How 4 Governments are Making Blockchain an Everyday Reality (By Not Looking Like Blockchain)
PARK Sangwon, CEO | SUH Jisun, Exec Dir of Design | KIM Beomjin, Head of Korea
Crashing currencies and fraudulent founders dominated headlines last year, making people weary of blockchain technology. But a crypto winter is both destructive and creative, said Vitalik Buterin, the Ethereum founder, on the Freakonomics podcast. It’s a good time to remember that Web3 is so much more than crypto, and to look at the projects that will outlast meme tokens and cults of personality.
We’ve worked on such projects with businesses to solve day-to-day problems like protecting payslip data. But the blockchain solutions we’ve seen with the broadest potential impact have come from governments. Some blockchain enthusiasts, particularly Web3 proponents, don’t like this — after all, the technology was created to wrest control from authorities. Blockchain apps should be governed by their participants, and should prevent a single entity from making the smallest decisions for the group.
But the reality is that to get people and businesses to try Web3 services in the first place, governments have gotten involved because their use cases benefit large groups of people and their funds support experiments. Government-led projects have gained momentum and completed successful pilots by keeping blockchain running in the background. While these projects tout the benefits of security and decentralization, they emphasize utility, practicality, and ease of use when getting people and businesses to adopt the technology in their day-to-day lives.
We’ll look at four examples of blockchain projects that governments have led or initiated, and that have progressed beyond pilot tests. Each project demonstrates ways to integrate blockchain technology with existing systems and gain wide user adoption.
The four blockchain projects we analyzed share some common threads that proved critical to success:
- Going back to the basics — These projects harness blockchain’s use as a secure, tamper-proof, decentralized storage system for data. That’s the feature and benefit they promote to their end-users. While they also use smart contracts and NFTs, those technologies are relegated to the technical background, their usage treated as a means to an end rather than the end in itself.
- Not reinventing the wheel — They feature familiar UI elements and adopt or integrate with existing business standards and resources. This means using Web2 browsers and apps, as well as features like QR codes. While this strategy falls short of Web3 ideals of total decentralization, it also lowers barriers to adoption and scalability.
- Using Layer-2 scaling options — Blockchains face scalability issues like relatively low network throughput, resulting in slower operations and high processing fees (a problem that Ethereum is trying to resolve). Blockchain projects being implemented today circumvent this limit by using Layer-2 scaling solutions, like side-chains. This tactic prevents complete decentralization, but it also makes blockchain solutions usable enough to solve everyday problems.
We’ll see these practices in action in the following examples.
Citizens adopt decentralized identity in South Korea with privacy controls
The South Korean government will roll out a national, blockchain-based decentralized identification (DID) system to the public by 2024 and have 45 million citizens adopt it within two years. The system will embed each resident’s registration card — similar to Americans’ Social Security number — into their mobile device. Some “distinguished citizens” like war veterans and police wounded in duty now have this DID.
Citizens will be able to use this DID for almost every transaction. A DID will lower the costs of providing access to e-government services by reducing administrative work, such as finding and authenticating documents and identities. It will simplify access to state benefits, financial services, and rights like voting. It will also open up new business models and grow emerging ones — think unmanned stores, automated vending machines, and hotels with digital concierges.
All these opportunities will allow South Korea to “reap at least 60 trillion won ($42 billion), or 3% of GDP, in economic value within a decade,” said Suh Bo Ram, Director-General of the country’s digital-government bureau, in a Bloomberg article.
The government’s optimism makes sense: South Koreans are already using other forms of digital IDs secured by blockchain technology. The National Police Agency has begun issuing mobile driver’s licenses (mDLs), which have a QR code that can be scanned to verify driving and age qualifications. Public servants in the Ministry of the Interior and Safety use DID built on a permissioned blockchain platform. In Busan, South Korea’s second-largest city and a blockchain regulation-free zone, citizens use the B Pass app, a mobile wallet integrated with DID built on the Metadium private blockchain. The app integrates with services like public transport, library usage, incident reporting, free healthcare for pregnant women, and tours.
These projects use private or permissioned blockchains to secure citizens’ data and transaction records, preventing forgery and identity theft. The mDL verifies credentials on the EOSIO blockchain, which can process 4,000 transactions per second (tps) — much more than Ethereum’s current rate of roughly 20tps. EOSIO powers the OmniOne DID platform, which combines blockchain with Fast Identity Online (FIDO) authentication — meaning methods like fingerprint and face scanning.
Being a decentralized solution, the platform gives citizens control over how entities access their data. Say you want to buy alcohol from a convenience store. You open your mDL app, which shows an image of your ID. You select the info you want to share (your age) and shake your smartphone to unblock that detail while obscuring sensitive personal data.
When you fill out a form on a government website, the site requests to open the mDL app. The app, in turn, tells you which data the form requires and you can allow it to share that information using a face scan, a password, or both. Behind the scenes, a smart contract is at work — the contract requests confirmation from the blockchain, which uses cryptography to share only the necessary information. Even the government won’t be able to control or see how and where citizens use their DIDs.
