While blockchain technology was initially designed to function as the architecture for Bitcoin, it is now being used in a variety of other contexts. One such context is governance, where distributed systems have great potential to change the public administration sector.


Why should governments consider adopting blockchain?

While blockchain technology has many potential advantages in public administration, there are a few key reasons why government entities should consider using it. These include increased decentralization, data integrity, and transparency—along with improved efficiency and reduced operational costs.


Decentralization and data integrity

There are many different ways to build a blockchain, but as distributed systems, they all feature some degree of decentralization. This is because a blockchain network is maintained by multiple computers (nodes) that work in sync to verify and validate all data. Essentially, they need to reach consensus and agree on the current state of the system, always maintaining a single version of the truth.

As such, blockchain systems can achieve a high level of immutability, and their structure can be customized to ensure that information can only be accessed and – in some cases – modified by authorized entities. In practice, different government agencies could act as validators, each contributing to the process of distributing and verifying information. This would greatly reduce the likelihood of data tampering and fraud.

In other scenarios, non-governmental organizations, universities, and citizens could also be included as validating nodes, which would result in an even greater degree of decentralization. Furthermore, these verification mechanisms can prevent other types of failures, such as data input errors (e.g., a data block that lacks crucial information would be denied by other members of the distributed network).

Beyond that, blockchain could one day play a significant role in electoral processes. Fair and open elections are cornerstones of democracy, and blockchain’s high level of immutability makes it an excellent solution for ensuring the integrity of votes. In addition to providing additional security for votes at polling places, blockchain also has the potential to make online elections a reality. A notable example of this occurred in 2018 in the state of West Virginia (USA), where distributed systems were used during the elections.


Transparency

Blockchain databases can be used to store and protect government records in a way that makes it difficult to manipulate or hide information. Under the current model, most government data is stored in centralized databases that are directly controlled by the authorities. And some of these databases are in the hands of a few people, which makes it much easier to manipulate. In such cases, blockchain technology can be a good fit because it can distribute the process of verifying and storing data among multiple entities, resulting in a decentralization of power.

Blockchains can therefore be used as a transparent database that reduces (or removes) the need for trust between citizens and government agencies. For example, some European authorities are exploring the potential of blockchain-based registries to reduce the occurrence of property disputes. This model could be based on a distributed system that is accessed and verified by both government agencies and citizens – and each party could securely keep a copy of their official documents.

Furthermore, blockchains could provide permanent access to records that law enforcement agencies and watchdogs may need, for example when reporting corruption or abuse of power. By reducing or eliminating the need for intermediaries in data sharing and financial transactions, blockchain systems could also make it harder for public officials to obfuscate information about the misuse of public funds.


Greater efficiency

Another reason to use blockchain in public management is to reduce operational costs by maximizing the efficiency of the institutions’ work. Since governments depend on taxes, it is important that they use their budgets wisely. Blockchain systems and smart contracts can be used to automate some tasks and operations, which would greatly reduce the time and money spent on bureaucratic processes.

While administrative cost reductions are eminently practical, they can also help to bolster citizen trust and satisfaction. Greater efficiency would likely result in higher approval ratings for government agencies and civil servants. Furthermore, by reducing operating costs, governments can invest more in other areas, such as education, security, and public health.

Tax collection is another important area of ​​governance where blockchain technology can be applied. Transaction records based on a blockchain network can easily move funds between parties, following pre-defined conditions. This could lead to drastic reductions in the administrative costs associated with collecting and distributing taxes and enforcing tax laws. For example, by storing records and processing returns on private blockchains, tax collection agencies can also provide security against fraud or identity theft.


Disadvantages and Limitations

While it is clear that blockchain can be used to improve the integrity, transparency, and efficiency of any type of digital data, there are certain limitations associated with its use in the public sector.

Interestingly, the immutability property of blockchain, which usually brings many advantages, can be a disadvantage in some circumstances. The immutability of data makes it essential that records are entered correctly before validation, which means that measures must be taken to ensure the accuracy of data collection (early in the process).

While some blockchain implementations can be designed in a more flexible way, allowing data to be changed, this would require approval (consensus) from a majority of validating nodes, which could raise doubts about the decentralization of the system and eventually lead to disagreements. However, this drawback can be easily overcome in private blockchains, which do not require high levels of decentralization.

Privacy concerns are also a factor, as records added to a blockchain will remain permanently available to anyone who has access to the system. This could conflict with procedures designed to seal documents, such as the destruction of a criminal record. Potential solutions to this issue could include the use of burn functions and other cryptographic techniques, such as zk-SNARKs or other types of zero-knowledge proofs.

Finally, it should be noted that governments themselves may present obstacles to blockchain adoption. In some cases, authorities simply do not understand the value of the technology, leading them to overlook the many potential benefits. In more extreme cases, governments where corruption is widespread may resist blockchain adoption to protect their own vested interests and prevent corruption from coming to light.


Final considerations

Despite the drawbacks, there are several potential uses for blockchain systems in the context of public administration. From increasing transparency to streamlining the tax collection process, distributed networks can help governments operate more efficiently and build greater levels of trust with their citizens. While some applications are still hypothetical, many countries are already experimenting with the many possibilities.

It is worth noting that digital systems have been used in public administration since the early 2000s, long before the first blockchain was created. Estonia is a notable example, which launched its digital identity program in 2002 and was the first country to hold online elections in 2005. In 2014, the Estonian government launched the e-Residency program, which mentions the use of blockchain technology for secure digital data management.