SOCIETY | Apr 6, 2017

Blockchain: how to improve data management in the public sector

What are the opportunities for blockchain in the realm of Public Administration according to McKinsey?

More than 1 billion dollars have been invested in blockchain the past year alone according to Deloitte.

This technology is having a revolutionary impact in many sectors: from finance to health, automotive to the media and as far as the government. The Finance sector and that most linked to virtual money should be considered as only one of numerous possible applications for this technology, since blockchain, devoid of centralised management, enables reduction of the intermediary chain, meaning data can be sent faster, more safely and at greatly reduced cost.

In the past year in particular, interest in blockchain has increased exponentially, above all due to the option to securely manage the exchange of information between networked subjects. Home automation, for example, is certainly one of the main areas in which the binomial IoT and blockchain guarantee significant results: thanks to this technology it is in fact possible to be certain that you are the only person authorised to open your front door or to activate the video surveillance system. Other applications enabled by smart contracts may include, for example, ​​public services such as water, gas and electricity. In the area of ​​energy, the integration between IoT and blockchain can enable a P2P market in which devices can automatically buy and sell energy, based on user-defined criteria.

Blockchain and the public sector

McKinsey had already estimated in November last year that if governments were to use and implement current technology to digitise services and processes it would lead to the generation of an economic value equal to a thousand billion dollars a year. One of the primary functions of a government is to archive and save important information on individuals, companies, organisations, activities and processes, but too often this is still stored on paper with individual entities that build their own data silos and information management protocols in total autonomy, without any interoperability with other governments. In this sense blockchain technology could simplify the management of reliable information, making it easier for governments to access and use data while maintaining high standards of protection and security for such sensitive information.

For example blockchain in the distribution of state aid and management of the welfare system could help streamline assistance delivery procedures, ensuring better governance of initiatives, policies and actions.

In the UK for some time for example, GovCoin Systems Limited, based in London, supports the Government in the distribution of projects to support the inclusion of the most disadvantaged sections of the British population. So far it has mostly been the banks, providers of payment services and insurance companies who have demonstrated the greatest interest in the development and implementation of blockchain via widespread investments. However starting with pilot projects, governments could also over time digitise their existing records and manage them within a secure infrastructure. In the long term this technology could enable individuals and organisations to achieve direct control of all the information relative to them and contained in government databases. This level of transparency could, in turn, make the creation of public services easier for the public sector.

What benefits?

Today there are a number of tools and technologies that institutions can implement to protect sensitive data and improve the management of records associated with ownership. Anyone who uses public services is rightly concerned that, despite the efforts of institutions to protect their systems, criminals could gain access to government databases and steal or manipulate data. In 2015, for example, certain cyber-criminals obtained personal data, social security numbers, fingerprints, work history and financial information of approximately 20 million users who had previously been subject to an audit by the US Government. Encryption methods can never be 100% secure and blockchain technology could help make violations of this type more difficult.

Estonia is implementing the Keyless Signature Infrastructure (KSI) technology to safeguard all public sector data: this technology allows citizens, simply by participating, to check the integrity their data in government databases. This process has enabled the development of digital services called e-Business register and e-Tax, thanks to which a decrease in the cost of administrative services has been registered for both the state and citizens.

By digitising all data, the Government could significantly reduce time and costs of services for the transfer of physical or financial assets, just as, for example, Sweden decided to do and where the total economic value of all assets exceeds 11,000 billion Swedish Krona or about three times the GDP of the entire country. Since the tasks of recording and transferring ownership are still too burdensome and costly for the public sector, the Swedish Land Registry is trying to digitise the entire process by developing a mobile app. The aim is to create a blockchain that can store all the detailed information about properties for sale and all subsequent transactions during the purchase process. It is expected that the use of such an application would reduce the average time of three to six months that is required to complete the sale of a property when using the traditional procedures, to just a few days, by using the newly developed technology. According to estimates in the McKinsey report, buyers throughout all OECD countries pay at least 3.5 billion dollars a year in administrative costs for the registration of purchases in the property sector. The implementation and use of digital technology could significantly decrease the cost of this service.

The Republic of Georgia has also declared that it is prototyping a similar technology that would enable citizens and businesses to use a simple smartphone application to purchase and transfer property titles within a short period of time and at reduced costs.