Leveraging Blockchain in the Public Sector to Address Societal Needs
This is the first issue of Overtheblock’s Public Sector Series. Starting from a review of the most pressing societal needs with respect to public services, this posts analyzes the main benefits and challenges that may stem from the adoption of blockchain by Public Administrations.
Public Sector Innovation
The process of digital transformation in Public Administrations (PA) occurred over the last two decades has involved several factors, having to do with economic, social, legal, and political aspects. Moreover, it has produced changes in management practices, administrative procedures, and required the acquisition of new skills by civil servants and end-users. Modern and transformed PAs need to adopt a citizen-centric approach, enhancing the involvement and participation of citizens in public life [1].
According to the OECD[2]:
“Innovation in government is about finding new ways to impact the lives of citizens, and new approaches to activating them as partners to shape the future together.”
Following this vision, McKinsey [3] identifies as key success factors for government transformation the following aspects: committed leadership; compelling communication; clear purpose and priorities; capability for change; cadence and coordination in delivery. They all have a strong people component, putting citizens at the heart of public-sector transformations. At the same time, Public Sector transformation has been deeply influenced by technological advancements. The adoption of disruptive technologies has enabled the improvement of Public Sector performance, facilitating the design and the delivery of citizen-centric services. Digitalization has become an important enabling factor for governments transformation [4] in terms of services, processes, decisions and data sharing.
Societal needs
Considering the central role of citizens’ expectations in this vision of the Public Sector Innovation expressed above, one may wonder which societal needs should be at the top of the priority list. According to a study published by OECD, one of the most prominent needs is trust. OECD [4] points out the need to enhance and rebuild the trust in the Public Sector for better public governance. Trust involves the relationships between citizens, governments, businesses, and political leaders. Specifically, improving service delivery can boost not only satisfaction with Public Sector organizations but also confidence in local and national governments. In more detail, recent studies revealed that citizens’ satisfaction with public services can be associated to qualities such as transparency, speed of service delivery, ease of interaction with public authorities, and clarity of regulations and policies [6]. Furthermore, the H2020 EU funded project SONNETS [7] suggested that not only end-users needs — among which: transparency, participation, ease to access to public sector information (open data), and the possibility to use streamlined and reliable administrative procedures — but also the civil servants’ point of view needs to be taken in consideration. These latter ask for increased resource optimization, and the improvement of bureaucratic and inter-agencies processes, in addition to easier access to Public Sector information and to the strengthening of employees’ competences. Like for end-users, also in this case, the need to adopt participative processes emerged. Figure 1 depicts the main needs that the different stakeholders ask to be satisfied by Public Sector Innovation.
The role of emerging technologies
Both mature and emerging technologies can significantly influence Public Sector performances. In this regard, the conceptual hype curve proposed by Gartner [8] shows the maturity of technologies playing a fundamental role in the digitalization of Public Sector (Figure 2).
In general, Distributed Ledger Technologies (DLTs) are recognized among the main technological trends that may influence the Public Sector [9], [10]. In this background, DLTs are assuming increasing importance as they are expected to potentially support Public Administrations by reducing administrative barriers and by fostering digital interaction with citizens and businesses.
In order to fully understand the potential of DLTs, and blockchain in particular, when applied to the Public Sector, this post focuses on the benefits and barriers for the adoption of this technology. Examples of applications in Public Administrations and significant case studies will be proposed in a forthcoming post.
Benefits for Public Administrations
Blockchain has offered a set of incremental rather than radical innovations in the Public Sector [11], [12]. According to JRC, despite the difficulty to demonstrate the real transformative or disruptive innovation of blockchain for governments, it is clear that, in some cases, this technology has the potential to bring a valuable benefit for citizens: they become able to use public services in a more secure, fast and simplified way. In addition, even if there is an increasing interest for this technology by the Public Sector, the number of ongoing projects is limited and their level of maturity is still low (mostly are in the test /piloting phase). For this reason, it is difficult to understand and forecast the real impacts, as the technology is in its infancy and must overcome several issues related to scalability, performance and confidentiality [10], [11], [12].
