Blockchain has often been called a disruptive technology, that is due to the fact that it provides the fundamental change that industries have required to keep pace with the ever-evolving expectations of its consumers. From the many potential beneficiaries of blockchain technology, the public sector stands out as the most significant.
Blockchain-based digital government can protect data, streamline processes, and reduce fraud, waste, and abuse while elevating trust and accountability. Public institutions are responsible for a vast number of trust-related functions and services, which makes blockchain a practical tool for government. Indeed, governments across all continents except Antarctica have taken note of this fact and are examining how they may be able to leverage blockchain technology in their services.
Throughout this article, we will explore how blockchain could benefit the public sector and how it could compensate for existing deficiencies. We will also be going through the use-cases of blockchain in the public sector. During the study of these use-cases, we will gain a more comprehensive insight into how Blockchain could transform and enhance the public sector.
Benefits of Blockchain in Public Sector
The public sector is suffering from several shortcomings. Blockchain can benefit the telecom industry in overcoming these shortcomings. Some of the most notable benefits are:
- Gaining Lost Trust of the Citizens
OECD research found that only 45% of citizens trusted their government in 2019, and the recent covid pandemic has most likely contributed further to this decline. It’s clearly visible that the trust of citizens in their respective governments is deteriorating more than ever. Governments should be wary of this situation, as a lack of trust will compromise citizens’ willingness to cooperate and coordinate with the government on various public policies. The reasons for this distrust are numerous and complex, but blockchain technology has the potential to reverse this trend.
Major values that build and preserve trust are considered to be high levels of integrity, fairness, and openness. These values are synonymous and at the core of blockchain technology. Blockchain provides for transparency, accountability, and immutability of the system by allowing the participants on the network to view and verify the data. The update of the data on the network is done in real-time and as a result, all the participants of the network are updated of transactions taking place on the network at the same time they occur. In addition, blockchain enables peer-to-peer transactions, eliminating the need for intermediaries between transactions and increasing trust.
- Cost Reduction and Increased Efficiency
Public sector and government institutions are plagued with wasteful expenses and extensive mismanagement of resources. Government agencies are entrusted with the limited resources of the economy and they must strive to fulfill their mission while responsibly managing scarce resources. The reliance on outdated legacy systems for conducting governmental operations is the root cause of the problem. These legacy systems are unable to provide transparency and accountability as a result inefficient and corruptible practices originate. The inaccuracy in the calculation of projects, the irresponsible use of funds, etc are the factors that increase the cost of government organizations by manifolds and contribute to their inefficiency.
Blockchain with the aid of smart contracts can reduce cost and increase efficiency by streamlining the current operational model used by government institutions. Smart contracts can help government organizations to automate their processes. As a result, the processes which previously used to take too much time and were prone to error will now be completed in an instant. Further smart contracts coupled with the feature of the immutable database of blockchain will provide a transparent and consistent operational model to governmental organizations.
- Protection of Sensitive Data
Breaches of personal data have become the new normal in today’s modern era. Worldwide, every major country has been a victim to these data breaches several times in the past decade and the U.S. leads that chart. The government databases are the prime target for hackers as it serves as society’s default records keeper. Also, another reason for the exponential rise of attacks on government databases is that records that in the past used to be in paper form are getting digitized now and being recorded in centralized databases. However, rather than accept such attacks as the cost of doing business in the digital age, they could be mitigated or prevented through the responsible deployment of blockchain data structures.
The blockchain will enhance the security of existing databases in two ways:
- by decentralizing the data, and 2) by leveraging cryptography.
Decentralization of the data is done by storing the data on various nodes present on the network. Doing this will eliminate the scope of a single point of failure which is always present in the centralized databases. Also, adding cryptography on top of it makes a system almost unhackable.
- Sharing of Data and Reduction of Bureaucracy
The bureaucracy has become the hallmark of government institutions. Most of the institutions are still relying on piles of paperwork and following outdated networking systems to conduct their operations. A traditional government organization with several layers between top management and front-line employees can slow communications and the flow of information and increase the number of “hands” an issue must pass through before being resolved.
This multi-step process is the cause of hassle to both the public and government officials involved in the process.
