Blockchain and local government

You’ve probably heard of Bitcoin – the cryptocurrency or digital money – that’s created and controlled by the network and not a central bank. And while Bitcoin has sometimes been hot news, what lies beneath the currency, blockchain might be about to set the world on fire.


If the easy publishing tools of social media were as revolutionary in their own way as the printing press, then I think it’s fair to say that blockchain is as revolutionary as the advent of double-entry bookkeeping. Instead of each entity keeping their own set of balanced books recording transactions, the electronic transactions themselves become the ledger. And this ledger is open to and shared by all parties. Critically, nothing can be erased, nothing can be overwritten, and the shared history of transactions that have been agreed by consensus ensures correctness. My debit is definitely your credit, because we’ve agreed it and indeed already transacted.

The financial services industry are very excited about this. I spent a day this week in a conference full of people from banks like Barclays and big business tech players like IBM.

The Government has committed £10 million in research to digital currencies and the technology beneath them like blockchain. Globally, it’s estimated that blockchain developers have already received over a half a billion in venture capital. This is currency might be digital, the ledger may be distributed, the technology and protocols still in the ether, but this stuff is for real.

Some in the finance world see this as a secure and more efficient way or managing transactions and ensuring that that they are compliant with regulation which requires them to watch out for money laundering and other naughty financial practices. The public nature of the blockchain means that data can analysed and bad actors identified.

So what’s in it for local government?

There’s already been much thinking about how blockchain applications could go well beyond transactions – to anything that has to be certificated or reconciled.  Wired recently published an article on how blockchain could mean self-service government. The much discussed potential use-cases might be around driver’s licenses and land registries and company licensing.

Local government might well use blockchain as part of ensuring that you do indeed belong on the electoral register or are entitled to a parking permit in your street or a place in the local school for your child. The recorded history of your dealings with the state, as well as consensus between parties that you indeed have a child, when it was born, school transcripts and records of where child credit is paid are all recorded on the blockchain ensuring that you really are in the catchment area for that top flight state school without a separate and duplicate authentication process.

But some of the biggest advantages in local government may in fact be back with financial transactions. Blockchain can be embedded with orders to execute, bits of code that ensure that financial transactions can only be made when certain business conditions have been met – these are called smart contracts. It could be a means of tracking the effectiveness of direct payments.  This could bring pooled budgeting into a new era and finally be a means of ensuring that those invest in preventative spending (say councils) are rewarded when others (say hospitals) reap the benefits. And because the transactions are open, it’s auditable and trackable. It could make payment on achieved outcomes less frictioned and crucially identify areas where the benefits of which types of prevention do and do not flow.  

This has massive policy implications. We’ve never been very good at really tracking where spend makes the most difference across different public agencies, and maybe that’s because our accounting just isn’t suitable. Double-entry 2.0 could make the difference.

Public vs private vs anonymous

The Bitcoin blockchain is public. I could download a copy of the ledger now. But blockchains don’t have to be completely public. Just like your corporate Intranet is just your own private Internet, blockchains can be run behind firewalls.  And even in a public blockchain not all information has to be disclosed. In fact, while Bitcoin is public, identities are private. But more has to be thought through about privacy and security concerns before we start keeping big open ledgers of all exchanges between, for example, children and the state.

Are we there yet?

Bitcoin is established “The Blockchain” that it runs on works great. But the technology isn’t stable – there’s much more to be worked out.  Many of the further applications are yet to have their first real use cases.  So I can’t see the electoral register compiled with blockchain at the core by the next general election, but I think we’ll get there.

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Photo Credit: Thaddeus Stewart via Compfight cc