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Blockchain For Government: 9 Possible Use Cases

  • 17 October 2018
  • Sam Mire

Each year, Sen. James Lankford releases a report on the state of government spending, which never fails to garner incredulity from those who care how their taxes are spent. But, the report also inevitably provides a measure of comedy in the form of patently absurd ways to waste taxpayers’ hard-earned cash. The 2017 report outlined $473 billion in spending that a reasonable person could categorize as wasteful, including a $20,000 adult summer art camp and $2.6 million spent caring for chimpanzees. Considering that the U.S. national debt is nearly $21.5 trillion and rapidly counting, the public sector can’t afford to continue spending as they do.

To hope that the worldwide network of governments will take action and make potential savings of $3.5 trillion from a private sector-like revamp into a reality is admittedly a long shot. But if they do ever get serious about pushing bureaucracy toward the blueprint of a well-oiled machine, they would be wise to consider how blockchain could play a central — or at least contributing — role in a reorientation of broken practices.

Abandoning outdated document storage practices, merging the fragmented branches of government, creating more security for our elections, and granting the public more insight into how budgets are formed and tax dollars are spent seems like a fair, reasonable starting point when assessing how the public sector can begin employing blockchain tech.

Blockchain in government - Possible use cases

Voting on the Blockchain: Preventing Fraud, Increasing Access

Blockchain use cases in government - Voting, Preventing Fraud, Increasing Access

Regardless of one’s belief on the current state of voter fraud, there’s no denying that the incentive to artificially inflate political support has been around since democratic processes were implemented. In one 19th century vote, the infamous New York City-based Tammany Hall recorded 55,000 votes. The problem: there were only 41,000 voters eligible to cast their ballot in the 1844 election.

Other more recent cases prove that the impetus for garnering supporters by any means remains alive. In January 2012, South Carolina announced that 953 people had participated in recent elections…despite being dead at the time of the vote. And another investigation found that since 1988, non-citizens have been successful in voting 7,474 times in the state of Virginia. Threats to elections are not only domestic, but also foreign. It was found that foreign governments targeted and managed to access elections systems in as many as 39 states.

The blockchain is an ideal technology to end the polarized debate over the prevalence of voter fraud in America. It will also insulate elections processes from potential foreign intervention, and some states are already testing blockchain systems in local elections. The ability to vote on the internet from home using blockchain tech will likely lead to greater participation thanks to greater convenience, while the immutable blockchain record can easily flag redundancies and tie unique personal identifiers to individuals to ensure that voters are who they say they are, and that they are eligible to vote.

Companies Trying to Solve This Problem

  • Votem Mobile voting secured on the blockchain.
  • Democracy Earth – “Sovereign” voting platform based on blockchain.
  • FollowMyVote – Online voting for citizen feedback, recorded on the blockchain.

National Digital Currencies

Blockchain use cases in government - National digital currencies

In March 2018, Venezuelan President Nicolas Maduro announced the launch of its national digital currency, the Petro. Maduro later stated that the coin raised $735 million from its first pre-sale day — though these figures must be taken with a miniscule grain of salt. State-owned media company Telesur claimed that 83,000 individuals in 127 countries have bought into Venezuela’s cryptocurrency, ultimately totaling $5 billion in pre-sales, though this is a heavily contested figure. Venezuela should not be used as a litmus test for the success of national digital currencies, as the country is already in a hole too great to dig out of, but they are living a trend that will only continue to expand.

In 2015, Ecuador became the first nation to launch a cryptocurrency, and since then at least 13 countries have either launched their own cryptocurrency or hinted that they are planning to do so. Most nations likely see the benefits of their own cryptocurrency as a form of profit and investment, a means of greater oversight and control over the population’s finances, the potential to monitor criminality, lower costs from eschewing the printing of physical money, easier taxation, and a move away from inflation-vulnerable fiat currencies.

Tunisia, Senegal, Venezuela, and the Marshall Islands have all issued digital currencies. 

