Blockchain technology was originally developed to function within the Bitcoin architecture, but is now used in many different areas. One of these areas is the field of administrative services, where distributed systems can significantly change the public sector.
Why should government agencies consider adopting blockchain technology?
While the technology has many potential governance benefits, there are several key reasons for government agencies to consider using blockchain. These include increased decentralization, integrity and transparency of all data, as well as increased efficiency and reduced operating costs.
Decentralization and data integrity
There are many different ways to build a blockchain network, but they are all decentralized to some extent due to their distributed type of system construction. This is because the blockchain is supported by many computer nodes that work synchronously to check and validate all streaming records. Their job is to reach consensus and agree on the state of the database while maintaining a unique version of the truth of the information.
Thus, blockchain-based systems have a high level of data immutability and the entire network structure can be configured in such a way as to provide access to information and only in some cases make changes to it by authorized parties. As such, different governing bodies can act as validators, each of which takes part in the distribution and validation process. This will significantly reduce the likelihood of data falsification and fraud.
Also, depending on the system settings, non-governmental organizations, universities and citizens can act as nodes, leading to an even higher degree of decentralization. Additionally, these validation mechanisms can prevent other common types of data entry errors (for example, a block of data missing fundamental information will be rejected by the distributed network of nodes).
In addition, blockchain could one day play a significant role in the electoral process. Fair and open elections are one of the cornerstones of democracy, and the high level of immutability of the blockchain network makes it an excellent solution for preventing vote fraud. But providing additional security is not the only advantage of this technology; thanks to blockchain, secure online voting can become a reality. The state of West Virginia piloted a real-life example of such a system during the 2018 US midterm elections.
Transparency
Blockchain databases can be used to store and secure all government records in a way that makes the information more difficult to manipulate or hide from the public. Under the current model, most government data is stored on centralized servers that are directly controlled by the authorities and some of the databases are in the hands of just a few people, which simplifies various manipulations on their part. In this case, blockchain is a popular technology, since thanks to it it is possible to distribute the process of verifying and storing data, effectively realizing the decentralization of power.
For this reason, blockchains can be used as a transparent database that reduces (or eliminates) the need for trust between government agencies and civilians. For example, some European authorities are exploring the potential of blockchain-based registries to reduce the number of property disputes. Such a model can be based on a distributed system that can be used for requests and various information checks by both government agencies and citizens, as well as for securely storing copies of official documents and claims.
In addition, decentralized blockchains can provide permanent access to all records of law enforcement officials, which in turn facilitates the work of regulatory authorities to uncover corruption offenses or abuses of power, thereby reducing or eliminating the need for intermediaries associated with data exchange and financial transactions. Such government infrastructure can make it much more difficult for government officials to obfuscate illicit financial activity by routing funds through a series of opaque private entities.
Increased efficiency
Another reason for using blockchain technologies in administrative management is to reduce operating costs by maximizing the efficiency of government institutions. Since the government relies on taxpayers, wise use of public funds is key. Systems based on blockchain and smart contracts can be used to automate tasks and workflows, which will significantly reduce the time and costs of the entire paperwork process associated with bureaucracy.
While cutting administrative costs is extremely practical, it can also help build trust among citizens. Improved efficiency and lower costs will lead to higher government ratings, and by reducing operating costs, the government will be able to invest more in other government sectors such as education, security and health.
Tax collection is another process that can be streamlined with this technology. Blockchain-based ledgers can facilitate the simple exchange of funds between parties, subject to clearly defined conditions. This could lead to a sharp reduction in administrative costs associated with the collection and distribution of tax funds. For example, by storing all payment records and processing refunds on private blockchains, tax collection agencies can provide enhanced security to protect individual taxpayers from fraud or identity theft.
Disadvantages and Limitations
While it is clear that blockchain can be used to improve the integrity, transparency and efficiency of data circulation, there are certain limitations associated with the use of this technology in the administrative sector.
But what's most interesting is that the immutability of data, which underlies so many of the benefits of blockchain technology, can also be a disadvantage in some cases. This property makes it imperative that all records are sequenced correctly immediately before they are verified, meaning that steps must be taken to ensure the accuracy of the initial data collection.
The blockchain network can be designed to operate in a more flexible way, allowing changes to previously recorded data, but this in turn will require approval (consensus) from the majority of validating nodes, which in the future may raise questions related to the decentralization of the system and ultimately lead to some disagreements among the participants. However, this disadvantage can be quickly eliminated through private blockchains that do not require a high level of decentralization.
Confidentiality of information is also one of the key elements in this area, since all records added to the blockchain will be accessible and this may conflict with the existing process of processing personal documents; a legal procedure such as expunging a criminal record is an excellent example. In countries that recognize a person's right to rehabilitation, data immutability may conflict with existing legislation or legal precedent. Potential solutions to this problem may include the use of a data burning function or various cryptography techniques such as zk-SNARK and other types of zero-knowledge proofs.
In conclusion, it should be noted that at this stage the government, due to its lack of awareness, creates various obstacles to such integration. In some cases, authorities do not fully understand the full value of blockchain technologies, which causes them to ignore many of the potential benefits. In more complex cases, a government in which corruption is widespread and long-established may be reluctant to adopt the technology to protect the interests of its officials.
Conclusion
Despite the potential drawbacks, there are several possible applications for blockchain to simplify government governance. From increasing transparency to streamlining the tax collection process, distributed networks can help government organizations operate more efficiently, which in turn will translate into trust among citizens. Although some benefits are still hypothetical, many countries are already conducting various experiments.
It is worth noting that digital technologies have been used to operate management functions since the early 2000s, years before the creation of blockchain. A notable example is Estonia, which launched its digital identity program in 2002 and became the first country to conduct elections via the Internet in 2005. In 2014, the Estonian government launched the e-Residency program, which refers to the use of blockchain technology to manage and protect digital data.
