April 29, 2021
Rising distrust between governments and their citizens, fueled by increasing awareness of corruption and pervasive disinformation, have weakened democracies around the world. However, neither new technologies nor restoring antiquated institutions can address modern democratic challenges alone. These fields should unite to address critical challenges to democratic governance using modern tools, like blockchain, where it is appropriate. Deployed responsibly, blockchain technology can embed transparency into government processes and promote greater inclusion in public decision-making. Built-in aspects of blockchain like transparency and data immutability have great potential to improve the provision of services for constituents.
In our previous blog post, we identified key characteristics of blockchain technology with some recommendations for civic technologists interested in exploring the potential of public sector innovation with blockchain. Trusted information is the heart of democracy, blockchain could strengthen numerous existing democratic institutions if deployed responsibly. The following sections outline key areas where civic innovation and government services could be strengthened with the right use of blockchain.
This blog is not an exhaustive list of specific use cases. Our team catalogues blockchain pilots that advance the UN Sustainable Development Goals in the Blockchain Impact Ledger. Blockchain projects that power innovations in public procurement, digital identity, land titling registries and certifying documents all promote the sixteenth SDG: peace, justice and strong institutions. Instead, this post will focus on the impact these and other blockchain pilots could have on strengthening the transparency and efficiency of democratic institutions.
Identity is a foundational layer in government systems, often a prerequisite enabling an individual to access civil and political rights, economic opportunities, and government benefits. Without accurate identification records, citizens are increasingly excluded from critical services, marginalized in political or economic activity, and subjected to trafficking, displacement, and social exclusion.
- Core attributes of blockchain, such as data accessibility, data integrity, and confidentiality address some of the challenges surrounding identity. Digital records are less subject to loss, physical seizure or destruction than their paper equivalents and could preserve citizen identity records despite migration, natural disasters, theft, seizure, and imprisonment.
- Certain digital identity models like self-sovereign identity allow citizens to selectively and temporarily share information about themselves relevant to a specific situation. The ability to selectively reveal and revoke access to identity data safeguards privacy for both in-person and digital interactions, and could help governments and organizations comply with emerging regulations like GDPR.
- The World Food Programme (WFP) launched a blockchain-based identity solution for over 100,000 Syrian refugees to more efficiently disburse humanitarian aid. It also facilitates payments for UN Women’s Cash-for-Work program and expedites WFP food shipments between the Djibouti-Ethiopia corridor.
Digital Land Registry
Land is a principal source of wealth, stability, and economic mobility – as long as owners have legal authority over their property. Ambiguity of ownership, risk of corruption, and cumbersome transaction processes increase fraud, erode trust in institutions, and stifle economic mobility.
- Digital registries secured with blockchain technology can be more accessible and less prone to error or manipulation than paper-based systems.
- Blockchain provides an immutable history of transactions; therefore, claims to land cannot be destroyed or altered, and are less likely to be disputed or manipulated. The history of transactions can also be viewed by anyone, anytime to ensure credibility.
- The Republic of Georgia has a successful deployment of a blockchain-based land registry; this effort was built on the strong foundation of an existing digital database of largely accurate records and a public education campaign about blockchain’s benefits.
Transparent Public Contract Bids
Public procurement is highly vulnerable to waste, fraud, and corruption. The inner workings of public payments are largely invisible to citizens and public officials can abuse public funds for personal gain with little oversight. The public visibility of all blockchain-based transactions can make it easier for watchdogs to keep an eye on the public purse – and harder for corrupt government employees to fiddle with the numbers.
- Improving the transparency of public contract bids could enhance public trust in government institutions by recording sales or purchases in a format that can not be manipulated on a publicly-accessible blockchain.
- The World Economic Forum partnered with the Colombian Inspector General’s Office and the Inter-American Development Bank in 2020 to create a proof of concept that conducts the vendor bidding and evaluation process on the Ethereum blockchain, allowing watchdogs to monitor the process and flag any suspicious activity.
Closing Taxation Loopholes
Effective tax collection is the lifeblood of the public sector, funding government and nearly all public services for their constituents. But the majority of countries struggle to enforce tax laws and collect the taxes necessary to fund important state functions.