Customs and Border Patrol

Blockchain use cases in government - Customs and border patrol

In 2017, seizures and apprehensions by U.S. Customs and Border Patrol agents totaled $5,869,004. However, the sheer immensity of goods that come into America’s ports, airports, and through its borders tells us that, logically, this multi-million dollar haul is only a needle in the haystack. Other nations face far greater issues in customs, with the most inefficient and corrupt nations’ customs officials slowing national economic activity. On the Customs Procedure Burden Index Score scale of 1 to 7, Venezuela (1.9), Argentina (2.1), Haiti (2.4), Chad (2.4), and Nicaragua (2.4) are the worst, so it’s no surprise that all of these nations experience widespread corruption and economic stagnation.

Conversely, the World Bank ranks nations on a scale of 1 to 5, and Singapore (4.18), Germany (4.12), Netherlands (4.12), Finland (4.01), and the UK (3.98) — all prosperous economies — are top in the world. For the record, the U.S. ranks 16th (3.75), not terrible but with room for improvement. That improvement could come from the adoption of blockchain technology, which will provide quicker, more reliable provenance about the origins and legitimacy of shipments, while also providing real-time records by which customs agents can plan and operate more efficiently.

Companies Trying to Solve This Problem

  • IBM & Maersk Their blockchain platform has several customs agency customers.

Transparent Budgeting

Blockchain use cases in government - Transparent budgetingNew York City’s Council and the mayor’s office were recently in a bit of a squabble. While the mayor’s $89 billion budget would eventually be accepted, for a time, the City Council demanded to know precisely how much the city intended to spend approximately $3 billion set aside for the homeless. The Council cited a lack of clarity surrounding this and other budget-related issues as the primary reason for a tense negotiation, and New York City’s case is not particularly unique. From $92 billion spent on corporate welfare to $25 billion spent maintaining unused government properties and — no joke — $2.6 million spent training Chinese prostitutes to drink more responsibly on the job, taxpayers are helplessly out of the loop about where their dollars are being burned — at least until it’s too late.

While there will always be some measure of waste in government, the blockchain can replace many of the middlemen who, combined, result in sky-high budgets and massive inefficiency. Plus, a clear record of who conceived, voted for, and encouraged wasteful spending practices could be cited as a point of reference when holding public servants accountable.

Companies Trying to Solve This Problem

Secure Data Entry

Blockchain use cases in government - Secure data entry

In 2015, the United States Office of Personnel Management — likened to the HR department of the U.S. government — was hacked, a shock to its overseers, considering that it believed it had top-flight data security measures in place. The leak was discovered when one of OPM’s IT men discovered malware that had apparently been embedded in the Office’s servers for over a year, with a domain owner name — Steve Rogers, the fictional character also known as Captain America — that suggested a specific, likely foreign hacking group was behind the breach.

There’s good reason to believe that much of the OPM’s store of archives, including 18 million copies of 127-page security clearance questionnaires containing information about employees’ past substance abuse, personal financial records, psychiatric care, and other sensitive information, was compromised. It’s known for a fact that an additional 4.2 million personnel files were invaded by the hackers’ probing. Eventually, it was revealed that 21.5 million people in all were affected, including anyone who had been given a government background check in the past 15 years. This was obviously an indication that even our nation’s most well-protected intel and data is not as secure as once thought, and that hacks can be far more covert than many suspected.

Until a technology such as the blockchain — which has multi-layer security and real-time detection of potential breaches — is employed to protect the most sensitive data that a government holds, faith by data entrants and government employees is not warranted. Considering that it’s not just social security numbers, but the identities of spies and undercover operatives that the government is tasked with keeping safe, why wouldn’t the best, most cutting-edge technologies be employed for security purposes? 

Replacing Paper-Based Systems

Blockchain use cases in government - Replacing paper-based systems

On average, it costs the government $2,603 per year to maintain a single five-drawer filing cabinet, between the cost of the cabinet, a file clerks’ salary, and indirect costs, such as boxes to transfer files and the creation of file disposal forms. Now, keep in mind that the National Archives, which date back to 1775, hold approximately 10 billion pages of textual records, 12 million maps, charts, and architectural drawings, nearly 50 million photographs, and 400,000 video and sound recordings.