Takeaway: Use blockchain to enhance integration and privacy in an existing ecosystem of services
Even as far back as 2009, Koreans have been using their mobile phones to access daily services, from buying food to riding the subway. Integrating their national ID into their mobile phones widens the variety of services people can access without requiring a significant change in user behavior.
In such a tech-savvy nation, you’d wonder why this hasn’t been done earlier.
Surveillance concerns (along with cost constraints) have thwarted previous electronic registration projects. But existing DIDs in the country should help assure citizens that with blockchain, they can control access to their data and protect their privacy, without giving up the convenience that integrations provide.
“Without blockchain technology there could be concerns about a surveillance state,” says Beom Soo Park, Deputy Director of Digital Safety & Security Policy Division of the Ministry of the Interior and Safety.
Traders sending goods to Egypt get faster customs clearance
Cross-border trade typically involves submitting paper documents to multiple government agencies. Shipping a single container can generate 200 communications artefacts. All this administrative work related to document processing can add up to 15% to 20% of the total cost of transporting goods.
In 2005, the United Nations Centre for Trade Facilitation and Electronic Business recommended the use of single-window environments for trade — digital systems that simplify trade processes and let a trader submit documents to a single entity rather than to multiple parties. Egypt launched its National Single Window for Foreign Trade Facilitation (NAFEZA) system in 2021 and incorporated into it a blockchain document transfer platform by CargoX. The platform processes advanced cargo information filings, so traders can comply with importation requirements even before they load their goods into ships.
More than 95,000 companies and entities globally use the document transfer platform, which processed 4.5 million sea-cargo import transactions in its first year of operation with zero document loss. The entire NAFEZA system reduced the time it took to release cargo from 16 to 29 days to 3 to 9 days. In August 2022, Egypt extended their agreement to use the blockchain platform by five more years, and expanded its usage to include goods traveling by air and land.
While Egypt’s trade agency could have used a traditional electronic system, it chose to use blockchain because the technology can trace and verify a file’s origins, as well as create a reliable audit log of all changes made to a document. The decentralization of data also prevents having a single point of failure for hackers to exploit. To scale the platform and circumvent the transaction limits and high gas fees of Ethereum, CargoX uses the Polygon sidechain.
Traders don’t need to be tech-savvy as they use a regular Web2 browser to create an account and upload documents to the document transfer platform. Much of the interface is like email, with buttons for attaching and sending files. The log-in process integrates cryptographic features and lets users verify their identity with a key, mnemonic passphrase, or a wallet like MetaMask or Ledger.
The trader gets assigned a blockchain key on signup, which will be used for signing docs and authorizing their transfer. To verify their identity, they pay a verification fee using their online business bank account. A third-party company also validates the trader against a global business database. Meanwhile, the partner importer in Egypt registers through NAFEZA’s system and provides details on incoming shipments. The system verifies that the trader is registered, assesses non-compliance risk, and sends an ACID (Advanced Cargo Identification) number to both the trader and importer through email and the blockchain platform.
Next, the trader uploads documents, such as a bill of lading, certificate of origin, and packing list, to a digital envelope with their ACID number. The files are encrypted and stored on a private InterPlanetary File System (IPFS) network, then tokenized with NFTs and transferred on the blockchain. Only the hash of a document, rather than its contents, are stored on the public blockchain, ensuring data privacy. User data like KYC information is also stored off-chain.
The trader sends the envelope to NAFEZA’s customs management system — much like they would send an email — and authorizes the transaction using their blockchain key. Once the importer co-signs the documents, the customs agency begins clearance procedures.
Takeaway: Invest in educating end-users even when you’re using a familiar UI
Although uploading files to the document transfer platform was straightforward and used a familiar UI, the platform was part of an overhaul of a large, complex customs clearance system. Its users needed to understand how the platform fit into the single window. Egyptian authorities trained thousands of customs officials, government employees, and traders in the usage of NAFEZA from 2019 to 2022. This included running almost hour-long webinars to demonstrate the use of the blockchain document transfer platform and entertain questions from industry players.
Training events let you demonstrate the benefits of blockchain technology for your end-users, learn more about their objections and challenges, share early wins, and get their buy-in. This is crucial when you’re embedding a platform into a legacy process and encountering resistance from people who have been doing things a certain way for decades. These sessions are also opportunities to show how your solution can improve compliance with existing industry standards and processes, positioning it as a useful rather than disruptive tool.
Students get globally verifiable academic certificates in Singapore
OpenCerts is an Ethereum-based, open-source platform developed by the Government Technology Agency of Singapore along with partners from the education sector. It speeds up the process of authenticating credentials provided by prospective students and job applicants. It also eliminates the problem of lost or tampered certificates, and reduces the hassle and costs associated with getting a certificate notarized.
When educational institutions issue credentials, OpenCerts assigns a hash to each certificate. The hash is stored on the blockchain alongside condensed information from the certificate, while personal data and the complete academic records are not published on the blockchain. When applying for an academic program or a job, users can email their OpenCerts file to educational institutions or employers, who upload the file to the OpenCerts site. The system checks if the uploaded file’s contents match those of the blockchain record, and verifies its timestamp and cryptographic signature to determine that it hasn’t been altered.
Singaporean citizens and residents, as well as foreign students in SG, can store certs on Skills Passport, an app used for accessing continuing education courses. Credentials for such courses can also be issued with OpenCerts and stored on the same app, creating a comprehensive profile of the user’s qualifications.
By adopting an open-source model, Singapore hopes to encourage academic institutions in other countries to adopt OpenCerts. Its cross-border aspirations mirror authentication platforms being built on the European Blockchain Services Infrastructure (EBSI). A student applying for a program in a different European country can ask their university to issue a verifiable credential to their target institution using EBSI. EBSI can also be used for a different scenario — refugees from outside the European Union who don’t have copies of their academic certificates can also have their qualifications assessed and receive verifiable credentials.
Singapore is also exploring use cases in other sectors for OpenCerts, as it’s essentially a document verification platform, which widens its potential utility. The platform can potentially authenticate certifications for equipment, enterprise systems, property development, athletes, travel, healthcare, and many other use cases.
Takeaway: Balance low barriers to entry with guardrails to maintain the quality of experience
OpenCerts is easy to adopt, given its easy, drag-and-drop interface. These features also introduce vulnerabilities. The ease of issuing credentials on OpenCerts can lead to the growth of diploma mills. To combat this, the Singapore government recommends that education ministries create a library of institutions that can issue certificates with OpenCerts. This approach prevents abuse of the system and keeps it useful and credible. The tradeoff is that it limits participation in the platform and introduces the role of a single authority, which contradicts blockchain ideals of decentralization.
The Web2-based user workflow also makes it easy for an impersonator to steal a file and use it for their own purposes. Organizations who build apps on top of OpenCerts can prevent this type of fraud by requiring other forms of authentication, such as fingerprint-scanning or DID. APIs and tools can be built to allow certificate holders to share their credentials directly from wallets and apps without downloading the file. Singaporeans can also share certificates directly from Skills Passport.
Patients in Estonia track how their health records are used
Across your lifetime, you’ll likely visit different doctors and labs. Each visit generates a paper or digital record, depending on where you live and which clinic or hospital you go to. If you could compile all those records, you and doctors would get a holistic view of your health, medical problems, and vaccinations through the years. That’s the premise behind Estonia’s e-Health Record system, which integrates data from healthcare providers nationwide to create a unified record for patients and doctors to view through an online portal.
Data protection concerns often hamper data-sharing and interoperability among health record systems. The blockchain doesn’t store the health records themselves, but the log files that track data processing activities on each record. That means it creates a reliable audit system for access logs, which can identify when a file is shared, prevent tampering, and ensure the most recent version of a file is used.
It’s an imperfect solution, as that means unauthorized people can still access your records. In 2020, the Estonian Data Protection Inspectorate discovered that third parties could easily view another person’s prescription info on some e-pharmacy websites by inputting that person’s ID code into a chat box. That same year, a healthcare worker was found to have accessed patient information upon the request of a third party without requiring the party to provide a legal reason for their query. In a Politico article, an Estonian government official pointed out that at least the data leaks were discovered — something that’s difficult to do with a paper-based system.
Takeaway: Start narrow and set realistic goals and expectations
While not completely reassuring, the official’s point reinforces the fact that Estonia is focusing on a narrow use case for now, seeing success with it, and learning about its gaps and limitations. With blockchain as an integrity layer on top of the national e-Health system, records are stored as irreversible (immutable) transactions and are difficult to tamper with. The Estonian government can detect unauthorized access to data almost immediately and penalize violators.
More comprehensive solutions, such as DIDs and smart contracts, can address the problem of privacy. Implementing such solutions will take more time, though, given the strict data protection regulations governing the healthcare industry and the European Union. And blockchain may not even be the best solution for that particular problem — a limitation that’s important to acknowledge to set realistic expectations among end-users.
Blockchain is blending into daily reality by not looking like blockchain
In the near future, you may find yourself using a blockchain-based app without thinking about the blockchain. For now, that strategy seems to work. People and businesses focus on the utility and practicality of Web3 apps and services, weigh the benefits against the costs of adopting them, and check who else in their network is using it — just like they would with any new product.
Some critics say blockchain doesn’t do anything current digital systems can’t. But maybe the point isn’t to do something new, but better — to solve existing problems more effectively. It gives users greater control over their data, protects the integrity of data even as its moves among different apps and computing environments, and creates a reliable audit log of transactions more effectively than current services can.
As exciting as use cases like crypto and bored apes have made blockchain sound, the novelty and brilliance of the technology may have to stay under the surface if we want to use it to solve real-world problems on a large scale.