Among the general benefits of using blockchain in any industrial sector, the most prominent are related to greater transparency, enhanced security, and easier traceability [13], [14].
What does it mean for Public Administrations?
This topic has been addressed in several studies [10], [11], [12] whose key results are hereafter recapped making reference to the previously analyzed Public Sector needs.
In general, blockchain technology is promising from a citizen-centric perspective. On the one hand, some services like personal certificates and land titles issuance can bring economic benefits using smart contract automation or notarization; on the other side, services like identity or voting can increase the ownership and control of citizens over democratic processes, drawing on the decentralized nature of blockchain. The use of blockchain can also increase the trust of citizens and companies in governmental processes and record keeping driven by the use of algorithms, which are not under the unique control of governments. Thus, the credibility of governments and citizens’ participation in public life are enhanced: citizens can access reliable governmental information without the control of third parties. In this context, the theme of Public Sector data is certainly of foremost importance [15]. Personal records may be managed with blockchain. For public agencies, the management of trusted information can be simplified, they can access and use critical public-sector data while maintaining the security of this information. Another aspect is related to the improvement of both internal and inter-agencies processes. Internal processes are improved: governments become able to process routine work automatically, and to provide services more efficiently lowering the costs. Inter-agencies processes can also benefit from blockchain, by removing the need for intermediaries and third parties. This translates into reduced economic costs, time and complexity, easiness of interaction with the PAs and more clear procedures. The process simplification described so far (both internal and inter-agencies) implies a faster service delivery and a reduction of bureaucracy. Last but not the least, significant benefits are related to the increased transparency, auditability and accountability and the consequent reduction of discretionary power and corruption [16]. As previously stated, in fact, transparency is one of the main features of blockchain, recognized in many applications in any sector. In the case of Public Sector, the use of blockchain allows the citizenry to seek and verify data that has a strong impact on the fight against corruption and frauds.
Challenges for Public Administrations
Despite these potential benefits and already existing examples of blockchain implementation in the Public Sector, some challenges can hinder its successful development. They could be associated with the following aspects*:
- Immutability: since it is not possible to remove data that has been entered into the blockchain, in the cases where deleting data is a regular occurrence, using blockchain technology may not be the best option.
- Data storage: blockchain is designed for small packets of data used to execute and guide smart contracts and is not ideal for data storage. Organizations should consider using blockchain in combination with other data storage solutions in the cases in which there is a big amount of data to be managed.
- Empowerment of public officers / civil servants and citizens: it could be difficult to explain the potentialities of blockchain to public officers / civil servants and they can obstacle its adoption. It is fundamental to emphasize how it can improve efficiency and strengthen effectiveness. In general, it is important that citizens / Public Sector officers understand the potentialities of blockchain. Without a consensus towards this technology by end-users, its implementation could be a failure.
- Costs: short and long-term costs associated to the investment for blockchain adoption are not clear and could represent an obstacle for its adoption by Public Administrations. PAs should adequately consider them in comparison with potential costs reductions that they could obtain through improved process efficiency leveraged by blockchain.
- Normative: there is a need to adapt the normative framework to the new technology [18]. The legislation is fragmented and different from country to country. Moreover, increased collaboration between private and public sector can help to develop standards and regulations and to support blockchain entrepreneurs, e.g. through tax incentives, grants and other mechanisms. Thus, the definition of intelligent blockchain strategies at national and local levels can provide governments with a competitive advantage in this transformative age.
- Systemic vision and Public Sector support: The implementation of a blockchain project in the Public Sector could be effective only if integrated into an overall digital transformation plan defined by each PA. It should not be considered only as a “silos” experiment. Moreover, the support from Public Sector managers and policymakers is indispensable: blockchain technology can highly improve the outcomes for citizens when leveraged well by a government or the public sector.
