08.02.2023

Briefly about blockchain technology and its role in the state

Blockchain is a cryptographically secured distributed peer-to-peer (decentralised) public network technology that can store transaction (deal) information permanently and with no ability to change it. At the heart of blockchain technology is the idea of linking all data in transactions of a particular system into a single chain that exists throughout the life cycle of the system. This chain of cryptographic function (hash function) linked blocks represents a database of all transactions made in the system. One of the features of such a system is that transactions are performed between participants without intermediaries, i.e. decentralised. This feature has become interesting for the application of blockchain in systems in which certain users sometimes lose access to servers and only have access to their immediate neighbours.

So, a blockchain system functions without a central server in terms of the architecture itself, with decentralised algorithms taking on the role of manager. Blockchain provides a high level of security based on fully decentralised systems, minimising the risks of data tampering and loss.

Based on the advantages of the technology, developed countries have started to actively transfer the most important digital services on its basis. In the U.S., for example, several states have established special initiatives to “blockchain” governance. For example, the Institute for Blockchain Studies identifies the most potential areas where blockchain technology can help improve governance:
1) Property – encoding objects and confirming the transfer of property;
2) Finance – transfer of currency, shares, private equity, bonds, derivatives;
3) Money circulation process;
4) Public records – administration of land rights, vehicle records, registers, business licences, passports, voter IDs, death certificates, proof of insurance;
5) Private records – contracts and performance of contracts, digital signatures, wills;
6) Physical assets – managing access to real estate, leases.

For example, the Illinois state technology office responsible for the blockchain-transformed government project highlights the following specific services that could be migrated to blockchain first:
– Insurance claims filing and management;
– assessment and management of professional licences;
– tax settlements and payments;
– administration of tickets, fines, including payments and processing;
– management, updating and transfer of criminal records;
– management of birth and death certificates;
– transaction management in the energy sector;
– recording and reporting of financial transactions, financial statements;
– management of origin of patents, trademarks, reservations, domain names;
– electoral vote management.

Given the specifics of our country, where human error, corruption and bureaucracy are the biggest governance problems – blockchain technology is almost a panacea to solve these problems.

Therefore, in order to force the transition of all possible state services to this technology in a few steps, it is necessary:
– Develop a preliminary strategy for using blockchain technology for governance;
– create a group of stakeholders at the government level, both from the business and technology sectors, to improve the previous strategy;
– identify the most promising blockchain applications to quickly create success stories;
– join collaborations with other organisations to share opportunities and costs.