Can blockchain help fix government bureaucracy?

Agencies can use the ledger technology to cut inefficiencies and ultimately deliver better experiences for citizens.
Written by Bob Violino, Contributor


Anyone who has ever had to wait months to obtain a needed document or resolve a personal issue, or has spent hours waiting in lines or filling out paperwork, can relate to the problem of government bureaucracy. Sometimes it seems as if public sector agencies exist in large part to test the patience of citizens.

Also: What is the future of blockchain?

Can blockchain technology help remove some of the roadblocks that slow processes at so many public sector agencies? As with other questions related to the potential of blockchain, it might be too early for a definitive answer. But the key word there is potential.

Defined as a "single version of the truth" made possible by an immutable and secure time-stamped ledger -- copies of which are held by multiple parties -- blockchain can deliver trust to many different processes in business and government.

Whether the model has the ability to reduce bureaucracy on a broad scale is up for debate. But clearly blockchain can have a big impact on how the government functions.

Possible benefits

Blockchain can deliver several benefits for government, according to consulting firm Booz Allen Hamilton.

Also: Blockchain: The 2 most important things to understand

One is building trust with citizens. A key feature of blockchain-based technologies is transparency through decentralization, the firm said, which allows participating parties to see and verify data. The use of blockchain for some services could enable independent verification of governmental claims. When citizens and government agencies share access to records, the potential for distrust decreases, according to the firm.

Another potential benefit is the protection of sensitive data such as Social Security numbers, birth dates, addresses, and driver's license numbers. As the default record keepers for society, government agencies are big targets for hackers, Booz Allen said. But attacks could be mitigated or avoided through the responsible deployment of blockchain data structures.

And a third possible benefit is reducing costs and improving efficiency. In the right context, blockchain technologies could reduce redundancy, streamline processes, decrease audit burdens, bolster security, and ensure data integrity, the firm said. It cited as an example the U.S. federal government's ongoing challenge with reconciling intragovernmental transfers. At any time there are trillions of dollars in unreconciled funds in the federal budget, and the process of reconciling these funds is time consuming and costly. A payment and accounting system that uses blockchain could provide a permanent audit trail and facilitate faster reconciliation, it said.

Projects underway at government entities

Government agencies are certainly interesting in the prospect of using blockchain to enhance various processes.

Also: 9 reasons to be cautious with blockchain 

"Blockchain technology has been, and continues to be, the subject of intense interest, especially for governments," said Rick Holgate, senior director and analyst for the public sector and government at research firm Gartner Inc.

"The observed level of unfocused enthusiasm is symptomatic of a technology in search of a problem," Holgate said. "The diversity of government missions and functions leads to an incredibly broad set of blockchain-inspired use cases and a high level of interest, investment, and experimentation in government."

Examples of blockchain use to date include voting, automated acquisition, record keeping, cross-entity transactions, cross-entity reconciliation, connected identities, social and humanitarian assistance, asset markets, and self-sovereign "wallets" for granting individuals more control over their identities and health records.

Beyond cryptocurrencies

The core values of blockchain are for decentralized problems, Holgate said, relying on some of its core attributes including digital asset creation; payment token distribution; a distributed ledger of immutable, traceable records; consensus mechanisms; and programmable behavior.

Also: Blockchain: The end of banking as we know it?

Use cases involving centralized control and authority can generally be accomplished through more mature technology. "Some of the promising use cases we've seen achieve practical implementation include decentralized identities to connect shared users [and] customers; distributing assistance to homeless or refugee populations; connecting various government organizations and even the private sector in an environment that can reduce friction."

Gartner sees long-term increased use of blockchain within the government once the wave of enthusiastic experimentation subsides and the technology matures.

Reducing bureaucratic inefficiencies

Blockchain can improve efficiencies in a decentralized process that has no central authority as a driving or controlling element, Holgate said. "Assembling documentation from multiple government entities with no common systems or close organizational relationships can be expedited," he said.

Also: Opera for Android becomes an Ethereum 'blockchain browser' 

That can improve traditionally dispersed and painful processes such as permitting and registration. The sharing of information among government organizations and the private sector, for assistance services, insurance claims, medical trials, and acquisition actions -- as part of multi-party transactions -- can greatly improve experiences for citizens.

In addition to bureaucracy, another common problem in government is corruption, and blockchain can also play a role in reducing that.

"Some of the early use cases of blockchain have centered on the idea of limiting corruption, fraud, theft, and diversion of government resources, by both the government itself and by citizens," Holgate said. "Design and governance of the blockchain implementation are critical. Inadequate attention can lead to failed pilots or can expose themselves through vulnerabilities."

Some of the widely known cryptocurrency thefts highlight that systems -- even those built on blockchain -- are not inherently secure.

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Building better public services

Overall, in addition to reducing bureaucracy, addressing corruption, and other applications, blockchain has the potential to transform the way public sector agencies provide services to citizens.

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"Opportunities are manifold," Holgate said. They include offering energy credits through a digital market; allowing citizens and businesses to collect, assemble, manage, and share their credentials or information for many authoritative sources; reducing friction in sharing information and payment tokens for intellectual property and royalties; and giving poorly documented populations a sense of digital identity and the ability to participate in an economy.

It all sounds great, but the extensive use of blockchain in government will require effort and won't happen overnight. "All of these are possible, subject to diligent attention to technical and human factors," Holgate said. "Blockchain is not an instant panacea."

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