- Blockchain technology can automate tax calculation and collection as goods are bought or sold, making tax collection more efficient and reducing the number of opportunities for corrupt actors to steal public funds.
- The Thai Ministry of Finance’s Revenue Department launched a value-added tax (VAT) refund system in 2020, using blockchain technology to condense the refund period from about a month to 1-3 days. The new system not only encourages greater taxable spending by foreigners, but reduces management and overhead costs while saving up to 10 million sheets of paper a year.
Certification of Credentials and Public Documents
Certifications or academic credentials help citizens establish qualifications for jobs, but forgeries jeopardize employment opportunities and make credential verification a time-consuming and expensive process for employers and government.
- Blockchain could provide a trustworthy credential for employers and workers that are difficult to forge and easy to verify. This approach can be useful for demonstrating the authenticity of government documents as well.
- In South Korea and New York City, the government is issuing COVID “Vaccine Passports” to individuals who have been vaccinated. The nature of the blockchain-backed ledger makes the records far less susceptible to forgery or abuse than simple paper cards.
Innovations in Digital Democracy
Current voting mechanisms assume that citizens gather infrequently to decide on their representatives who handle ongoing decision making. However, with the internet, sharing citizen input more frequently becomes much less of a burden – if the voter input can be trusted. Engaged citizen involvement in democratic governance requires not only easy communication but a high degree of trust in the information aggregated from citizens before it can drive legislation and impact public administration.
- Blockchain technology could empower citizens to vote more often and on more granular topics, such as specific pieces of legislation or budget plan. In a “liquid democracy,” citizens could securely delegate their vote to subject matter experts, offering a more flexible form of representation than traditional elections. Systems like Democracy Earth are being used to pilot new forms of aggregating citizen choice and deliberative decision making.
Empowering Public Watchdogs
Government regulatory agencies and watchdog organizations are recognizing a growing potential for improved law enforcement and oversight with blockchain technology. The transparent nature of public blockchains permits payment tracing of suspicious transactions, and specialists can de-anonymize participants by correlating payments and cross-referencing them with financial services requiring “know your consumer” (KYC) compliance.
- Numerous international government organizations, such as Europol and the UN Office on Drugs and Crime, and federal agencies such as the DEA, ICE, SEC, IRS, and the FBI are using blockchain analysis services like Chainanalysis and CipherTrace to track illicit finances and bring criminal organizations to justice.
Combatting Disinformation with Verifiable Media
Disinformation corrodes public trust in the media. Institutions designed to inform citizens about issues directly affecting their lives can foment public discord and undermine a shared perspective of reality and truth that prevents healthy democratic problem solving.
- The cryptographic security of blockchain technology can improve how we detect fake media and create ecosystems to support fact based information. Validating media authenticity is particularly important in prosecuting human rights abuses.
- Blockchain can also protect content against censorship. Chinese activists published an interview with Dr. Ai Fen, director at the Wuhan Central Hospital, about the emerging COVID-19 virus on the Ethereum blockchain to prevent government censors from burying the information in the critical early days of the pandemic.
Promoting Human Rights and Environmental Sustainability
Increasingly complex global supply chains make it harder for organizations to ensure that their suppliers are adhering to ethical and sustainable practices. Consumers and companies may unknowingly participate in modern slavery or ecological degredation because current auditing systems are rife with inconsistencies.
- Blockchain technology can help customers, companies, and governments get more accurate information on source materials and manufacturing practices in complex supply chains. Electronic markers like RFID tags and QR codes connecting to unique blockchain identifiers create a comprehensive picture of the value-chain for brands and consumers.
- Customers of Moyee Coffee can scan a code to identify the specific farm where their coffee was harvested, and even tip those farmers directly. The World Wildlife Fund uses blockchain for its Bait to Plate program, which tracks the provenance of tuna to verify that suppliers are fishing in designated areas that protect vulnerable ecosystems.
The transparency and immutability of blockchain-based solutions will not on their own solve problems of corruption, forgery, or fake news. However, these technical attributes can help empower creative governments and civic leaders with more powerful data-driven tools to help stamp out these issues that degrade democracy, while creating new forms of trustworthy citizen engagement in civic institutions and their governments. In the next post in this series, we will dive into one of the most crucial aspects of healthy democracies: supporting legitimate elections.