Bureaucratic, slow, and corrupt – these are the adjectives often associated with governments. Corruption is a major challenge in developing nations according to the World Bank. While corruption may not be so pronounced in developed nations, bureaucracy and slow systems are still prevalent in these nations. Canadian companies report wasting more than 6 billion dollars (CAD) due to bureaucracy every year. As governments around the world strive to make governance adhocratic, agile, and transparent, the sine qua non is not only fair intentions but also effective implementation. While technology can solve the problems of bureaucracy and inefficiency, finding the appropriate technologies and scaling such solutions are two primary challenges.
Cloud-based centralized architectures allow for censorship and misuse of information by a central authority. Many people consider Twitter censorship as a way to control the opinions of the masses. Tech giants store information about the preferences and inclinations of the users from their social media contexts. It is easy to retrieve this information from centralized databases and use it to sway elections. Centralized authorities can even fudge the records and alter the truth. Whereas, a decentralized architecture such as Blockchain is secure, inclusive, and trusted by design, making the technology a worthy contender for solving governance problems. Further, the Blockchain ledger is immutable and does not allow anyone to alter the information once recorded. However, the adoption of Blockchain has to overcome many challenges before it can truly reach the masses.
Readiness for Mass Adoption
People living in remote areas/villages, refugees, and children without birth certificates often lack social identity proof and hence lack access to most government initiatives and schemes related to education, employment, and healthcare. Hackers can also attack centralized servers and steal the identities of citizens with social identity proofs. Self-Sovereign Identity (SSI) is a secure digital identity for people, things, and apps that are not controlled by any entity. These Blockchain-based identities are secure and protect privacy by allowing citizens to authenticate their own identities. Government can issue identities, certificates, and other credentials in a fast and secure manner with SSI.
Adoption of Smart Contracts
Smart contracts are deterministic, fast, and devoid of human errors. They can be executed on bank holidays and are often compared with a vending machine that will dispense an item only after the item is paid for. Smart contracts are suitable for most monetary and non-monetary exchanges that are simple and straightforward. Smart contracts can be used to execute legal and financial rules associated with the ownership of land and vehicles, educational certificates, and lease agreements. The implementation of smart contracts requires a thorough inspection by professionals to ensure that all possible situations and outcomes have been accounted for.
Laws and regulations
Today, laws and policies do not accept smart contracts for most transactions as evidence of finality. Governments and organizations have to make policies for the acceptance of smart contracts as proof. As an example, nations and states have different tax policies and regulations associated with their services. In certain cases, smart contracts alone may not suffice and have to be complemented by traditional means of law enforcement or verification. Lawmakers and policymakers must ruminate over the applicability of smart contracts for various use cases and services, and wisely select the role of smart contracts and traditional means on a case-by-case basis.
Cost of Adoption
Most Blockchain implementations require enormous computing resources to reach a consensus. The huge upfront investment required for high-powered hardware is a deterrent to investment in Blockchain. The cost factor has also given rise to the centralization of the mining pools. In fact, the majority of the mining on Ethereum is handled by only three mining pools. This situation is not ideal for governments because centralization will give rise to imbalance again and create serious side effects. Therefore, governments need to run pilot projects to assess capital investments in Blockchain. Governments also need to promote advancements in Blockchains that enable the use of inexpensive computing resources viable.
Energy and Environmental Concerns
Energy consumption by miners is a serious concern for governments adopting Blockchain. Nearly 85% of energy still comes from non-renewable sources such as coal, diesel, and natural gases. The use of fossil fuels harms the environment and increases pollution. Therefore, governments have to look for environment-friendly Blockchains. However, environment-friendly Blockchain is still in its early stages, and governments must be skeptical about energy-intensive mining mechanisms. Otherwise, the investment in energy and the environmental impact will offset the economic returns associated with Blockchain.
Early Adopters of Blockchain for Governance
Despite the challenges, many countries and organizations are looking up to Blockchain to solve governance issues. Blockchain has proven that it can instill trust and a sense of inclusion in citizens. Federated yet centralized architecture cannot match the security and privacy offered by the decentralized architecture of Blockchain. Many countries have already adopted Blockchain for various domains. Here is a list of domains followed by the countries that have adopted Blockchain:
- Education – Japan, Malta
- Healthcare – Estonia
- Land Registries – Georgia, Sweden, Switzerland
- Digital Identity – Emirates
- Digital Currency – Malaysia
- Social Impact Finance – Korea
- Data exchange – Estonia
Conclusion
Trust, transparency, security, privacy, and inclusion are the main ingredients of effective governance and Blockchain has all the necessary ingredients. Implementation concerns, initial cost investment, and energy consumption make Blockchain adoption challenging. However, Blockchain is still in its nascent stage, and technologists and engineers around the world are working toward better designs and implementations. Many countries around the globe have already adopted or are in the process of adopting Blockchain for various ESG initiatives. These early adopters have paved the way to create a wave of acceptance for Blockchain technology. Continuous improvements to achieve a more affordable, adaptable, scalable, and environment-friendly version of Blockchain can make it ideal for governance.
Also published here.