Blockchain technology is a proven solution for private, public, and educational sectors, bringing with it the ability to protect data, streamline processes, and reduce fraud; blockchain also increases trust and accountability. A blockchain-backed government allows individuals, businesses, and governments themselves to share resources over the distributed ledger using cryptography. While blockchain is a potential remedy for many pain points for departments within the government, it still must be properly implemented; here’s how to do that and how blockchain can specifically streamline the processes within a decentralized government.
When Decentralized Government Doesn’t Work (and Why)
Before we start talking about the benefits of blockchain, we need to talk about where shortcomings occur. Blockchain is a solution to many problems found in the government sector, but it’s not a panacea. Unfortunately, there is a precedent of governments implementing blockchain in their daily operations but having seen mixed or even negative results. Why? Oftentimes, this is because the government agency—eager to enjoy the benefits blockchain offers—skips the assessment of potential barriers and jump right to the implementation. Blockchain and integration requires more intentionality and planning than that.
Another sticking point is that blockchain can help hide a person’s real identity when they use the blockchain. Oftentimes governments need to be able to verify a user’s identity when they make a purchase, but there are also instances where full anonymity must be ensured—anonymous ballots are central to fair and free elections, for example. So, implementing blockchain into a government agency is much more complicated than flipping a switch; the way the decentralized ledger will be used must also be considered.
So, When Does Decentralized Government Work?
As noted, implementing blockchain does require due diligence, but the benefits shouldn’t be overlooked. Payments, data sharing, supply chain, and identity management are all finding ways to use blockchain to improve processes.
In April of 2021, Pew Research found that 24% of people say they trust the Federal Government to do the right thing “most of the time” or “just about always.” Not a flattering number, but it is an improvement from low watermarks of 17% in October 2011 and March 2019. While the reasons for this mistrust are complex, blockchain may help improve. A key feature of blockchain-based solutions is transparency through decentralization, allowing participants to see and verify data. A blockchain solution for some services to allow for verification of government claims.
Personal data breaches have also become a day-to-day fear since governments are a large target for hackers. In 2017, for example, the Equifax data breach exposed the full names, addresses, birthdates, and Social Security Numbers of over 140 million Americans. The Department of Homeland Security says blockchain can revolutionize the way we manage online identity and access the internet.
Decentralized Government Use Cases
Wise buyers know that use cases are critical to any decision to implement a solution like blockchain. We’ve talked about how blockchain implementation has gone wrong, but what about how it can be more successful. Each use case has limitations, but the future is promising.
Public procurement (government contracting) is the largest marketplace for government spending, but also the largest source of official corruption. Vendor selection processes are complex and involve a high degree of discretion, leading to financial waste and decreased healthy competition. Blockchain can address the corruption-risk factors by providing oversight.
Many governments have started experimenting with blockchain-backed land title registries. Sweden, for example, is seeking ways to increase efficiency in a transaction-intensive industry. In addition to mortgage lending, blockchain-backed land registries can potentially provide a secure, decentralized, publicly verifiable, and immutable record system so homeowners can definitively prove their land rights.
Many governments disburse millions of dollars to support noble causes including education, arts, humanitarian aid, social assistance, and more. The process behind awarding them, though, is convoluted and inefficient, which causes money to be lost to banking fees and middlemen—opening the door for corruption. Blockchain can be used to build public trust in the awarding process.
This is by no means a comprehensive list of use cases, though. As noted, blockchain-backed voting is a flawed yet promising use case while Environmental, and Social, Governance (ESG) is also proving to be an effective means of providing traceability and immutability. The possibilities for decentralized government are truly limitless: we’ve only just begun to explore the use cases. As this opportunity grows, SIMBA Chain will be there to help governments implement the blockchain solutions they need.