The emergence of blockchain technology promises vast opportunities, including enhanced efficiency, speed, and data security. But should governments be harnessing the technology at this early stage? Lander & Rogers lawyers and blockchain enthusiasts Joshua Butler and Robert Neely consider how the public sector can benefit from the technology and the advantages of being an early adopter.
It is said that, in terms of development, blockchain is like the internet in the early 1990s. The blockchain movement is gaining momentum and attracting strong interest from entrepreneurs, but for now, the hype is outpacing proven use of the technology. The infrastructure is still being built out and consumer-facing applications are yet to scale.
So, what does this mean for the public sector? If, as appears the case, blockchain technology may have many useful applications for government services, should governments be getting involved now or waiting until the technology has matured?
While there is still a lot of work to be done before blockchain solutions can be employed by government, agencies that are proactive in seeking out the benefits of this technology are likely to be rewarded as first movers.
Now is the ideal time for government agencies to get educated and informed. This means engaging with industry bodies and experts to understand the opportunities and the challenges presented by both public and private blockchains. There is value for government in looking for appropriate use cases in which to trial the use of blockchain technology in a careful and controlled environment.
What’s in it for government?
The benefits of blockchain that are likely to be most appealing to the public sector are security, auditability and the improved efficiency and speed gained from not requiring independent verification of transactions. Blockchains are highly secure by design — they are engineered in a way that makes hacking them extremely resource intensive and uneconomical. This is an attractive prospect for the public sector where data security is paramount.
They can also be deployed without the need for a central exchange or verifying authority. This has the benefit of reducing administration costs and risk for government. Audibility features could also reduce costs for government agencies when compared with legacy systems. These benefits would seem to make blockchain technology worth exploring for the public sector.
Areas ripe for adoption
Let’s consider some areas of government that are primed for blockchain adoption:
- Procurement — tracking the supply chain of goods and services being purchased by government from provenance to procurement. Blockchain applications are already being used for supply chain management, particularly in relation to agricultural products. For government, having access to a true, accurate, and transparent record of the supply chain for a particular product may result in better spending control, more accurate forecasting, a faster and more efficient tendering process, and a reduction in the risk of doing business with a new supplier.
- Health records —building, tracking, and storing the health records of citizens. Digitising health records is an inevitability, however, it has been a pain point for the Australian government this year with the challenges of the My Health Record rollout, in particular the public’s concern with the security of their sensitive information. A blockchain solution poses a more secure option than a centralised database as it is less vulnerable to hacking.
- Identity management — managing and verifying the identity of individuals in a more secure, efficient, and inclusive manner. In a decentralised blockchain ID model, citizens could build, store, and own their ID data (from their drivers licence history to tax records) and share it with the relevant government agency whenever necessary, without the need for the government to store the data itself. This type of model would also allow individuals with no traditional forms of ID — for example refugees and other vulnerable persons — to build their identification in a blockchain. Through building a digital form of identity, individuals could potentially gain access to services from which they may have previously been excluded due to lack of traditional forms of ID.
- Law enforcement — seamless sharing of data between agencies. One of the key friction points in law enforcement is the way that different agencies share data — a process that can be tedious, slow, and prone to error. Storing law enforcement data on a blockchain and allowing agencies to directly access that data (via permissions) would save the resources currently spent on making cross-agency requests to update different stakeholders every time that changes are made or new data is added.
The possibilities are many“In the short-term, governments should be taking a serious approach to identifying lower-risk use cases for testing and rolling out blockchain solutions.”
This is by no means an exhaustive list. Any government database that acts as a source of truth by recording transactions or changes in value could potentially benefit from blockchain technology. Some examples that come to mind are ASIC’s corporate register, the Personal Property and Security Register, the Registry of Births, Deaths and Marriages, state and federal voting rolls, and intellectual property databases such as IP Australia’s trade mark register.
When the time comes, shifting these processes onto the blockchain could significantly reduce the resources currently allocated to building, authenticating, and auditing all this data.
Where to next?
The private sector is seeing huge investment into blockchain exploration and adoption. As ever, the public sector has more on the line than just capital risk when it comes to implementing new technologies.
In the case of blockchain, governments, understandably, are likely to hold back until the underlying infrastructure is reasonably mature and properly tested. However, development in this area is rapid.
In the short-term, governments may benefit from identifying lower-risk use cases for testing and rolling-out blockchain solutions. When the security and scalability issues are resolved, it will be the government agencies that did the early work which will be blockchain-ready and they will realise the benefits first.
Joshua Butler, Lawyer at Lander & Rogers, and Robert Neely, Partner at Lander & Rogers.