Although blockchain technology was initially designed as a component of the Bitcoin architecture, it is currently used in multiple fields. One such field is governance, given that distributed systems have enormous potential to transform the public sector.


Why should governments consider adopting blockchain?

Although blockchain has many potential advantages in the field of governance, there are a few – but very weighty – reasons that can lead to the adoption of said technology by government entities. Among the aforementioned reasons we can highlight greater decentralization, transparency and integrity of data - together with an increase in efficiency and a reduction in operating costs.


Decentralization and data integrity

There are many ways to build a blockchain, but since they are distributed systems, they all involve a certain degree of decentralization. To a large extent, this is due to the fact that a blockchain network will always be maintained by a network of computing nodes, working synchronously to verify and validate all data. These nodes have to take care of reaching consensus and agree on the state of the database, thus preserving a single version of the truth.

In this way, blockchain systems can achieve a high level of immutability, and their frameworks can be adapted to ensure that information is only accessible, and in some cases, can only be modified, by authorized parties. In practice, different government agencies could act as validators, each contributing to the process of distributing and verifying the data. This would greatly reduce the likelihood of data manipulation and fraud.

In other scenarios, non-governmental organizations, universities and citizens could be included as validator nodes, leading to an even higher level of decentralization. In addition, these verification mechanisms can prevent other types of very common failures, such as data entry errors (which means that a block of data that lacked essential information would be rejected by the distributed network of nodes).

Aside from that, blockchain could one day play a significant role in relation to electoral processes. Holding open and fair electoral processes is one of the pillars of democracy, and the high level of immutability of blockchains makes them an excellent solution to ensure that votes have not been manipulated. Aside from providing an extra level of security in the process of casting votes at polling stations, blockchain also has the ability to turn the prospect of holding secure online voting into a tangible reality. The state of West Virginia carried out a pilot test of such a voting system during the 2018 midterm elections of the United States of America.


Transparency

Blockchain-type databases allow government records to be stored and protected, making it very difficult for anyone to manipulate or hide the information. Under the current model, most government data is stored in centralized databases, controlled directly by authorities. Some of these databases are in the hands of just a few people, which makes them quite easy to manipulate. In these cases, a blockchain may be ideal because it allows the verification and storage process to be distributed among multiple parties, effectively decentralizing power.

Therefore, blockchains can be used as transparent databases that reduce (or eliminate) the need to rely on trust between government bodies and citizens. For example, some European authorities are exploring the potential of blockchain-based registries to reduce the prevalence of property disputes. Such a model can be based on a distributed system accessible and verifiable by both government agencies and citizens – in which each party has a copy of official documents and claims securely available.

In addition, decentralized blockchains can offer permanent access to records, which security forces and control bodies may need to uncover cases of corruption or abuse of power. By reducing or eliminating the need for intermediaries in data sharing and financial transactions, blockchain systems can make it more difficult for government officials to obfuscate irregularities – such as the distribution of funds through opaque private entities.


Greater efficiency

Another reason to use blockchain in the field of governance is that it allows reducing operational costs by maximizing the work efficiency of national institutions. Since governments depend on taxpayer funds, it is extremely important that they use their budgets wisely. Blockchain systems and smart contracts can be used to automate tasks and work processes, reducing time and money spent on bureaucratic processes.

Although saving administrative costs is eminently practical in nature, it can also help to reinforce citizen confidence and satisfaction. Greater efficiency accompanied by lower costs can, without a doubt, contribute to increasing the degree of approval of government bodies by citizens. By cutting operating costs, governments can allocate more resources to other areas, such as education, security and public health.

Tax collection is another key area of ​​governance that can benefit from the implementation of blockchain technology. Blockchain-type ledgers allow funds to be easily moved between parties, following a series of pre-established conditions. This can lead to dramatic reductions in administrative costs associated with tax collection and distribution, and with the enforcement of tax laws. For example, by storing records and processing returns through private blockchains, tax collection agencies can provide a higher degree of security, effectively protecting taxpayers from potential fraud or identity theft.


Disadvantages and Limitations

Although it is clear that blockchain can be used to improve aspects such as data integrity, transparency and efficiency, there are also certain limitations associated with its use in the public sector.

Paradoxically, immutability, a property associated with many of the advantages of this technology, can be unfavorable in some circumstances. Immutability requires records to be entered correctly before validation, which means that it is necessary to apply measures that ensure the accuracy of the data collected from the beginning.

Although some blockchain implementations can be designed based on a more flexible approach, allowing data to be modified; This circumstance will always be subject to the approval (consensus) of the majority of validating nodes - which could call into question the decentralization of the system and, eventually, lead to disagreements. Even so, it is an inconvenience that can be quickly solved through private blockchains that do not require a high level of decentralization.

Privacy concerns are also an important factor, since records added to a blockchain will be permanently available to anyone who has access to it. This may conflict with procedures for sealing documents to prevent public disclosure - such as in the case of expunging criminal records. In countries where the legal right to digital oblivion is recognized, such immutable records may contradict current law or legal precedents. Potential solutions to these problems can include the use of burn functions, and cryptographic techniques such as zk-SNARKs or other types of zero-knowledge proofs.

Finally, it is necessary to point out that governments themselves may present obstacles to the adoption of blockchain. In some cases, authorities simply do not understand the value of the technology - leading them to ignore its many potential benefits. In more extreme cases, governments where corruption is rampant may resist blockchain adoption to protect the interests of their own officials.


Final thoughts

Despite the aforementioned disadvantages, there are several potential uses for blockchain systems in the area of ​​governance. From increasing transparency to optimizing the tax collection process, distributed networks can help governments operate more efficiently and increase levels of trust with their citizens. While some applications are still hypothetical, many countries are already experimenting with the technology.

It is worth noting that digital systems have been used by governments since the early 2000s, a few years before the creation of the blockchain. Estonia, a country that launched its digital identity program in 2002, is a notable example, being the first state to hold elections over the Internet in 2005. A decade later, in 2014, the Estonian government would launch the e-Residency program -which mentions the use of blockchain technology for the management and security of digital data.