The impact of blockchain technology on public sectors

 (Image: Pixabay CC0)
(Image: Pixabay CC0)

VUB research shows that blockchain technology can strengthen democratic values

Ledger technology or Distributed Ledger Technology (DLT), of which blockchain is one system, offers new ways to bring government services to citizens and businesses. Governments have therefore started experimenting and investing in blockchain and DLT solutions for the public sector. But what impact does this new technology have on public sectors, and on public values, and what role should government play in its development? Research by Marlen Komorowski, Laurence Claeys and Thomas Van Dam of imec-VUB-SMIT shows that ledger technology can transform, and even strengthen many public sectors.

Marlen Komorowski: "Our analysis shows that decentralized technology in public sectors can enhance democratic values by increasing public integrity and overall efficiency, as well as improving inter-government cooperation. But the technology still struggles with several limitations and imperfections, such as issues regarding the environmental impact, legal framework, interoperability and low adoption rate."

Distributed Ledger Technology - DLT

The public sector is determined by regulations and agreements, registers and transactions. These are usually managed by government institutions, which largely still function as they did in the 20th century. However, the digital age offers new systems, such as DLT. DLT is an umbrella term for systems that operate in an environment without a central authority, such as blockchain.

Thomas Van Dam: "Today Blockchain is still a synonym for cryptocurrencies, such as Bitcoin. But governments can also make use of this. Blockchain and DLT networks are essentially no more than a register in which every transaction is irreversibly stored. Factors such as transparency, irreversibility of transactions and the resilience of the networks make this decentralized technology very attractive and accessible to the public sector."

The VUB researchers analyzed a total of 21 DLT use cases in different public sectors from nine different countries. The findings highlight that many blockchain and DLT applications are already being used or tested by various governments or public stakeholders. The study shows that the most elaborate applications can be found in land-title registers, digital currencies from central banks and solutions for the energy sector. But also, healthcare, the food sector, immigration, the tourism sector and diplomas could soon be managed via blockchain systems.

Komorowski :"We found that blockchain as a technological solution is being tested or already being applied in many different countries, government sectors and domains: Even more than one would expect."

For example, Estonia was the first country to introduce a blockchain-based national identity system in 2017. Since 2016, property deeds, land-title registry and trading in Georgia have been handled through a blockchain network. In Japan, online voting in local elections via a blockchain system was tested in 2020. And in Sweden, blockchain is being tested for digitizing invoices, non-resident income tax and customs duties. In addition, two central banks are already issuing a digital currency.

Government recommendations

The researchers make a few recommendations based on their research.

Komorowski: "We see it as essential that governments take an active role in the development of blockchain solutions, to ensure that public values are safeguarded. This includes adapting the legal framework, training staff and funding provision. A strategic decision-making approach should also be developed."

This study was carried out by imec-SMIT-VUB on behalf of the Ministry of the Interior and Kingdom Relations (BZK) of the Netherlands. The findings are based on desk research and a survey among 140 blockchain and DLT experts in the Netherlands, conducted from August to December 2021.