The 20th century has cemented itself in history as a period of unparalleled growth, development, and innovation across every field of study while also witnessing the emergence of new domains that have left a deep footprint on our evolutionary course. This century of development occurred on a stable and more importantly, compatible governmental and administrative framework that managed to withstand the strains placed on it.
Now, twenty years into the twenty-first century, countries from all over the world are signaling the fact that the current governmental administrative systems based on the nineteenth-century centralized, hierarchical model are struggling to reflect the high-speed, digital world we live in. In fact, it becomes increasingly clear that legacy governmental structures are unable to cope with the rapid shift towards an increasingly digitized society, the challenges that emerge with it as well as the unprecedented degree of mobility of our globalized world. As a direct result, we see a significant increase in administrative bottlenecks and friction points, a general state of dissatisfaction with governmental performance, as well as a general sense of alienation concerning the citizen-government relationship.
As such, a new vision and strategy for government is needed, one that is based on technological infrastructures that can support an agile type of organization capable of reacting to the rapidly changing world we live in. Blockchain, a relative newcomer to the tech scene, seems to hold the potential to create a stable framework, capable of supporting a new type of administrative organization suited to answer the expanding needs of the 21st century.
Why did the first generation of eGovernments fail to meet their objective?
A high-level overview of current governmental models shows an outdated system that is concerned with collecting data and resources (primarily financial) and storing them on centralized siloed data networks that act as a basis for government decisions. Citizens, businesses, and enterprises interact on a daily basis with siloed, hierarchical government organizations to exchange data, pay taxes and fees which creates the need of multiple layers of oversight in public sector organizations for validating transactions and data exchanges between government, citizen and businesses, and even between governmental organizations. The problem with this operational flow is that it sets the stage for multiple bottlenecks and friction points such as:
- increased spending on bureaucracy
- sluggish decision making
- invisible boundaries generated by inflexible rules
- the prevalence of corruption on every governmental level
- the alienation of the public from the governmental
Technological innovation has been one of the main factors that contributed to the integration of new and improved work models across various spheres of activity, including governmental procedures as well as the public sector. The problem is that most governments are slow when it comes to embracing change which leads to disharmony in decision-making processes that translates to increased citizen dissatisfaction when it comes to their interaction with public services and governmental institutions.
The first wave of eGovernment initiatives tried to address some of the ailments of the bureaucratic apparatus in a bid to streamline the interaction between the public and governmental organizations as well as to increase the back end operations of governmental institutions. The problem is that the first wave of digitalization encountered several obstacles inherent to the governmental structures that it could not overcome: the prevalence of legacy infrastructures, insecure data communication channels, and centralized storage systems that are susceptible to single point of failure attacks. As such, digitalization was mostly viewed as a method of increasing efficiency without providing an alternative to the status quo. The shortcomings of this approach can be observed in the numerous cybersecurity attacks that have targeted government systems over the years:
- In May 2009, a hacker infiltrated the Virginia Prescription Monitoring Program (US) and hijacked the personal information of 8.3 million Virginians, demanding USD 10 million for the stolen data.
- A security breach in South Carolina at the Department of Revenue in October 2012 cost the state more than USD 14 million, as 3.6 million Social Security numbers and 387.000 taxpayers’ credit and debit card numbers were exposed when a database system was compromised
- In November 2015, the Georgia Secretary of State announced that 6.2 million voters’ private information, including Social Security numbers, had been accidentally included in a State Download File, sent to at least 12 groups.
Why is blockchain viewed as an ideal foundation for eGovernment?
Blockchain debuted on the tech scene in the aftermath of the 2007 economic crisis as a framework that could enable a viable alternative to the precarious financial system that imploded, unleashing a chain of events that had global economic ramifications. In this context, blockchain emerged as a technological framework that can guarantee trust between multiple unknown parties over a wide distributed, decentralized peer to peer network.
For more than a decade since this technology has hit the market, it has firmly positioned itself in the limelight, gaining significant support and following. Even so, there is still much confusion over what is blockchain, and how it differs from technologies that preceded it. Blockchain is a distributed incorruptible ledger of economic transactions that can be programmed to record not only financial transactions but virtually any type of data that has value. A type of distributed ledger technology (DLT), blockchain is a digitized, distributed database that records all the information introduced in a decentralized peer to peer network. The created database is then replicated and shared among the network participants. This means that all members have access to the information, which provides a highly transparent environment. As an exercise in imagination, when talking about blockchain, one should envision an ordered list of blocks, where each block is identified by its cryptographic hash. Every block is arranged in such a way that it references the block that came before it, which leads to the creation of a chain of blocks (hence its name). When a new block is created and appended to the blockchain, all the information contained by the new block will be available to every member of the network. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires the collusion of the network majority.
