Michael Aaron

For a technology that started out as the basis of cryptocurrency, blockchain has evolved to be so much more. Today, blockchain is poised to disrupt the way dozens of industries are operating, and set to revolutionise the public sector. Indeed, nine in ten government organisations globally plan to invest in blockchain for use in financial transaction management, asset management, contract management and regulatory compliance by 2018, and here in Australia, the trajectory looks similar.

Last year, Data61 and Australian government agencies announced that they are undertaking a detailed study to determine what blockchain could all mean for both government and industry. The review will look to provide practical use cases where blockchain technology could be piloted in government services and the private sector, such as sharable registry information, verifiable supply chains and assessment of aggregate risk exposure in the financial services sector.

Blockchain is a distributed database that can be used by individuals who want to complete transactions involving multiple parties. Large organisations can use it to collaborate across multiple organisational silos. Large, cross-industry ecosystems may want to use blockchain to handle complex transactions across multiple jurisdictions, and governments may want to use blockchain to help their citizens or in the delivery of new government applications.

Trust has never been more important for governments in Australia and around the world. Globalisation means that governments need to find ways to expand the economy, and new ways to improve citizen engagement and accountability. The integration of blockchain technology into government activities will help local, state and federal governments move past a lack of trust, providing transparency for transactions.

Ledgers have been used for centuries by governments and businesses to keep account of assets and liabilities, property, records and relevant transactions. But traditionally, ledgers were private and guarded, seen only by an internal few, or auditors. Blockchain takes this old and simple concept and takes it to a new level. Simply put, blockchain acts as a distributed open ledger that can be used to register and record property transactions, healthcare initiatives to track medical records, citizen services and much more. Day-to-day, blockchain can also help government processes and purchases more efficient, reducing the chances of fraud and error.

In Australia, private sector organisations are already looking to blockchains as a potential new disruptor. For example, Agricultural technology business AgriDigital, executed the world’s first live settlement of the sale of an agricultural commodity on a blockchain with the sale of 23.46 tonnes of grain in central NSW. Australia Post, announced last year that it was looking at a blockchain technology project for the storing of digital identities, while AGL Energy will test how using blockchain technology could allow households to trade surplus energy from their rooftop solar panels. This initiative will also involve IBM and distributed energy advisers Marchment Hill Consulting and it is hoped it will highlight the regulatory and system changes needed to make the market work effectively, the value in peer-to-peer energy markets, as well as how blockchain technology can be leveraged to make it more effective.

Because participants in a transaction on a blockchain have access to the same records, there is no need for third-party intermediaries to validate transactions or verify identities or ownership. Business licenses, property titles, vehicle registrations and other records could all be shifted to blockchains, freeing citizens from the need for lawyers, notaries and trips to government offices to certify that transactions are legal. Additionally, with blockchain consumers, business partners and government groups alike could know with certainty how things are made, stored, transported and sold – whether those assurances relate to child labor, materials or the environment.

In a recent global study by IBM’s Institute for Business Value (IBV) and the Economist Intelligence Unit, it was found that government organisations around the world are prioritising blockchain to help reduce innovation roadblocks and inaccurate or incomplete information across their organisations. The results of the study show:

• Seven in ten government executives predict blockchain will significantly disrupt the area of contract management, which is often the intersection of the public and private sectors
• 14% of ‘trailblazer’ government institutions expect to have blockchain in production at scale by 2017, and are utilising blockchain to help reduce time, cost and risk in regulatory compliance, contract engagement, identity management and citizen services.
• Six in ten governments recognise regulatory constraints as the greatest barrier to the adoption of blockchains, followed closely by what they perceive as immature technology and lack of executive buy-in

The study also found that Asia Pacific is setting the pace of adoption along with Western Europe, with North America trailing. But unlike Western Europe (which ranked ‘financial transaction management’ as the top area for new business models) and North America, (which focused on the potential of ‘borderless services’), Asia Pacific governments expected ‘citizen services’ to be the area that delivered the greatest innovation through blockchain.

Countries in the Asia Pacific region, including Australia, are set to be among the first to really grasp blockchain technology, with the government agencies taking on the technology. This could potentially see these governments begin to make transactions that in the past, they wouldn’t have – this comes down to blockchain addressing the lack of trust issue.

Disruption, especially in bureaucratic institutions is rare. Decades later, even the Internet hasn’t drastically changed how governments operate and rarely do they compete in personalized citizen services. That could change as blockchains evolve to bring closer collaboration among citizens and government institutions. Open data (e.g. data that helps pinpoint the optimal location for a new retailer or record soil conditions for farmers) is arguably among a government’s greatest assets. As the societal value from that data grows, government organisations will need to ensure that their data is easily accessible, free to use and available in a consumable format. Likewise, institutions will need to take greater safeguards to protect that data from cyber-attacks. Open data on blockchains meets these imperatives, and can help governments become open governments.

Through blockchain technology, government will be better able perform its dual role of facilitating the business innovation of citizens and, at the same time, co-creating better services for citizens, founded on openness and trust.

Michael Aaron is the Blockchain leader at IBM.