As with many technological revolutions, Blockchain is not only an opportunity for businesses in the private sector. Blockchain’s core advantages – speed, efficiency and security – are all three fundamental pillars of a well functioning government.
It is crucial for any government to be a trustworthy player in a transparent, safe and collaborative ecosystem of actors.
Blockchain could remove friction
The Blockchain opportunities for governments are massive. No matter the size, a government has a lot of roles to fulfill which makes the possible benefits of the technology so tremendous. Overall, it is key for governments to remove friction that leads to negative aspects of bureaucracy. The need to remove that friction is big: budgetary pressure, aging population with limited resources and the need for data to become more efficient.
In the next years, we will see Blockchain appearing in government domains such as financial transaction management, asset management, contract management, citizen services and identity management. Most of these domains require paper-based work nowadays. This makes it costly, fraud- and error-sensitive. All three issues Blockchain technology could limit to an unseen minimum.
Blockchain technology could also lead to building a reputation management tool for businesses and contractors. Based on complete and solid data in the Blockchain, it should be easier for governments to see which malicious businesses they should focus on, by example, tax fraud. In addition governments could rate their contractors on the work they have delivered or on how well a contractor respected the deadlines.
Contract management is one of the crossroads between governments and privately held businesses. One of the opportunities here are related to supply chain and trade. If all imported and exported goods are logged in a well built Blockchain, governments could levy import or export taxes safer, easier and cheaper. Moreover, it could also provide end consumers insights based on immutable data of where the products come from, and are thus able to see if child labor was involved in the process.
Estonia, European pioneer in Blockchain applications
There are only few countries in the world that have created a Blockchain-friendly climate. Some of the pioneers worldwide are Estonia, Singapore and Switzerland. We conducted a small deep-dive in what Estonia has done to better understand the challenges and opportunities.
In 2007, Estonia suffered from a severe cyber attack hitting websites of the Estonian parliament, banks, ministries, newspapers and broadcasters. In an already digitally advanced society as Estonia, entrepreneurs and policy makers realised they had to step up their game to build a more robust e-government system. They believe that thrive led them to become number one in the integration of Blockchain technology. Today, the Baltic technology hub has become a pioneer in adopting Blockchain technology for its services.
Today, almost all government services in Estonia are digitized. The technology behind all of this is based on advanced cryptography that includes two-factor authentication. Some data is decentralised and built on Blockchain as they want it to be immutable, like medical healthcare data or e-votes. This technology gives Estonian residents control of their data. For example, they can access all their medical data and check who has seen or used their data. If someone used their data for no reason, that person or organization can be prosecuted.
What puts Estonia, Singapore and Switzerland ahead of so many other countries, is that they built a policy framework where everyone could participate in. Blockchain technology is useless if there is no legal policy for someone to use it. Building this framework will be the first assignment for many other countries around the world.
Governments will transition to Blockchain
Will all governments adopt Blockchain? Local politics and their complexity will determine the speed of adoption. But in the end, we believe they will have to make the switch, as they play a crucial role in our society. A society which is continuously asking more of its government and its businesses, that are already moving applications to Blockchain technology. Lagging behind would only make it more complex to eventually make the transition.
Complexity increases with the idea cryptocurrencies could become massively adopted. If so, governments will lose grip on the incomes of its citizens. Losing that grip has huge impact on tax incomes putting pressure on national healthcare, employment, education, public infrastructure, and so on.
Blockchain could transform governments into transparent and trustworthy players in a collaborative ecosystem. But to do so, it will need to convert current processes, reshape the set of stakeholders and redefine everyone’s roles and responsibilities.
Contact us to discuss Blockchain and its opportunities for your organization.