Blockchain is a modern technology that involves using secure and transparent data while reducing redundancy, enabling trust between the parties involved in the data exchange, and eliminating central points of failure that could put that data in jeopardy. This allows for easier data querying, enablement of near-instant processes (i.e. smart contracts), and reducing or eliminating altogether the need for a central authority (e.g. banks or government). Due to its decentralized nature, blockchain allows people and private or public institutions to perform more secure and transparent transactions and set up efficient automated processes without a need to manually control them.

In the public sector, blockchain adoption will probably be slower than in other sectors. However, this modern technology has a huge potential to enable governments to bring citizens’ participation, efficiency in operations, digital security, permission-based transparency, and operations’ speed to a whole new level.

Blockchain experiments are accelerating globally in all areas across the globe. This proliferation of blockchain technology can only suggest that government leaders do not need convincing about the need and potential uses of the blockchain. Instead, they may need an impulse and specific use cases to accelerate the digital transformation of public institutions and to use the opportunity to create stronger relationships with their citizens, partnerships between countries, and create new areas of development.

Blockchain Basics in the Public Sector

Blockchain technology can be successfully used to solve a vast range of issues associated with the public environment. One low-hanging fruit is the improved security of financial transactions which, with the right implementation, can enable central banks to avoid the risks of using a central ledger (e.g. malicious attacks for accessing and altering the data, lack of trust from the public due to data opacity).

Instead of using a central database, the governmental authority can use a distributed ledger in which every user can use a copy of the full database and can monitor all existing transactions. A public blockchain can use specific consensus models to determine which kind of actor has the right to publish each block.

However, blockchain advantages go far beyond financial transactions and are erroneously associated with cryptocurrencies alone. The number of blockchain-driven initiatives in the public sector has skyrocketed during the last few years, from 117 initiatives in 26 countries back in 2017 and 208 initiatives in 45 countries back in 2018 to over 450 initiatives in 78 countries in 2020. Some of the main types of blockchain projects involve key areas of the public sector, such as strategy & research, personal records, identity (credentials, attestations), land title registry, market infrastructure, financial services, compliance, reporting, research, and digital currency.

In their pursuit of fostering environments that are attractive for investors, world governments have begun to experiment with blockchain. What a growing number of public sector actors are beginning to realize is that technology doesn’t need to be revolutionary in order to have a profound impact on society. By simply reducing the dependence on intermediary institutions, blockchain has the potential to ease regulation compliance, eliminate resource burdens, and completely dissolve layers of bureaucratic redundancy.

Why is Blockchain so Useful in the Public Sector & Governmental Institutions?

The key elements of the blockchain that make it so appealing for modern institutions are:

• Distributed and decentralized: blockchain offers a distributed system operation, thus removing the single potential point of failure. The transactions are also verified cryptographically and updated in an instant across all parties, thus enhancing security and providing visibility across the transaction.
• Transactions are verified within minutes: blockchain is considered to be the future because the time for a successful transaction is measured in minutes, not in hours or days. The banking system can take its operations to the next level and dramatically improve the satisfaction of the end customers by leveraging smart contracts and transferring funds extremely quickly.
• Immutable & irreversible: because each transaction’s record is ineligible, invalid transactions are instantly rejected. All transactions include time, date, and participants, so the potential for hacking diminishes considerably.

How can Blockchain be Used in the Public Sector?

This powerful technology can have some astounding uses in governments and public institutions. Here are some uses that blockchain can bring to the table in 2022 and beyond while paying particular attention to the data protection regulations:

• Identity verification: this groundbreaking technology can be successfully used to keep tabs on the numerous identities of citizens from a country or a region, securing them on the ledger and allowing for quick access. Citizens can use the blockchain to easily gain access to their birth certificates, IDs, visas, driving licenses, passports, and the list goes on.
• Personal records: blockchain can enable public institutions to offer interoperable health records, financial records, or insurance records, thus minimizing the time spent to provide basic or advanced services.
• Benefits & entitlement: smart contracts, which are an integral part of the blockchain, can be used for domestic & international aid, medical benefit payments, or anticipatory payments.
• Land title registry: citizens can access via blockchain a wide range of historic records and details related to property transactions. Public institutions would also be able to use this large database for proper security measures.
• Supply chain inventory & management: institutions in the public sector can also use the blockchain to keep track of an asset from its creation up to its latest phases, such as purchase, transportation, and inventory. 
• Vendor management: another use of the blockchain in the public sector relates to tracking and paying vendors, along with monitoring schedule performance and managing transactions. This means governments can benefit from perfect transparency for all of their contracts issued with new partners.
• Streamline interagency processes: smart contracts and blockchain technologies can be used to automate transaction handling and enhance information sharing between public institutions. This can enable public bodies to repurpose their available resources currently spent on inter-agency transactions and let them focus on their own mission.
• Tax collection and public budget distribution: fiscal authorities can make use of smart contracts to instantly collect taxes (e.g. VAT) while the government can redistribute funds in a pre-planned, transparent manner.
• Voting and eParticipation: voters can make the most out of the blockchain technology to vote electronically, while governments can ensure accurate counting, voting eligibility, and flawless auditing. Moreover, citizens can propose new regulations and can be engaged in the decision-making process through hybrid eDemocracy platforms making use of both blockchain/Web 3 and traditional/Web 2 technologies.
• International shipments: by using a secure ledger that is distributed among each participant, blockchain enhances data transparency and improves inspection rates & recordkeeping for inbound international shipments, providing a mandatory audit trail for all participants in the chain and ensuring no product is misplaced.

The Importance of Blockchain will Only Continue to Grow

According to top analysts, blockchain will probably enable the financial sector to save up to $20 billion each year. Additionally, it will continue in numerous other industries and sectors, including the governmental sector. Choosing to leverage the blockchain trend is not just a matter of if, but of when.
Digital transformation is a long path and not a destination, especially for the public and large organizations. Fortunately, public institutions can now work with a strategic partner that comes with extensive experience in digitally transforming the public sector space and delivering highly complex public sector IT projects.