Digital Transformation in Government Insight #33:
The Blockchain Revolution

What is blockchain?

Blockchain technology was invented to create ‘digital cash’, Bitcoin, in 2008. Blockchain itself is a type of database that contains many records and puts them into a block. Blocks are then ‘chained’ to the next one using cryptography. This effectively forms a ledger (which is why blockchain is sometimes referred to as distributed ledger technology). This ledger can be shared and represents one single source of ‘truth’ — it cannot be changed retrospectively. The ledger can then be permissioned (only certain people can access and alter the ledger) or unpermissioned (the process is open to anyone). Obviously permissioned ledgers are the key focus for government applications.

In an article late last year, US technology media site, Tech Crunch said: “Some people believe blockchain technology could ultimately have the same kind of transformative impact as the internet…”

This statement gives a true indication of how big, how game-changing and disruptive, blockchain can be. While banks make up some of the major players getting on board blockchain at the moment (banks have been experimenting with blockchain technology as a way to track transactions with increased security and reduced costs), there are also lots of applications in government.

Interestingly, according to a discussion between Deloitte’s Joel Lipman and Jesse McWaters of the World Economic Forum, Australia is in the position to be a global leader in this space.

Blockchain in government

There have been a few pieces in the media in the past six months or so, looking at the use of blockchain in government. For example, the Tech Crunch article on how blockchain technologies could transform government proposed the use of blockchain technology for elections, digital identification, e-health and tax audits. The article went on to differentiate between government-to-citizen applications (e.g. e-voting and electronic health records), government-to-government applications (e.g. keeping citizen records on one ‘ledger’ to make information sharing between government departments automatic), and government-to-vendor applications (such as vendor tracking and payments).

There is also an in-depth report produced last year for the UK Government, Distributed Ledger Technology: beyond block chain. This report was produced by the UK Government’s Chief Scientific Adviser and is extensive (but also incredibly useful reading) at 88 pages.

According to the report: “A shared ledger is essentially a database that keeps track of who owns a financial, physical or electronic asset: a diamond, a unit of currency, or items inside a shipping container, for example. Crucially, every participant can keep a copy of the blockchain, which is updated automatically every time a new transaction occurs. The security and accuracy of the information is maintained through mathematics — specifically by cryptography — to ensure that all copies of the ledger match each other.“

The report goes on to explain the technology and why/how it has much broader applications than Bitcoin. It looks at examples from both the corporate and government sectors. In terms of government applications, it says: “Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.”

Chapter 6 of the report looks at conceptual government case studies, citing welfare as a possible big user and beneficiary of blockchain. The welfare support case study looks at how blockchain technology (distributed ledgers) could be used to pay welfare recipients. Interestingly, this was flagged here in Australia after the Centrelink payment issues when the Financial Review ran an article urging the government to look at blockchain’s potential.

Blockchain in Estonia

Estonia...the country that keeps popping up with anything do with with digital transformation in government (DTIG)! They were noted as leaders in our recent blogs on e-voting and electronic health records, and now again we find we can’t write an article on blockchain technology in government without referring to digital pioneers Estonia.

The Estonian Government uses blockchain technology in its Keyless Signature Infrastructure (KSI), which was developed by Estonian company Guardtime and underpins many of Estonia’s digital services. Estonia is at the forefront of digital innovation, and citizens can use their ID card to vote, bank online, review their children’s school records, apply for welfare, file their tax return, upload their will, apply for licenses, and the list goes on...and on!

Blockchain in Australia

Take-up is really only just starting here in Australia and case studies are scarce — we’re more in the exploration and trialling phase. Some examples of projects/organisations looking into blockchain include:

• Data 61 exploring blockchain and its applications
• The University of Melbourne, which is trialling blockchain technology to record student credentials
• Australia Post (for digital identity)
• IBM
• Commonwealth Bank
• ANZ
• ASX (as a possible replacement for its CHESS system)

Salsa Digital’s take

Blockchain is a technology that can deliver many benefits. We like this quote from the UK Government’s Distributed Ledger Technology: beyond block chain report: “In summary, distributed ledger technology provides the framework for government to reduce fraud, corruption, error and the cost of paper-intensive processes. It has the potential to redefine the relationship between government and the citizen in terms of data sharing, transparency and trust.” Sounds pretty good, right?

Blockchain technology is a huge area with great potential and like many ground-breaking technologies there will no doubt be applications no one’s even thought of yet, a flow-on of possibilities. It’s certainly a topic we can see ourselves re-visiting in the months to come, an important component of DTIG. If you’re keen to read up on blockchain, check out the links in this blog and/or our additional blockchain must-reads below.

Blockchain must-reads:

• Standards Australia’s Roadmap for Blockchain Standards (March 2017)
• CSIRO’s blockchain articles (scroll to the bottom of the page)
• CSIRO’s blog on blockchain
• The Future of Blockchains (Chartered Accountants publication)