The use of blockchain, when incorporated correctly, can greatly impact and reduce bureaucracy by streamlining the practices of government organizations. At present, the data crucial to carry on the functions of government organizations are siloed in various databases of various different organizations. Blockchain would provide a uniform network where the data from all the organizations could be present, allowing communication and sharing of data between different organizations would be possible.
Blockchain for Public Sector: Use Cases
Here are the few major use cases that could utilize the potential of blockchain technology and make the public sector more accessible, reliable, and accountable.
- Public Procurement
A public procurement program (or government contracting) is the single largest marketplace for government expenditures and the largest source of corruption in government. Processes for vendor selection can be complex and opaque, involving a high level of human discretion, thereby attracting corruption and inefficiency. The blockchain-based procurement process can significantly reduce corruption risks by facilitating third-party oversight of the transactions and facilitating greater uniformity through automated smart contracts, thus increasing the transparency and accountability of transactions and parties involved.
Worldwide, governments and their legal branches are the primary sources of information for everything from land titles to incorporation of companies, and from marriage and divorce records to criminal records. The management of these registries is a complex process, and reliance on outdated systems and legacy tools has led to corruption, fraud, high costs, and lengthy processing times. Blockchain can help in managing registries using distributed ledgers and provides much-needed transparency to eliminate fraud and corruption while simultaneously offering the potential for real-time updates.
- Electronic Voting
The concerns and allegations surrounding election security, voter registration integrity, poll accessibility, and voter turnout are increasing with every election. Counting votes in a timely but secure and transparent manner has become a challenge faced by every democratic government. A blockchain-based voting system can minimize election tampering and maximize poll accessibility due to its decentralized, transparent, immutable, and encrypted characteristics.
- Grant Disbursements
Each year, governments give grants of millions of dollars to support a variety of causes, including education, the arts, humanitarian aid, and social assistance, amongst other causes. The process is often convoluted, opaque, and inefficient, resulting in money lost to the middleman and banking fees, and opening the door to corrupt financial practices. Blockchain could potentially restore public trust in such systems by reducing the number of existing intermediaries into the process, thereby streamlining the process, reducing costs, and reducing the possibility of funds being siphoned off.
- Digital Identity Management
A functioning economy & society depends on identity, and managing identities is a central function of government. The traditional identity management systems used by the government suffer from a variety of infirmities, such as difficulty accessing data, data insecurity, and fraudulent identity creation. Blockchain offers a solution in the form of digital identities, which enable everyone in the network to have the same source of truth about the validity of credentials and the verification of data inside credentials without revealing the private data.
- Data Storage
Data has become the new currency in the modern world and the government is the custodian of this new currency possessing massive amounts of data of its citizens. Traditional data storage facilities used by the government make use of centralized servers to store the sensitive data of its citizens which are prone to data breaches by hackers. Blockchain can be used to support the digital storage of publicly accessible records. By distributing storage across multiple nodes, both the resiliency and the integrity of the data can be ensured.
- Central Banking
Worldwide, central banks are still relying on outdated systems and policies to discharge their day-to-day functions and duties (regulation of money in the economy). The ever-rising inflation and constant loss in the value of money are the indicators that they need to change the current way of working. Blockchain gives a great alternative to the existing incompetent mechanism. With blockchain incorporated in the central banking system, they can replace the current physical currency with digital currency, also known as CBDC. These CBDC will give greater control, transparency, and accountability to regulate the supply of money in the economy to the central banks.
- Enforcement of Regulations
For governments, enforcing regulations is as challenging as adhering to regulations for businesses. The phase of digitization of information is underway now, we’re gradually moving past the era of physical documents and every information is turning to data. Regulators are still relying on legacy tools which are proving to be inadequate when it comes to managing the data needed for both the enforcement of and adherence to regulation. Blockchain-supported distributed ledgers will provide regulators with the tools to track and trace items or data granularly and in real-time, which would make the enforcement of laws more robust and efficient.
A government’s ultimate goal is to serve its citizens as effectively as possible. The blockchain is here to assist them in doing just that-improving transparency, accountability, and interaction while reducing the time and cost necessary to provide citizens with far greater value through state services.
As governments around the world are becoming aware of the potential of blockchain technology, the time is not far when we see the above-mentioned use cases become a reality.
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