducing leakage and corruption

Given its digital nature, bitcoins allocation and proper use can be tracked using enabling analytics apps. This should reduce leakage and deter corruption.

  1. Devising public policy – information sharing, creation and collaboration through blockchain application.

Collaboration between citizens and government will be necessary in order to turn ideas into meaningful policies that can be appropriately monitored and enforced. A solution that fully leverages digital technology would include the creation of an online policy forum through which government can collaborate with citizens in the formulation of policies. This shall also include decisions like, allocating budgets across all sectors, deciding on tax brackets, devising social welfare plans, improving healthcare, enhancing infrastructure, education system planning etc. Maybe some of these should be made transparent for information of citizens only, and others for citizens to help the Government chose among alternatives.

  • Governments could benefit by gleaning insights and suggestions from citizens.
  • A collaborative approach to assembling best practices and viable governance solutions would lead to better policy outcomes and would allow governments to position themselves as trusted partners in policy creation.
  • Transparency created by blockchain based voting across different choices of policies shall lead to integrity in the Governance.
  1. Distribution of budget – to specific institutions and authorities for execution can be done using Bitcoin. This shall avoid any leakages and transparency shall keep corruption at bay. This shall however need all economy running on digital currency, for this to work. It maybe a good idea for less developed markets to move from cash economies straight to digital currency economies, possibly leapfrogging plastic (cards) based payment systems altogether (just as African countries leapfrogged wired internet with mobile internet).
  1. Tracking Government Performance – with the transparency created above, and citizens holding power to share their views on blockchain driven collaborative information platforms, and appropriate processes governing the government, appraisals can be done easily by devising key performance indicators with a 360 degree review process.
  1. Implementing processes and documentations within local institutions Blockchain enabled digital registries help validate ownership among citizens for property, and other related assets. All documentation on Blockchain makes it easily traceable, and transparency keep corruption at bay.

 

Blockchain implementations in Governments worldwide, so far,

 

  1. The Estonian government has been experimenting with distributed

ledger technology for a number of years using a form of distributed ledger

technology known as Keyless Signature Infrastructure (KSI), developed by an

Estonian company, Guardtime. KSI allows citizens to verify the integrity of

their records on government databases. It also appears to make it impossible

for privileged insiders to perform illegal acts inside the government networks.

This ability to assure citizens that their data are held securely and accurately

has helped Estonia to launch digital services such as e-Business Register and

e-Tax. These reduce the administrative burden on the state and the citizen.

Estonia is one of the ‘Digital 5’ or D5 group of nations, of which the other

members are the UK, Israel, New Zealand and South Korea, enabling deeper

inter-government collaboration over time. The opportunity is for the

government to enable a future where the delivery of government services is

more personal, immediate and efficient.

  1. UK Government is trying Blockchain Welfare Payments System among various other initiatives. This can be replicated in countries like India, by complimenting it with Aadhar Card (unique id) based payments.
  1. US Government is soliciting Blockchain research for improving Healthcare and Human Services. It should be clearer in time how that’s implemented but it’s a good idea to crowd-source the solutions.

There are several political parties around the world that try to be for the people, by the people, with the people. Blockchain can offer a good technology tool to demonstrate that; let the power be distributed, and trust be built in a crowd sourced government.

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