Blockchain's Use In The Public Sector

In Blockchain We Trust

What do we know about blockchain technology, apart from the buzz of Bitcoin? Can we use it to beat bureaucracy or build trust? Challenge explores the opportunities for the public sector.

Double-checking identities online, securing CCTV footage, speeding up business, even tracking flowers and diamonds across supply chains. The possible uses of blockchain technology seem vast – and the potential for it to transform the public sector look promising. Could we use it beat bureaucracy? How can the technology help build public trust with governments?

What do flowers in Kenya, container ships at sea and mobile phones in Amsterdam have in common? They are all linked by blockchain technology. That is what allows shipping giant Maersk to replace more than 200 paper documents with digital information to track flowers, as they are being shipped from Kenya to Amsterdam. Anyone can see the progress of a shipment any time, including where the container is located.

Since Maersk began collaborating with IBM to develop blockchain technology for global shipping in 2016, many ports and customs authorities have started using the platform in pilot projects. Maersk and IBM hope to make shipping supply chains safer and more efficient, leading to lower costs and speedier processes.

Maersk is using blockchain to track the movement of goods across seas.

What is blockchain?

Perhaps better known as the technology behind virtual currencies such as Bitcoin, blockchain is being explored as a means to solve many real-world problems.

Blockchain encrypts data in a digital database, showing who owns or does something at any moment. Also known as Distributed Ledger Technology (DLT), it is a decentralised record-keeping system – or ledger – that is maintained by a network of many computers.

Unlike other record-keeping systems, blockchain is an immutable record of all transactions – that means it is unchanging over time and cannot be changed. Thanks to the way this technology works, its key breakthrough lies in its ability to establish trust in a decentralised system.

Blockchain allows diverse parties to collaborate or transact without requiring a trusted central third party, or an intermediary like a bank or a court. Since copies of the data are spread across all points of the blockchain network, everyone with access to the network has the same view of the state of things.

The key breakthrough of blockchain technology lies in its ability to establish trust in a decentralised system.

How blockchain works

Think of each transaction – exchanging money or updating healthcare records, for example – as a block. These blocks of data are validated automatically by complex rules and algorithms unique to each network, and then “chained” together securely using cryptography.

The data in the blocks is processed and stored in ledgers across all the computers in the blockchain network, rather than in a central location. Those ledgers are updated every time there is a new transaction. Since the data is stored in so many places, it becomes difficult to tamper with or shut down the whole blockchain network.

Many uses, many opportunities

In every industry, the transactions that require trust, a permanent record and multiple parties to cooperate have the most potential to move onto a blockchain.

In the public sector overseas, blockchain trials are happening for healthcare records, electoral rolls and digital identity. In the future, the Singapore Public Service could use blockchain to verify vendors’ track records on GeBiz, track a public officer’s career moves, and support or even replace certain auditing processes.

Another use for blockchain is smart contracts, or virtual agreements that automatically execute when certain conditions are met. The enforcement of certain rules, then, could be transferred from people to computers.

As Harvard Business School professors Marco Iansiti and Karim Lakhani wrote in the Harvard Business Review: “Imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases… protected from deletion, tampering and revision. Every agreement, every process, every task and every payment would have a digital record and signature that could be identified, validated, stored and shared.”

Imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases... protected deletion, tampering and revision. Every agreement, every process, every task and every payment would have a digital record and signature that could be identified, validated, stored and shared.

The many uses of blockchain

Blockchain is still in its infancy, but its use is growing quickly across the globe – especially in banking, healthcare and government.

Uses by government agencies

Who: Georgia
What: A custom-built blockchain system to register land titles and validate property transactions. The system is integrated into digital records at the National Agency of Public Registry. The Georgian government says it expects the system to increase transparency in land title ownership, reduce fraud and create cost savings.

Who: Estonia
What: A digital identity card powered and secured by blockchain allows citizens to access public services. Citizens can verify their records in government databases on the blockchain platform and control the access to the information. The government is also adopting blockchain to secure healthcare records.

Who: The UK
What: The UK’s Ministry of Defence is using blockchain to improve the trustworthiness of sensor networks (e.g., security cameras), according to UK consultancy Cambridge Consultants. Meanwhile, the Ministry of Justice is registering digital evidence (e.g., police camera footage) on a blockchain so it can be verified in criminal investigations.

Who: The US and the UK
What: An example of public-private collaboration in healthcare, the DeepMind artificial intelligence unit at Alphabet Inc. (Google’s parent company) plans to build a blockchain system in the UK that will track how patient data is used. The system will allow hospitals to see who is using healthcare records. This will be first tested at DeepMind’s partner hospitals, such as London’s Royal Free Hospital.

australia-financial-intelligence-750x537

Who: Australia and Singapore
What: The Australian Criminal Intelligence Commission and AUSTRAC, a financial intelligence agency, is funding the development of a blockchain system by Singapore-based HoustonKemp. The aim is to record intelligence created by crime investigators and improve the sharing of such information across agencies.

In Singapore...

