The benefits that blockchain technology brings to the public sector

Blockchain is a decentralized database that stores information in blocks linked together using cryptography. These blocks are created and validated by a network of computers, so data on the blockchain is very difficult to change or tamper with.

A blockchain-based digital government can increase trust and accountability while securing data, streamlining processes, and reducing fraud and waste. In a blockchain-based government model, individuals, businesses, and governments share resources on a cryptographically encrypted distributed ledger. The technology’s design eliminates the previously existing weak points and automatically protects citizens’ and governments’ personal information.

In addition to solving existing problems, a blockchain-based government can bring the following benefits:

Strong data security:Data is stored on a distributed ledger, which cannot be altered or tampered with, ensuring integrity and reliability.

Strengthening transparency and accountability:All transactions and activities are recorded publicly and indelibly, enhancing government oversight and accountability to the people.

Streamline the process:Manual processes can be automated, increasing efficiency and reducing operating costs.

Minimize fraud and abuse:The security and transparency of blockchain technology helps prevent fraud and abuse of power in government operations.

Strengthening citizen participation:Citizens can easily access government information and participate in decision-making processes, leading to a more open and democratic government.

How can blockchain technology transform the government sector?

The current massive level of connectivity has not only led to a data explosion but has also completely changed the way the economy operates and interacts. In this period of economic transformation and constant change, governments need to become more open, efficient, cost-effective and responsive in real time, i.e., a people-centric government.

To meet this new demand, a fundamental change is needed, removing the foundation of bureaucratic government agencies. Such a change can only be achieved by promoting the use of secure blockchain architecture and other aspects of this technology.

The advantage of a government adopting blockchain technology lies in the increased efficiency of government agencies, both in the way they operate and in the level of support from the people.

Despite many technological and legal challenges, the application of blockchain technology promises to bring a future of reform and efficiency to the government, towards a people-centered government model.

In the modern world, identity theft and data breaches are persistent problems. Governments, as society's default custodians of records, have also become a top target for hackers worldwide.

Incidents such as the 2017 data breach of US data analytics and technology company Equifax, where personal information of more than 143 million Americans, including social security numbers, birth dates and addresses, was stolen, or the 2015 data breach of the Office of Personnel Management, where data of millions of government employees was compromised, have undermined public trust.

However, these problems can be solved by developing blockchain technology applications. By leveraging blockchain technology to store and manage digital identities, we can build a system that is secure, convenient, and unforgeable.

When used properly, blockchain technology can help organizations save costs while also reducing waste, streamlining operations, enhancing security, reducing the volume of audits, and even ensuring data integrity.

Governments around the world have recognized these benefits of blockchain technology and the myriad of additional benefits that come with it. Several government organizations have begun preparing or have already implemented the use of blockchain data structures and multiple use cases in their operations.

Blockchain technology use cases in government and public sector

1. Smart city

Blockchain technology is a distributed, decentralized technology that can store and transmit data securely and confidentially. This technology can be applied in many different fields, including smart cities.

A smart city integrates and manages commercial, social and physical infrastructure to simplify services for citizens while ensuring the most efficient and cost-effective use of available resources. Governments can provide advanced services and solutions to the public and local authorities by combining Internet of Things (IoT), cloud computing and blockchain technology.

Blockchain technology is applied in urban management and operations such as efficient and transparent asset management; traffic management helps reduce congestion and traffic accidents; urban security management helps prevent criminal activities.

In particular, it can provide a secure, interoperable infrastructure that enables all smart city services and operations to operate at a higher level than they do today.

Overall, the application of blockchain technology in smart cities has the potential to bring many benefits to citizens and businesses.

2. Central bank

Applications of blockchain technology in central banking include:

Currency issuance:Blockchain technology can be used to issue currency in a decentralized manner, helping to minimize the risk of inflation.

Cross-border payments:Blockchain technology can be used to make cross-border payment transactions fast and efficient.

Digital currency:Blockchain technology can be used to issue digital currencies, which can enhance the safety, security and efficiency of the payment system.

Financial risk management:Blockchain technology can be used to efficiently collect and analyze financial data, helping to reduce financial risks.

Fraud prevention:Blockchain technology can be used to verify the identities and records of financial institutions, helping to prevent fraud.

Asset Management:Blockchain technology can be used to manage central bank assets securely and efficiently.

Information management:Blockchain technology can be used to store and secure central bank information securely and efficiently.

Internal process management:Blockchain technology can be used to automate internal processes, helping to increase management efficiency.

Legal risk management:Blockchain technology can be used to store legal records securely and efficiently, helping to minimize legal risks.

Additionally, the use of blockchain technology in central banking could lead to a more transparent and accountable financial sector, less prone to fraud and corruption.

