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Blockchain Adoption by Government to Surge

By Sohini Bagchi

Blockchain as a term may be at the trough of disillusionment stage of the hype cycle, but many of the technologies powered by blockchain are readily finding acceptance among government bodies across the world. Recent studies and developments suggest that despite certain challenges, blockchain has the potential to build the required trust among citizens in government services and increase the efficiency with which those services are delivered.

Government adoption of blockchain to boost

The growth momentum was already visible at this year’s World Economic Forum (WEF 2020) in Davos, where there was widespread discussion on using blockchain for data collection and environmental solutions.

Last month, the Canadian government announced the development of an on-chain platform for steel-tracking. Very recently, the Australian government has released a roadmap for blockchain, where it pledges to formalize an advisory committee, establish a collaborative model with industry and research sectors, investigate use cases, and learn from other pro-blockchain countries.

The United States Air Force has partnered with Fluree, a blockchain data platform, to build blockchain-based communication system to protect against cyber attacks and ensure better command and control over operations.

Read more: Blockchain Goes Beyond Just Cryptocurrencies

Closer home in India, the Election Commission collaborated with the Indian Institute of Technology to develop a blockchain system for voting. The new system aims to allow Indians to vote even when they are away from their hometowns.

The Maharashtra government has launched Blockchain Sandbox for E-Governance to make it more efficient across the state. The government of Maharashtra is also working to implement blockchain technology in various sectors, like agricultural marketing, registration of vehicles, document management, and supply chains. The Indian state of Telangana is also exploring the use of this technology in public services.

In India alone, as many as 40 blockchain initiatives are being executed by the public sector in India, roughly 92% are in pilot or proof of concept (POC) phase and nearly 8% projects in the production or execution phase, as per NASSCOM India Blockchain Report 2019. The government has further announced that it has allocated Rs 4 Crore extensively for developing blockchain-related products and technology.

More recently the Chinese government is using blockchain technology to archive medical data, track the supply of virus prevention materials and consult the public amid the Coronavirus outbreak. According to the People’s Daily Online, there are 20 blockchain-based applications designed to help fight the Virus – with most of the apps being used to manage citizens’ personal data.

Read more: Tech Industry Feeling the Heat of Coronavirus

From these use cases, it is clear that blockchain technology has opened doors to multiple innovations, in public sectors, with many working with their private partners in the space on various models to enhance transparency, efficiency and social scalability with blockchain technology.

It is therefore not surprising that PwC’s Global Blockchain Survey 2018 report, says governments can leverage the technology to develop a powerful tool to manage registries, licenses, permits and supply chains among others. Globally, the market size of blockchain technology application by government was $104.5 Million in 2017 that is expected to reach $3.4 Billion by 2023, growing at a compound annual growth rate (CAGR) of 84.5% during the forecast period (2018 to 2023), said another report.

Challenges of blockchain adoption

Despite these achievements, the vast majority of use cases haven’t yet yielded the results they initially promised. Public sector adoption has been slower than anticipated. Take the case of elections. Experts “have expressed skepticism, saying the online platforms are never more secure than other online ballots. They are concerned that blockchain addresses only the security of a cast ballot but does not help to authenticate voters or the security of voters’ devices. Others have raised concerns that Internet voting systems cannot be audited with a level of confidence comparable to physical polling places.”

With an increasing number of players in blockchain, some worry that there’s so many different networks, no standard exists to allow them to interact with each other. This standardization is what the industry calls interoperability. According to a recent report published by Deloitte, the lack of interoperability “grants blockchain coders and developers freedom — and can give CIOs’ headaches as they discover that platforms can’t communicate without translation help.”

“Standardization could help enterprises collaborate on application development, validate proofs of concept, and share blockchain solutions as well as making it easier to integrate with existing systems,” the Deloitte study said.

One of the frequently noted criticisms of blockchain network is the fact that it relies on intensive computing power — and hence a lot of electricity — in order to run. A 2018 study released by Elite Fixtures said that it costs more than $26,000 to mine just one Bitcoin in South Korea, which is one of the world’s largest markets for cryptocurrency trading.

But a number of firms, including Amazon, IBM and Microsoft, are working on ways of improving the cost and complexity involved in creating blockchain networks by using cloud technology. By creating blockchain-as-a-service, these cloud providers are releasing blockchain templates intended to automate the setup of basic blockchain infrastructure; which they claim can reduce application development from months to days.

Read on: Exploring the Next Wave of Blockchain Innovation

Also, there are areas in blockchain where regulation is uncertain, such as smart contracts. These are software applications that automatically execute the rules programmed into it. Such contracts contain a set of conditions under which a buyer and a seller agree. When those conditions are met, the contract is automatically enforced, something which proponents say is more proficient than paper-based contracts. But Deloitte highlights that existing regulations don’t cover smart contracts, which could inhibit investment in blockchain.

Then there’s a shortage of developers. Those limited and experienced developers can demand premium salaries, which in turn pushes up the cost of implementing a blockchain solution.

However, these barriers don’t mean that widespread adoption of blockchain is a lost hope. While Blockchain is still in its early stages, but as Kevin Werbach, Wharton professor of legal studies and business ethics, said at the Penn Wharton Budget Model’s first Spring Policy Forum, “Many of the blockchain projects will fail. But if you could go back 25 years ago, to the early 1990s, and you knew what the internet was going to become … what kind of bets would you make? It took 20 years for all this to unfold. Something similar will happen with blockchain.”

With governments across the world now starting to see the potential, its time they experiment and figure out where the real opportunities lie, where this technology can actually solve problems in new kinds of ways.

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Sohini Bagchi
Sohini Bagchi is Editor at CXOToday, a published author and a storyteller. She can be reached at [email protected]