The paradigm of digital governments is focused on providing user-focused, agile, and innovative public sector services. The immediate benefits generated by implementing blockchain in a reformed governmental structure are:
- reduced financial costs, time and complexity of inter-governmental and public-private data exchanges
- an overhaul of bureaucratic procedures, increased accountability and reduced rates of corruption
- the introduction of a layer of automation, record transparency, integrity, and traceability
- boosting participation and citizens trust in governmental processes and decision making.
Overview of how blockchain works
Blockchain positions itself as a technology that can unlock a wide array of benefits across various industries and enterprise sectors. Its ability to streamline operations, enhance efficiency, and reduce costs, while maintaining unparalleled levels of security makes it highly appreciated among savvy entrepreneurs and tech enthusiasts. All of these advantages are made possible through blockchain’s ability to store transaction data, or any type of information that is considered valuable in a secure, tamper resilient environment, characterized by high levels of transparency and availability.
The name blockchain manages to illustrate through elegant simplicity how blockchain works from a storage perspective. Data is stored in interdependent blocks to form a chain-like structure that continuously grows as new information is added. Each block records and validates the time and progression of transactions which are then added to the blockchain following a set of predetermined rules imposed by the network participants.
Besides the validated timestamped information, each block contains a hash, a unique identifier that acts similar to a digital fingerprint, and the hash of the preceding block. This ingenious design choice makes blockchain a highly tamper-resistant environment for the data stored within the system because the previous block hash locks the new block in the chain, preventing any modifications to the block, as well as blocking any attempts of inserting a new block between two existing blocks. Due to this state of interdependence between blocks, even if a malicious actor manages to modify a block of transactions, any subsequent blocks will be rendered invalid, as the hashes will no longer match.
These design choices make blockchain a highly agile and flexible technology that delivers a suite of disruptive benefits that manages to challenge not only established financial and business structures, but also the public services and governmental dimension.
Tamper resistant technology
Due to the sum of its beneficial characteristics, and its unique design choice, blockchain emerges as an anti-tamper technology, capable of demonstrating through complex algorithms that the data stored has not been modified by a malicious actor. Blockchain achieves tamper resistance due to its data storing mechanisms and extensive use of cryptography and hashing functions. Hashing is a process through which data input is passed through a hashing function to obtain a hash digest, also referred to as checksum, a string of characters that acts as a unique identifier. In the world of data security, hashing brings several major benefits. Firstly, each input gives a unique hash digest. Even if only one byte is different between two seemingly identical files, the resulting outputs will be completely different. Secondly, it’s impossible to reverse engineer a hash digest, which means that you can’t determine the original input from the hash digest.
Blockchain is considered to be an anti-tamper technology due to its clever use of hashing. When new data is added to a blockchain, it first gets verified by the system, timestamped and embedded into a data container referred to as a block, which is cryptographically secured through a hashing function (SHA-256 is the most popular in the blockchain world) that incorporates the hash of the previous block in the new block to seal them together. This process is repeated for every new data insert to produce an interdependent chain of blocks, where the smallest change in a block will render all of the following blocks obsolete, as their hashes will no longer match.
Distributed data storage
Decentralization indicates the degree of diversification in ownership, influence, and value in the blockchain. A large segment of the blockchain community views decentralization as a quantitative metric that shows how many block producers exist in a given network. On the other hand, some developers have a more qualitative approach, focusing on the hardware aspect, in the sense that affordable computer systems can participate as a node in the network. Decentralization is not a fixed binary attribute. It is measured in degrees of decentralization. A common misconception is that blockchain networks can simply be labeled decentralized or not.
Centralized platforms and organizations typically don’t function on a blockchain architecture. These types of organizations are controlled by a small group of individuals, the management team, board of directors, who control the majority of ownership in the company and are the decision-makers. This is not always the case, as a company can employ a private blockchain to streamline operations and increase productivity. In this scenario, decentralization is used to strengthen data security by distributing the information all over the network but also to ensure optimal data retrieval speeds. A relevant example is the use of a distributed system in keeping public records, where each region from a country has a node with which the public can interact.
Record traceability and history
In a traditional database system, users can perform the standard CRUD operations (create, read, update, delete), four basic functions of persistent storage that constitute the backbone for interacting with any database. Both relational and non-relational database systems are designed to rely on the CRUD operations to enable basic interactivity. The problem with this approach is that database administrators or users with sufficient clearance can access and modify data entries. This is also valid for malicious actors who manage to exploit a security vulnerability and gain access to the database which can lead to numerous problems such as data breaches, corruption, and even complete loss of data.
