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6 Uses of Blockchain in Public Institutions and a Warning Call

We give a brief introduction on what Blockchain is and give examples of how public administrations are using it in different countries.

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By Laura Tamia Ortiz Chaves. Published: August 03, 2021.

In other posts, we have talked about the importance of information and the need for it to be public and open and quality, timely and truthful, among other characteristics, to ensure its value for society. However, an alternative being explored by some public actors to ensure the integrity of the information they manage and share, at least part of it, comes from the private sector and is still under development: Blockchain. We will briefly introduce what it is and give six examples of how public administrations are using it in different countries.

What is Blockchain?

Blockchain has its origins in the financial sector, born as the basis of a digital currency, bitcoin, and in response to the need for trust between the parties involved in making secure economic transactions without intermediaries. But why without intermediaries? It’s simple, to protect privacy. In a standard financial transaction, the people involved must verify their identity, for which there are intermediaries, such as banks or companies like Paypal, that assume this role of verification. Still, they do not do it altruistically since they keep the data of those who carry out the transactions and market with them. Considering that context, a blockchain verification model was proposed.

In a very simplified way, a blockchain is a large immutable database or ledger distributed among several participants or nodes of a network. It contains the complete history of the transactions carried out within the network. The network can be public or private, open to anyone, or permissioned, i.e., it requires permission to participate in it. Each block of information received by each of the nodes is identical to the others but has a unique identification code generated automatically through mathematical calculations, which is interconnected with the rest of the blocks, which prevents it from being modified. If one is changed, they all fail.

The information travels encrypted through the network, so it should be distributed without revealing its contents. In addition, a blockchain can only be updated at the same time and by consensus among all participants or nodes. Therefore, when new data is entered, it can never be deleted. That results in a truthful and verifiable record of all entries made in the system. When you want to verify the information, a verification signal is sent to the whole network. If all the nodes contain the same information and there are no errors in the identification codes of the blocks, this information is confirmed.

(If you are interested in this information in much more detail, we invite you to review the section of the OECD dedicated to this technology: https://www.oecd.org/going-digital/topics/blockchain/)

Source: OECD Blockchain Primer

6 uses of blockchain in public institutions.

Governments are investigating blockchain as a way to increase transparency and efficiency in public management. Some of the utilities identified are related to establishing digital identities, verifying personal and property records, promoting secure voting, mitigating and identifying fraud, improving auditing processes, and increasing citizen control over the government.

Let’s look at some examples:

Ukraine is one of the governments that has explored blockchain implementation in its public processes the most. It has implemented the ProZorro system to monitor public tenders based on blockchain. The state has a database and offers different APIs to bidders. Thanks to the system, everyone receives the same information and ensures that everyone has the same opportunities to submit their bids based on the information received. In the same vein, the Colombian Attorney General’s Office announced a pilot test for incorporating blockchain in the preventive monitoring of public procurement, aimed at curbing corruption in School Feeding Program contracts, for which there is still no data.
Through the European Commission, the European Union published in 2017 a report on the possible applications of blockchain in education. It recognizes that this technology can serve, on the one hand, to certify the degrees issued by educational entities securely, and on the other hand, to protect academic work in a distributed manner. https://publications.jrc.ec.europa.eu/repository/handle/JRC108255
Government of Aragon (Spain). They have created an electronic bidding platform to manage the contracting of services and public works through blockchain. They have approved an Administrative Simplification Law that provides for the use of blockchain to verify digital identity (national regulations have not yet regulated this type of technology for this purpose, so despite being contemplated in this Law, its scope is currently very limited). https://www.blockchainaragon.com/ and https://www.aragon.es/-/ley-de-simplificacion-administrativa-en-aragon
Several countries, including the United Kingdom, Ghana, Ukraine, Japan, Georgia, and Sweden, have used blockchain technology to optimize land title registration procedures. https://modex.tech/using-blockchain-to-reshape-land-registry-and-property-rent/
The Monetary Authority of Singapore conducted an industry study on the industrial and financial problems to which blockchain technology could answer. It found that the technology could be used for more efficient, cheaper, and faster interbank payments for cross-border monetary and government securities transactions. https://www.mas.gov.sg/schemes-and-initiatives/project-ubin
South Korea and New York provide citizens who have already been vaccinated against COVID-19 with a “passport” that offers advantages such as greater mobility. To prevent fraud and possible counterfeiting, they have generated logbooks, which are verified by blockchain. https://www.reuters.com/article/us-health-coronavirus-southkorea/south-korea-to-issue-blockchain-protected-digital-vaccine-passports-idUSKBN2BO43W and https://www.wnyc.org/story/what-know-about-new-yorks-vaccine-passport/

A warning call

More and more governments are betting on this technology. However, Australia’s Digital Transformation Agency (DTA) developed a report that highlights gaps in this technology and recommends avoiding its use and opting for “proven alternatives that are already available for immediate use.”

The risks identified by the Agency are mainly related to permissioned blockchains, in which the primary users -who authorize entry into the network- often fully control it, which eliminates the benefits of decentralizing this control. It also draws attention to a fundamental point for governments managing sensitive or confidential information. In many cases, the encryption of the data is not predetermined, making the data available to all users of public and private blockchains, something unacceptable if the information must be protected.

You can read the full report at https://www.dta.gov.au/help-and-advice/technology/blockchain.

Links of interest

If you want to know more about this topic we invite you to visit: