Bits of “Blockchain” is pointless in Govtech

Recently we’re seeing a rising hype, related to the integrations of the Blockchain technology by governments as a fundamental layer for securing the databases and entering the new era of pioneering solutions. Where technology should serve as a revolutionary saviour against corruption, bureaucracy and fraud.

I think there is a major lack of understanding by both counterparts; the technology providers — about the real burden of internal and regulatory processes within the state and statesman’s understanding of the technology itself. Combined they always get referred to similar initiatives launched back in 2014–15–16 in decent parts of the world, but in reality we’ve never seen the scaling or further adoption of such project, or even valid case studies based on those experiments.

What I lack lately, is the grand vision in blockchain solutions, that would align with the true revolutionary nature of distributed technology and serve as a catalyst for decentralisation and primarily change: The Governance Model. Recently I read an article about the absurdity of using blockchain for EDMS (electronic document management system), where author made a good comparison: “Image in early days of internet, some postal service started a project of e-mail technology integration within it’s existing framework. Where letters (content) would still be delivered paper based by postman, but notifications and hash could be exchanged by sender and receiver over SMTP.”

Actually this is the exact case that state entities are pushing in the name of a “blockchain”. Apart from allegories, I will try to break down the architecture and the procedural bureaucracy associated with upper mentioned cases and analyse if any particular declared bits of “blockchainisation” can cover the loopholes in the system.

Hashing through blockchain
Primary function that is currently used or implemented by governments is the creation of digital fingerprints of state records and their storage in third party provided private applications (like in Ukraine’s case) or directly in a bitcoin ecosystem through Anchoring (like in Georgian case). To understand the full picture we should follow the entire process flow and identify the counterparts in the decision making process of property registry as an example.

There are huge differences between the Georgian and Ukrainian registry systems and process is much complex, but I tried to show the median flow to analyse, what problems exist at what stage:

  1. Seller’s identification and ownership rights are determined by either state registrar or notary in physical manner — In both countries there are no electronic signatures yet integrated.
  2. Both registering peers are assigned master keys to write and modify directly in the DB without any control.
  3. DBs are not synchronised and supporting documents are provided paper based (Ukraine) — P.S. notaries are taught to identify documents by paper quality.
  4. There are tons of still non digital ownership rights (Ukraine) and tons of mistakes within the records.
  5. DBs does have log recordings and content is public in both countries, but no API access exists to monitor activity.
  6. In Ukraine document is valid only if paper based, that involves again third party notary for validation and in Georgia on contrary web based image is considered valid without signatures.

If we look at the pattern of system’s miss use, it is obvious that fraud is committed on the entry level driven by human factors, when ID’s and supporting documents get falsified, notaries bribed and in most bizarre case (happened only in Ukraine) data lost from DB.

P.S. In Georgia there has being 0 incidents of any data change or loss for 10 years of central registry’s operation without digital signatures.

I am still a conservative believer of blockchain’s capabilities — that it is just a mean of achieving agreement on the state of the ledger, between the counterparts, who don’t trust each other. In registry system we do have counterparts on the level of service providers (notaries), but proposed step of blockchainisation is not to solve upper mentioned problems or delegate rights and offer a horizontal self-sustainable distributed ecosystem, but just an attempt to return trust to the same inefficient, centralised, corrupt entity by putting a blockchain badge.

Above is the architecture of newly “blockchainised” system, that was proposed and adopted by both Georgian and Ukrainian governments. It is obvious that at the entry level and most fraudulent part is untouched, and corruption bastion still remains under the bureaucratic state. But putting bits of “Blockchain” creates even more points for fraud and inefficiencies:

  1. Government has a total control of a “hashing node”- plus should sustain it in addition. (spending on maintenance + support)
  2. Within the private blockchain - hashes are created through a cryptographic keys that has no entity to issue, regulate, assign, control.
  3. Hashes don’t contain content and no document can be retrieved from it, if deleted from the central DB.
  4. Hash has no intrinsic evidence value if fraud is detected.
  5. Some NGO is assigned a role of an archive of “trhash”(poor foreign taxpayers)
  6. Third party (private business) is exclusively given permission to additionally place “hashes” in Bitcoin chain using a cryptographic key generated by public “bitcoin protocol”.
  7. Any transaction to be written in blocks should be accompanied by commission payed in Bitcoin. (who’s the sponsor? What is Bitcoin?)

So if in first case we had a one sided weak point and centralised control on the entry level, now we are given a triple gateway system where every key holder should act fair on altruistic basis.

Basically that’s what happens with every change and reform if implemented in bits and pieces — when bureaucrats are not ready to give up the commanding heights and technology companies trying to suit to make a bold headline in the press. We ended up with an uglier monster, that will become harder over time, to take down.

Regulation
From a regulatory perspective, we’ll find 1,001 reasons why using blockchain is contradicting with current legislation and general issues such as: Finality problem and ledger differences in particular timeframes can have flaws in terms of truth determination. But I am more optimistic in this direction and consider that regulations should adjust to technologies and not vice versa.

The biggest justification argument we might hear is that, it’s a first phase of the “blockchainisation” and … smart contracts with magic powder will follow — No sign of data distribution, decentralisation, tokenisation of assets, other peers (apart from NGOs) in the network, optimisation of real procedural hell and control given back to civilians. Blockchain has many meanings these days, but lacks the initial spirit of change!

P.S. As a bonus attaching a detailed process flow for a civilian to register a land plot in Ukraine. 60 procedures +2 with a blockchain

Lasha Antadze
Worked on Ukrainian e-Gov reforms 2015–2016 
Redesigned 165 public services
Lead and launched the first Public service hall in Kiev (Gotovo)
Initiated the first distributed auction pilot with State Land Agency
Worked on Regulatory framework for blockchain as a protocol adoption