Digital Governance with Jeffrey RoyE-governmentGovernment
February 25, 2019

Blockchain and Government: Promise and Peril

In recent years there has been much hype surrounding blockchain technologies and their transformative potential. According to one Deloitte global survey from 2018, the hype may be overdone: such is the view of nearly 40 per cent of informed respondents.

Much of this skepticism stems from the frequently dramatic volatility of crypto-currencies, such as Bitcoin, which are fueled by blockchain platforms. The volatility, in turn, is tied to rampant speculation and fraud that has led numerous governments to clamp down. As one example, South Korea is struggling to contain what amounts to unfettered online gambling, already banning anonymous bank accounts, threatening to completely shut virtual currency exchanges. 

Yet as any blockchain enthusiast would point out, crypto-currencies are not to be equated with the underlying blockchain foundations. Some even foresee bright days ahead for crypto-currencies themselves, as none other than Square founder and Twitter CEO Jack Dorsey has spoken about bitcoin’s potential as an eventual global currency – a scenario of interest to Square as it disrupts the financial sector with more decentralized and accessible product offerings, having already enabled bitcoin trading on its platform.

So what is blockchain? According to a recent report on blockchain in government by Deloitte, it’s “a distributed consensus ledger that is shared, thus creating a digital ledger of trusted transactions maintained among and across participants. In place of multiple independent and isolated ledgers, there is a single shared record distributed across every party to the transaction.”

The two critical words here are “trusted” and “shared” – the implication being a transparent and accessible record of transactions outside of the control of any single authority (i.e. essentially user-driven). Yet while the “shared” aspect of blockchain is not in doubt, the “trusted” is more contested, as is always the case with novel and more distributed forms of governance.

In many ways, blockchain mirrors the democratizing spirit of social media and the wisdom of the crowd (a scenario that played out when social media helped organize a crowd that took down one military dictatorship in Egypt only to see another rise in its place) and open source computing (that continues to be challenged by proprietary offerings, with various hybrids now commonplace). The allure lies in circumventing traditional authoritative structures; the risk stems from what sort of creations arise in their place.

As headlines frequently highlight, blockchain is ideally suited to the underworld of online life, namely organized (and not so organized) crime and all sorts of shady actors keenly seeking new ways to operate transnationally and virtually. According to a 2015 report by Europol, “the move to digital finance eliminates face-to-face interactions (and reduces identity risks for organized criminals), allowing anonymous exchange of financial resources.”

This same report highlights the importance of private-public partnerships in combatting such threats and devising new solutions for cyber-stability. And indeed, that is one essential lesson from early blockchain experimentation: that governments must be outward and agile in working with a range of existing and emerging stakeholders in order to devise a workable path forward.

The BC Government, notably, has been experimenting with blockchain in order to improve business registration services. A proponent of wider adoption, IBM has also urged that province to deploy blockchain in the newly legalized realm of cannabis. According to IBM, the technology could help the government limit or eliminate black market sales by tracking cannabis through the entire supply chain — including “where and how cannabis is sourced, sold and priced, from seed to sale.”

Democratic enthusiasts also see great potential to improve online voting. Along with Estonia’s perennial leadership in this realm, the Swiss canton of Zug, a self-proclaimed blockchain capital, has reportedly deployed the technology to successfully and securely underpin electronic voting in a local plebiscite. By contrast, the patchwork of proprietary systems and the absence of province-wide standards brought its own share of problems to several Ontario municipalities in October’s local elections.

For governments, then, avoiding blockchain is simply no option at all, both in terms of regulatory responses and any eventual usage by public sector organizations. If Canada is to compete as a blockchain innovator in the public sector, a Parliamentary inquiry would help spur political awareness and wider societal learning, both future enablers of promise rather than peril.

Jeffrey Roy is professor in the School of Public Administration at Dalhousie University (roy@dal.ca).

About this author

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Jeffrey Roy

Jeffrey Roy is Professor in the School of Public Administration at Dalhousie University’s Faculty of Management. He is a widely published observer and critic of the impacts of digital technologies on government and democracy. He has worked with the United Nations, the OECD, multinational corporations, and all levels of government in Canada. He has produced more than eighty peer-reviewed articles and chapters and his most recent book was published in 2013 by Springer: From Machinery to Mobility: Government and Democracy in a Participative Age. Among other bodies, his research has been funded by the IBM Center for the Business of Government and the Social Sciences and Humanities Research Council of Canada. He may be reached at: roy@dal.ca

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