Due to blockchain’s design, data traceability is available without configuring record history. This is because each data insert in a database has its hash stored in the blockchain network. Even a small modification to an input can drastically change the hash of the information. By comparing the two hashes, an admin can easily determine that the information has been tampered with. But because it is impossible to determine the initial input from the hash digest, they will not know exactly how the information was modified in the database.
Each year, companies spend billions of dollars on cybersecurity solutions to secure their data from external tampering. Besides cybersecurity measures, companies and enterprises rely on third-party auditing firms to guarantee that data is correct and resolve any eventual disputes. Although an efficient line of defense, auditing firms charge a significant fee for their services, but more importantly there is the question of who verifies the auditor. In the end, companies are still required to place their trust in an external party to whom they must give access to their data.
Blockchain provides a viable alternative to this model. By combining cryptography with hashing algorithms, blockchain ensures data immutability, a feature that brings unprecedented levels of trust to the data owned by enterprises. In turn, immutability provides data integrity which drastically simplifies audit processes, while providing proof to stakeholders that the information has not been altered.
Data immutability significantly reduces overhead, streamlines operations, and unlocks new value:
- Data integrity is assured by blockchain’s architecture and data storing mechanism. Once data has been introduced in a blockchain network, it cannot be altered without compromising the entire data chain. Any data discrepancies are automatically detected by the system, which allows companies to pinpoint in real-time any tampering attempts.
- Streamlined auditing – as an append-only structure, blockchain provides an indisputable record history of all the data that has been introduced in the network.
- Enhanced efficiency – data immutability enables information traceability and record history which can unlock new business momentum and new opportunities in analytics
- Ideal settlement ecosystem – data traceability, immutability, integrity, and a complete record history can reduce costly business-related disputes from months and even years, to a couple of days.
How are countries leveraging blockchain in the public sector?
Exonum land title registry – Georgia
The National Agency of Public Registry (NAPR) of the Republic of Georgia implements a blockchain solution to convert land title registries to a digital format and store them on the blockchain. The system works by storing the cryptographic proof that the transaction has been published on the Bitcoin blockchain. The initiative is the result of the partnership between NAPR and Bitfury, a company that provides blockchain solutions based on the Bitcoin protocol. This use case confirms blockchain’s ability to create a property-related record-keeping platform that helps mitigate corruption and property-related disputes.
Exonum leverages blockchain technology to enable citizens to validate property-related certificates and to support notaries in making new registrations. At the moment of writing, the platform facilitates the registration of purchases and sales of existing land titles, as well as the registration of new ones. In the future, the company behind Exonum confirmed that it will extend the functionality of the platform by enabling the registration of property demolitions, mortgages, rentals, and notary services.
- a substantial decrease in the time required for land title registration and verification, from a matter of days to a couple of minutes
- unprecedented levels of transparency in the registration process of land titles
- streamlined operations, reduced financial costs for land title registration services
- land title records become immutable and impossible to contest in front of a court of law
Blockcerts academic credentials – Malta
In October 2017, the government of Malta launched a blockchain-based project that explores new methods for proving the authenticity and validity of academic credentials. The Ministry for Education and Employment (MEDE) of Malta decided to use Blockcerts, an open standard for building apps that issue and verify blockchain-based official records. Developed in 2015 by the Massachusetts Institute of Technology (MIT) and Learning Machine (a startup focused on blockchain-based credentialing systems) Blockcerts uses blockchain technology as an infrastructure to provide all aspects of the value chain: creation, issuing, viewing, and verification of the certificates.
The functionalities provided in the project include the issuance of academic credentials, the verification of certificates, and the storage of personal credentials in the user app. The Blockcerts application provides citizens that register with the platform a digital wallet where they have full ownership of their records. Besides basic functionalities such as the issuance of academic credentials, the verification of certificates, and the storage of personal credentials in the user app, the platform allows users to control which third parties can see their academic records and verify their originality. The verification process can be done via the Blockcerts universal verifier, which is similar to a web app, where users can introduce the URL of a certificate to verify its validity, see the owner of the credentials, the issuing date, the issuing institution, and the transaction ID.