This is by no means an argument to digitize the entirety of the National Archives — far from it; it’s a measure to show the immensity of governments’ storage needs, as well as a view into how much this is costing taxpayers. Even non-government businesses rely disproportionately on paper-based records systems, so much so that roughly 70% of businesses would fail within three weeks if fire or flood did significant damage to their paper record stores. While off-site storage of files has saved some government agencies as much as $7,000 annually, many believe that the time for digitization of records storage, especially for non-essential documents, is long overdue.

The amount of paperwork associated with local and federal government processes is mind-boggling. Digitizing the vast majority of paperwork that the government is required to keep on hand but rarely uses would be a purpose worthy of blockchain technology. Serving as a permanent, non-space consuming record of marriage licenses, arrest records, and much more, the blockchain could reduce entire buildings and personnel departments to remnants of the archaic past.

Interagency Data Management

Blockchain use cases in government - Interagency data management

Of 382 federal web managers interviewed in a study, 87% indicated that wasted tax dollars could be reduced through structural improvement. And there are a lot of wasted tax bucks, with respondents indicating that 42% of American tax dollars are wasted — the equivalent of the total personal income tax payments of 11 states in the northeast United States. Tellingly, 65% of respondents “suggested the implementation of standardized system(s)” within government to achieve higher efficiency. The Government Accountability Office estimates that addressing inefficiencies in government could save $178 billion.

Uniformity between centralized, siloed departments and the massive cobweb of varying bureaucratic standards and practices make the sharing of data and the processing of payments in government not only costly, but in many cases, nearly impossible. Establishing a single blockchain-based means of communication would protect from costly data breaches and losses, decrease training costs, reduce administrative costs, and establish a single standard by which the web of wasteful government spending could be shrunken.

Companies Trying to Solve This Problem

  • NASA –  While not interagency, NASA recently put out a grant for blockchain based computing networks for more resilient communication across locations. 

Combating Corruption

Blockchain use cases in government - Combating corruption

Last year, a Chapman University survey found that corruption of government officials made 74.5% of 1,207 American adults polled either “afraid” or “very afraid,” making it the most prevalent of 80 possible phobias. Yet on the global Corruption Perceptions Index, America ranked a respectable 16th out of 180 countries in 2017, while institutionally corrupt nations such as Russia (tied for 135th), Mexico (also 135th), Haiti (157th), Venezuela (169th), Libya (171st), Afghanistan (177th), and Somalia (dead last at 180th) all face far greater consequences than Americans as the result of dishonest individuals in government. Around 90 million people in the Caribbean and Latin America had to pay a bribe to access a public service in a 12-month span.

This is dire. But there’s hope that the blockchain will allow citizens to oversee government spending records, file and view specific complaints of corruption that cannot be whitewashed, publically register land and assets in nations where illegal confiscations are common, and create a system of transparent government contractors to bring cronyism into the light. And this is just the tip of the spear.

Companies Trying to Solve This Problem

Improving Shared Services Models

Blockchain use cases in government - Improving shared services models

Last year, the complexity of shared services — the consolidation of operations across a business’ divisions for efficiency and cost savings — was once again on the rise, as the number of shared services centers with more than three functions rose to 53%, compared with 20% in 2013. And they’re getting better, with 73% of respondents reporting productivity increases of 5% or greater. The adoption of more sophisticated, knowledge-based shared services systems has doubled — and even tripled, in some cases — since 2013.

Considering some estimates show $27.9 billion in potential savings from the incorporation of shared services systems, these upward trends can be reasonably expected to continue. Many businesses consolidate facets of IT, HR, accounting, payroll, security, and compliance — though other facets of an organization can also be included — because there is some measure of overlap between these divisions. Fittingly, the blockchain has viable uses in each of these fields, and so it serves as a logical basis for integrating and elevating shared services models going forward.

Companies Trying to Solve This Problem

About Sam Mire

Sam is a Market Research Analyst at Disruptor Daily. He's a trained journalist with experience in the field of disruptive technology. He’s versed in the impact that blockchain technology is having on industries of today, from healthcare to cannabis. He’s written extensively on the individuals and companies shaping the future of tech, working directly with many of them to advance their vision. Sam is known for writing work that brings value to industry professionals and the generally curious – as well as an occasional smile to the face.