Is Blockchain Useless for Governments?

Like many organizations, governments are also busy thinking about or experimenting with blockchain technology. But do they have to do that? Blockchain is closely related to bitcoin, so scary, risky, criminal? As a municipality, can you continue to work much better with secure databases? 


However, if you, like me, believe that bitcoin has unleashed a revolution, we can shake hands with each other. Because the technologies that form the basis for this revolution – and yes, blockchain is one of them – are anything but worthless for your organization. It is only essential to determine where exactly the added value is. But partly because it is tricky technology to fathom, it is also complicated to determine what is worth watching now.

Bitcoin or blockchain?

It is true that bitcoin and blockchain are closely related, but blockchain is not the only technology that makes bitcoin special. Bitcoin blockchain is a combination of multiple technologies. In addition to blockchain, this is also Proof-of-Work and an open-access peer-to-peer network. Without these additions, blockchain is just a storage structure and a very awkward one. Nevertheless, the term blockchain, or the new container concept “Distributed Ledger Technology”, has become the standard to make people enthusiastic about technology that they do not fully understand.

blockchain technology explained

Blockchain is nothing valuable in itself: a blockchain is technically a way of structuring data in a chain of blocks containing transactions. That is needlessly complex if that is the only thing that you use. Bitcoin was the first application in which a blockchain was used, but blockchain is now wrongly seen as the element that was so decisive in the success. But that is not the case in my eyes. It is precisely the open nature, the “permissionless entry” – which means that you can participate in bitcoin without someone’s “permission” – is that achieved. Everyone in the world can validate the data independently, without having to rely on a trusted third party.

In his presentation called  “Blockchain or Bullshit?”  One of my favorite speakers in the field of bitcoin revolution and blockchain,  Andreas Antonopoulos , addresses this theme:

“Blockchain is bitcoin with a new hairstyle and a nice suit that you can present to your management. It is the ability to deliver a clean, comfortable version of bitcoin to people who are too afraid of truly disruptive technology. “

Worthless or valuable?

Because blockchain or “Distributed Ledger Technology” has now become the prevalent term that makes people enthusiastic, there are many platforms that implement this technology in a different way. For example, some may be a  permissioned or private blockchain  (which requires permission to view the data). Whether it is a system in which only a select group of individuals approve transactions (with which you must get permission to participate in the consensus mechanism).

In my opinion, the essential parts that make bitcoin and other open block chains so disruptive are lost. Some of these “blockchain” projects are nothing but old wine in new bags. The exchange of one trusted party for the other. The fact that a blockchain is used is not of added value in these cases, in fact: it is only a nuisance. If you already want to use a system that does not embrace the open and limitless nature of bitcoin, what is wrong with an “old-fashioned” bitcoin database?

The open nature of bitcoin, where the network is accessible to everyone, and all actors within the network can independently verify the truth irrefutably, is what makes it truly unique. If data in a blockchain is hidden in the background from a trusted party (such as a government organization), where you have to ask the same organization for that information (and therefore not public), what does that really offer as added value?

The point of bitcoin and other open blockchains is that they decentralize the trust. Nobody is the boss, everyone can independently verify the truth. In my view, the added value for blockchain is therefore in situations and processes where trust is involved. Trust the citizen in the government or vice versa.

Trust instead of distrust

In other words, we should look at processes where it would be much more convenient if we could trust each other. Because of fundamental mistrust, many processes are provided with compelling, complex, time-consuming and costly control procedures. Because we essentially another not to trust. Whether it concerns spending of subsidy money, or the validity of a license: relying solely on trust is not easy or sometimes even unwise when one of the two parties benefits from distorting the truth.

If parties can achieve that trust through an independent, open, boundless network, then many tight control procedures can be overboard. But there is quite something that is needed. Government organizations often now have the control and control. They have their administration in order and have unlimited access to them themselves. The citizens who do business with them have in the event of a dispute by definition an information backlog, because the information is not public. Not everyone has the same data, so not everyone can find the same truth. The citizen must, therefore, trust that the government acts in good faith. And it can not be ruled out that this does not happen in some situations.

Trust the network

In order to actually benefit from blockchain technology, government organizations will, therefore, have to dare to accept that a part of the control and control is entrusted to the network. Because of the unchangeable consensus rules of an open blockchain, the behavior of the network is regulated, and can also be relied on.

Many municipalities are now conducting pilots with closed, private blockchains. They label bitcoin as scary, meaningless, and deal with blockchain. But with that, they do away with the core elements that are so important to give a blockchain added value. If the contents of a blockchain remain hidden on the ICT systems of the municipality, why do you use one? If a blockchain can only be viewed by a select group of people who already trust each other, then it is a pointless instrument. As a citizen, I still have to be able to trust that the municipality is not lying about what it says, I can not control it myself.

“Do not trust, verify!”

Blockbox experiments should, therefore, in my view, focus on using open block chains to deliver decentralized trust. For processes that are complex due to faulty trust, a lot of efficiency gains can be achieved with blockchain. This is the time to try things out. Of course, mistakes are made here, but that is also necessary otherwise we learn nothing from it. I only advocate that you start a sensible pilot, and not one of which you can already estimate in advance that it is useless.

About the author


Vikram is a Digital Media Strategy Consultant who helps small business owners grow their
business. He is passionate about blogging, digital marketing, and emerging technologies.

Add Comment

Click here to post a comment