- the Blockcerts gives Maltese citizens the opportunity to become the true owners of their credentials and certificates
- self-sovereignty and privacy protection – through access control mechanisms, citizens are the ones who decide what institution or company has access to view their credentials
- hardcopies become a thing of the past. The ability to demonstrate through a digital signature the authenticity of a document mitigates the need for notarization services and bureaucratic overhead
- fake credentials and certifications can be easily disproved as each document is cryptographically linked to its owner
Chromaway property transactions – Sweden
The Chromaway project was launched in 2016 by the Swedish Mapping, Cadaster and Land Registration Authority, Landshypotek Bank, SBAB, Telia, Chromaway and Kairos Future with the goal to redefine real estate transactions, mortgage deeds as well as to address a series of issues that are deeply ingrained in the real estate transaction system:
- lack of transparency and uncertainty. Due to the stakes involved, large bodies of documentation needs to be reviewed before the final stages of the process which usually translates to costly delays and a state of administrative limbo
- due to constant delays, the real estate registration system is slow and unreliable
- the lack of trust between parties requires the setup of complex arrangements between buyers and sellers and the involvement of multiple third parties like insurers to help manage and supervise the transaction which adds significant overhead costs
From a technological standpoint, Chromaway is composed of a public blockchain network and a smart contract layer on top of it that facilitates a degree of automation to the transaction flow which streamlines and secures the process of transferring property titles. The system interfaces to the Swedish Land Registry which is responsible for storing land titles. To mitigate any possible litigation concerning the storage of personal data in an immutable environment, the blockchain network is designed to store only the state of the system after the execution of each step in the workflow. The only private element stored on the blockchain is the seller’s price.
- reduced title registration time and transaction duration from a matter of weeks to hours and in some cases even minutes
- reduced transaction costs. In the case of Chromaway, the involvement of the Land Title Registry in the workflow drastically cuts insurance costs
- elimination of paperwork and reduced risk of fraud
- streamlined market operations which boost trust among transacting parties. Once a transaction governed by smart contract logic initiates, the parties involved enter into an automatic commitment with fixed rules that negate the intervention of third parties
- as a tamper-resistant technology, blockchain guarantees the integrity of the records introduced in the system, ensuring that every party has access to a single version of the truth
uPort decentralised identity – Zug, Switzerland
The Swiss city of Zug launched in November 2017, uPort, a government-issued identity project based on the Ethereum blockchain which aims to provide a trusted and self-reliant blockchain-based identity to authenticate for egovernment services. As a whole, the project does not focus on developing public services that rely on blockchain-based identity. Instead, the uPort platform makes citizens the de facto owners of their personal data by giving them the ability to share data in a trusted and secure way with government institutions and other organizations. As with many blockchain-based solutions, the uPort app creates a unique crypto address on the blockchain which is linked to a digital wallet that is stored in a user’s smartphone.
The uPort project provides an alternative to existing identity confirmation and personal data management models, by providing a decentralized framework for ownership, management, representation, and attestation of the identity of a person. At the moment of writing, the only public service working with the new digital identity model revolves around the documentation for proof of residency, but the team behind uPort stated that it aims to expand the functionality of the platform to other public services run by the local authorities such as surveys, e-voting, bike renting, book borrowing, tax declarations or parking payments.
To utilize the platform, citizens are required to register the uPort identity with the Municipality of Zug. From a technical perspective, the newly created digital identity is a public address of a smart contract from the Ethereum blockchain. The Zug registration office has administration rights in the uPort application. After the verification process is complete, the municipality of Zug issues a signed attestation accompanied by a private key that serves as a server-side credential. This means that the uPort digital identity is recognized as an official government-issued identity.
- reduced operational and infrastructure costs – the Zug municipality is no longer required to store citizens personal information in cumbersome database systems that require frequent maintenance and troubleshooting
- a blockchain-based self-sovereign identity service eliminates the reliance on siloed data repositories that are susceptible to single point of failure attacks and a wide range of cybersecurity threats. In a decentralized, distributed blockchain architecture, the risk of data breaches and leaks are eliminated
- a unified identity service streamlines efficiency by enabling near-instantaneous identity verification and validation
Pension infrastructure – the Netherlands
The two largest pension providers in the Netherlands initiated in 2018 a Pension Infrastructure (PI) based on blockchain technology that aims to facilitate a flexible and transparent pension administration system for citizens. The idea of the project was inspired by the similarities between blockchain payments and pension administration.
In our mobile, fast-paced society, people work for multiple employers and have different jobs throughout their career. This shift in job mobility has a deep impact on pension administration as future pensioners often sign to multiple personal pension schemes with various pension fund providers. Furthermore, it has become a common occurrence for people to start their own business that creates the need for customized pension solutions for self-employed workers.