Overall, the application of blockchain technology in central banking has the potential to bring many benefits to the national economy. However, the application of this technology needs to be done carefully, ensuring safety, security and efficiency.

3. Verify educational qualifications and professional qualifications

Individuals storing their educational and professional records in encrypted identity wallets will give them greater control over access to their information. In addition, the wallet will allow authorities to verify evidence of completed courses and work experience at companies.

Verifying credentials can sometimes be a costly and time-consuming process. This is because each institution has its own verification process and there is no unified repository of credentials. Blockchain technology solves this problem by creating a common, immutable record of all credentials.

This will eliminate the need for time-consuming manual procedures and make it easier for companies to check the qualifications of hiring candidates. For example, Malta is a concrete example where the government has used blockchain technology to record and store students' academic records.

4. Vaccination tracking

Blockchain technology enables the storage of vaccination data, making it easy for schools, insurance companies, and healthcare facilities to verify an individual's vaccination history. Based on vaccination records, the system automatically initiates related micropayments and grants access to appropriate benefits.

For example, when a child enrolls in school, the school can instantly verify the child’s vaccination history using blockchain technology, ensuring the safety of the school community. Or, an insurance company can automatically assess risk based on vaccination information, adjusting insurance premiums accordingly.

Overall, blockchain technology promises to bring many improvements in vaccination tracking, contributing to the efficiency and reliability of the healthcare system.

5. Public procurement

Blockchain technology has outstanding features of transparency, decentralization, immutability, operating as a distributed ledger... In particular, the application of smart contracts on the blockchain technology platform to internal audit activities has been bringing many efficiency in work, clearly changing the auditing methods and procedures that are very different from the traditional auditing process.

Smart contracts are simply programs stored on the blockchain system that only run when programmed conditions are met. These contracts often automatically execute agreements so that both parties can get results quickly without third-party intervention or wasting time. Smart contracts also automate the implementation process, ensuring that the implementation steps are consistent with the terms of the contract.

Smart contracts can be designed to control loan allocation, manage loan applications and funding, and monitor compliance with loan terms. Such automated performance tracking offers the benefits of real-time data, better compliance, and increased security.

Overall, the application of smart contracts in public procurement offers great potential for improving transparency, efficiency and reducing risks in this activity. However, implementation needs to be carried out carefully, ensuring that technological, legal and human resource challenges are addressed to achieve optimal efficiency.

6. Personal income tax collection

By comparing tax data with income transactions, calculating tax and social security deductions, and other functions, smart contracts can automate the tax collection process. Wage and net tax payments are automatically sent to relevant parties through a blockchain-based system. This has the benefit of automating the tax collection process in an efficient, fast, and secure manner.

7. Land registration system

Land registration is an area where blockchain technology can have a huge impact. With the ability to store land records transparently and immutably, blockchain technology can effectively prevent illegal property transfers.

In addition, the technology also allows for the simplification of government processes that are often paper-based and prone to fraud, such as the issuance of birth certificates and tax refunds.

While it still takes time to learn how to effectively integrate blockchain technology into the government sector, the technology’s potential to bring beneficial improvements is undeniable. For example, the Indian government is experimenting with several initiatives that use blockchain technology to store property records, and the Republic of Georgia has begun using the technology to build a tamper-proof land registry.

Challenges of blockchain technology in the public sector

Blockchain technology has attracted interest in the public sector due to its traceability, efficiency, and security. While the news about the potential applications of blockchain technology in government is promising, there are still some challenges:

Data immutability:Blockchain technology is an add-only ledger that can completely transform the trust aspect in the public sector. However, once data is added to the distributed system, it cannot be removed. This poses challenges when managing sensitive information, such as personal records.

Difficulties in implementation:Like any new technology, blockchain technology requires effort and time to implement effectively. Convincing government agencies to adopt the technology can be a challenge.

Link to virtual currency:Most people associate blockchain technology with the cryptocurrency bitcoin. It can be difficult to separate the concept of blockchain from the cryptocurrency for the purpose of improving governance.

Technology maturity:Blockchain technology is still in its infancy, facing limitations in scalability and energy consumption. Experience in applying blockchain technology in the public sector is limited, and the issue of scaling is still under discussion.

High security requirements:Blockchain technology eliminates centralized power but still requires several centers to maintain the system. Hybrid centralized systems (DLT) can be more vulnerable to attacks. Transactions on the blockchain need to be thoroughly tested before being deployed to ensure security.

Data management:Governments often need to store large amounts of data in giant databases. Many records are duplicated across different departments and organizations. Blockchain technology allows everyone to access the same data, eliminating the need to duplicate and store multiple copies in multiple locations.

In conclusion, the application of blockchain technology in the public sector requires careful consideration of both potential and challenges. Governments need to take a cautious approach, addressing legal, technological and cognitive issues to effectively exploit the potential of this technology, bringing benefits to the people and society.