- Integration with other emerging technologies: In many cases, blockchain alone is not the solution and it usually depends on a non-DLT layer which runs on top of a legacy type of centralized database.
*LINKS elaboration from [15,17,18,19]
To sum up, Table 1 proposes an analysis of the blockchain benefits and challenges discussed in relation to the Public Sector needs. It shows a good alignment between the identified needs and the main benefits stemming from the use of blockchain. This helps to explain how through the adoption of blockchain the Public Sector could be able to satisfy the most relevant societal needs. In this context, however, Public Administrations should also take in consideration which challenges could hinder the achievement of such benefits, and to understand if a blockchain-based solution applied to their context could be an optimal option. In particular, challenges related to data storage, citizens’ empowerment, integration of blockchain with other technologies and costs seem to be the most critical issues.
Main applications in the Public Sector
This introductory description of the potentialities of blockchain in the Public Sector allows to better understand why blockchain could be successfully applied in this context.
Which are the main and most promising applications of blockchain in the Public Sector?
As previously anticipated the number and the level of maturity of ongoing projects is still limited (mostly are in the test /piloting phase) [10], [20]. Deloitte [20] proposes a synthesis of existing experimentations, identifies the key areas of implementation and the distribution of projects worldwide. According to this vision, the three most interesting areas of blockchain application for governments are: identity management, land registration, and voting. The main values of blockchain leveraged by such applications regard transparency, citizens’ participation in public life, processes simplification through the reduction of intermediaries, reduction of time and costs for the services delivery. In addition, other potential application fields [17] in which blockchain can bring value to the Public Sector are: financial services and banking; benefits, entitlements, and aid management; supply chain management, asset tracking, and inventorying. This latter has important implications on frauds mitigation.
Starting from this introductory background, more details about applications, relevant projects and case studies of blockchain in the Public Sector will be provided in the next post of the Public Sector Series
REFERENCES
[1] OECD, Digital Government — 12 principles
[2] OECD, (2017), “Embracing Innovation in Government — Global Trends”
[3] McKinsey, (2019), “Putting people at the heart of public-sector transformations”
[4] McKinsey, (2016), “Transforming government through digitization”
[5] OECD Public Governance Reviews, (2017), “Trust and Public Policy — How better governance can help rebuild public trust”
[6] McKinsey, (2015), “Implementing a citizen-centric approach to delivering government services”
[7] SONNETS project
[8] Gartner, (2019), “Top Trends From Gartner Hype Cycle for Digital Government Technology, 2019”
[9] JRC Technical report (2020), “A multi-dimensional framework to evaluate the innovation potential of digital public services”
[10] BDO Global Survey, “Blockchain in the Public Sector”
[11] JRC, (2019), “Blockchain now and tomorrow”
[12] JRC, (2019), “Blockchain for digital government”
[13] IBM, (2018), “Top five blockchain benefits transforming your industry”
[14] Forbes, (2019), “The benefits of applying blockchain technology in any industry”
[15] McKinsey, (2017), “Using blockchain to improve data management in the public sector”
[16] World Economic Forum, (2020), “Exploring Blockchain Technology for Government Transparency”
[17] OECD, (2018), “Blockchains Unchained”
[18] European Commission, Legal and regulatory framework for blockchain
[19] Ernst Young, (2020), “How can blockchain help create better public services?”
[20] Deloitte, “Will blockchain transform the public sector?”,
Please cite as:
Pautasso E., Ferro E., (2020) Addressing Societal Needs: Benefits and Challenges in the Adoption of Blockchain by the Public Sector, Overtheblock Innovation Observatory, retrievable at https://medium.com/overtheblock/addressing-societal-needs-benefits-and-challenges-in-the-adoption-of-blockchain-by-the-public-4cd15933070f
OverTheBlock is a LINKS Foundation’s initiative carried out by a team of innovation researchers under the directorship of Enrico Ferro. The aim is to promote a broader awareness of the opportunities offered by the advent of exponential technologies in reshaping the way we conduct business and govern society.
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