Who: Monetary Authority of Singapore (MAS)
What: Its Project Ubin is a project with several financial institutions and technology partners to test interbank payments using DLT. The MAS has also evaluated the implications of using digital tokens as a virtual Singapore dollar. If interbank payments based on blockchain are successful, they could lead to faster settlements in financial services, especially for trade across borders.

Who: Singapore Customs
What: It is building a national trade platform based on blockchain. The new IT ecosystem will connect businesses, community systems and platforms, and government systems. The new national trade platform will replace the current TradeNet and TradeXchange platforms for declaring permits and other services for trade and logistics.

Who: Ngee Ann Polytechnic (NP)
What: It is working with smart contracts startup Attores to verify the authenticity of NP’s diplomas with blockchain, the first education institute in Singapore to do so. With a student’s blockchain ID, potential employers can retrieve the person’s academic records and education history, explains Mr Patrice Choong, the director of the polytechnic’s office of innovation and entrepreneurship.

Uses by private companies

Financial services
Blockchain is being used in securities trading, domestic payments, international remittances and more. In Singapore, several banks, along with the Info-communications Media Development Authority, have come together to create a prototype Know Your Customer blockchain. This blockchain helps banks and financial institutions verify their clients’ identities and information more efficiently.

Healthcare
In the healthcare sector, BlockVerify and similar companies are working on tracking pharmaceutical products along supply chains, to ensure that hospital patients receive authentic medicines.

Real estate
Singapore-based real estate online platform Averspace lists properties for sale or rent. It then conducts transactions using digitised contracts secured by blockchain. By doing so, Averspace makes it easy for homeowners and tenants to directly enter into a digital tenancy agreement, without having to pay commission fees.

Diamonds
London-based Everledger provides a secure ledger for identifying diamonds and verifying transactions between suppliers, and for insurance firms and law enforcement agencies. It has placed more than 2.2 million diamonds on a blockchain, creating a “digital passport” for each diamond. Diamond producer De Beers also uses blockchain to track diamonds from the point of origin to the end consumer. This ensures that their diamonds are authentic, ethically sourced and do not fund wars.

Freight and transportation
On a global scale, transportation and technology firms have formed a Blockchain in Trucking Alliance (BiTA) to develop standards for the freight industry and promote education about its possibilities.

Blockchain and issues for the public sector

The opportunities and issues to think about.

By automating transactions via smart contracts, and having records automatically updated with blockchain, public agencies could gain greater efficiency and cost savings. Administrative paperwork that can be moved onto a blockchain system would free public officers to pursue more engaging, meaningful work.

Open to all – good or bad?

With every transaction recorded on a public ledger for anyone to see, blockchain could help reduce fraud and corruption. For example, if citizens are able to see certain transactions of government spending, that could increase trust in the public sector, says Lead Technologist for Internet Technology Jonny Voon of Innovate UK, the UK government’s innovation agency.

But many people are still wary, especially about privacy. Blockchain allows for both individual anonymity and a public view of transactions. For financial uses, that anonymity could make it hard to trace money that is laundered – an issue regulators have to tackle. Yet, a digital ID linked to each user means that, in cases of poor security, leaks or hacks, a user’s entire history of transactions could be revealed.

Still, with fair regulation, the opportunities abound. The distributed nature of blockchain “democratises technology”, opening up possibilities in innovation to more people, SGInnovate’s founding CEO Steve Leonard told a panel on blockchain and Smart Nation in 2017.

Regulating blockchain

To spur more innovative solutions, regulatory frameworks that address risk and protect the interests of the public should also encourage experimentation with blockchain. The MAS’ regulatory sandbox is an example of how some legal and regulatory requirements are relaxed for certain financial technology projects, while keeping appropriate safeguards against the consequences of failure.

The Maritime and Port Authority (MPA), together with Customs and the Singapore Shipping Association, is experimenting with blockchain to electronically document ships and cargo owners. “There will be legal, security and other issues that will have to be addressed before [blockchain] gains widespread use,” says Mr Kenneth Lim, Chief Technology Officer of MPA. “Undertaking trials now will help us better understand its potential and limitations.”

In the European Union (EU), the European Commission is studying how to apply blockchain to non-financial sectors. The goal is to identify and discuss the possible uses and impacts of blockchain for EU industries and businesses.

With blockchain’s potential for trade and other transactions across country borders, policymakers will also need to be able to coordinate regulation internationally.

Though Bitcoin and other virtual currencies are the ones in the spotlight, the blockchain technology that powers them has many more potential uses.

New chain on the block

Given blockchain's potential for transforming the way we work, public officers will need to become familiar with the technology sooner than later.

SGInnovate hosts a series of talks on blockchain, where you can network with experts, find out more about their projects and explore the possibilities. Officers interested in the technology can also take up online courses (see a list at the end of this story).

Though Bitcoin and other virtual currencies are the ones in the spotlight, the blockchain technology that powers them has many more potential uses. It has even been compared to the game-changing protocol that powers the Internet as we know it. So get a head start on understanding the technology – you might just become part of a solution to beat bureaucracy with blockchain.