The Dutch pension provider APG is exploring multiple blockchain PoCs in the pension administration sphere, but at the moment of writing, the PI project has the most well-rounded logic concerning the application’s design and functionality. The PI initiative is currently backed by the Dutch Authority for the Financial Markets (AFM) and the Dutch National Tax Office (Belastingdienst).
The PI system is designed to provide different functionalities based on the type of user:
- tax authority representatives get access to a complete image of the contributions collected by an individual across many pension funds
- citizens have access to real-time insights regarding the evolution of their pension scheme and pension balance
- employers can directly introduce salary changes
- regulators can view part of the data stored in the system, but do not have an active role yet
From a technical standpoint, the project utilizes a combination of several blockchain functionalities: distributed registration, membership management, information exchange, automatic execution, and digital fingerprints.
- reduced costs on pension administration. Pension administration is an intricate web of operations that is based on a large number of bilateral connections between pension funds, and the governmental and private sectors. The pension funds that initiated the project expect that blockchain-based pension infrastructure will generate EUR 500 million of cost savings.
- Increased efficiency, transparency, and security. The distributed nature of blockchain technology ensures that data only needs to be introduced once in the system, as it will then be replicated across the entire network. Trust is ensured by the fact that every network participant has access to a single version of the truth. Decentralization and distribution also mitigate the dangers that stem from relying on traditional, centralized database systems
- the platform removes the need for third-party intermediaries that require a fee for their service. This translates to lower transaction costs for citizens
eConsultare, public consultation platform – Romania
Modex, the Blockchain Database company, has launched in June 2020 eConsultare.ro, the first blockchain-based platform for e-governance in Romania that enhances the level of trust and transparency by directly involving Romanian citizens and other representatives of the civil society in the decision making process. By utilizing its Blockchain Database (BCDB) solution, Modex created a secure platform that facilitates online consultation on matters of public interest. The main beneficiaries of the eConsultare platform are the Ministry of Environment, representatives of the civil society, as well as Romanian citizens who can reject or accept government initiatives through direct vote.
The first of its kind in Romania, the newly unveiled public consultation platform has been designed to increase the degree of democratization of the decision-making process while facilitating open and interactive participation from citizens. The goal of the eConsultare platform is to directly involve citizens in the process of establishing and verifying the feasibility of proposed projects, ensure transparency in central and local public administration while giving citizens the opportunity to become active participants in defining and addressing community issues.
At its core, the eConsultare platform is a web application that operates on top of a blockchain architecture which uses cryptographic methods to secure the personal data of citizens who register and vote on the platform and to guarantee that nobody can intervene in the consultation process to modify or invalidate votes or personal data. Due to the underlying blockchain technology, any data tampering is immediately detected and traced back to the individual who attempted it, with a full suite of information that ties the unlawful modifications to the perpetrator.
In order to discourage people from creating multiple or fake accounts, the eConsultare platform employs Know Your Customer (KYC) procedures to validate the identity of registered citizens. This way the system will provide an accurate representation of the voters. The application will offer different functionalities depending on the type of user: citizen or representative of a public institution. Although the platform is designed to offer unparalleled levels of transparency, enabling users to effectively count each vote that was cast on an initiative, it achieves this by remaining GDPR compliant. This is possible due to the complex blockchain framework which facilitates advanced cryptography.
From the dashboard of the application, citizens can access all the information related to their account, including a list of the open polls where they can exert their vote, a full list of the polls where they have already expressed their choice, with the possibility to distribute their activity to social media channels if they choose to, a statistics section that displays in real-time the state of the platform (number of registered users, active users, open polls, etc). Both types of accounts have access to a Blockchain Explorer, through which they can see every vote that was cast in the system. Each vote is passed through a hashing function that makes it impossible to trace a vote back to a user. This mechanism enables every user of the platform to count votes, while also preserving complete anonymity. In contrast, representatives of public institutions lack the ability to vote in polls but are able to create and submit them for approval. A full suite of metrics regarding poll activity, as well as the status of their created pools, is available in the dashboard.
- enhanced levels of trust and transparency. Citizens get to express through direct vote their view on the feasibility of proposed legislative projects
- increased levels of democratization. Citizens are no longer relegated the role of bystander and become an active participant in the decision making process
- accurate representation of the will of the citizens
- due to the blockchain framework it is built upon, eConsultare eliminates the risk of fraud and corruption, as each citizen has a unique vote tied to him or her. Anonymity and GDPR compliance is facilitated by the clever use of cryptographic algorithms
- citizens are guaranteed that public funds are allocated to projects that best resonate with their interest.