On the 4th of October, public servants from across the world put questions to global expert John Edge about what blockchain means for government. Edge, the founder of the Whitechapel Think Tank, has first-hand experience using distributed ledger technology for public good, having built a system to manage welfare payments. He shared his experiences with us in an Apolitical webinar.
What is blockchain, and what can it do?
Blockchain is a registry: it’s a service where I can go with a key and get the right to open up a box of data. Today, we have lockboxes where data sits – you can buy secure hardware-encrypted storage to store information. To share that data, we can use blockchain. Think of it as a registry, where I can get the keys to open that lockbox with the data in it.
Blockchain gives us the ability to prove a fact. The heart of these types of technologies is the consensus system, the ability of people to reach consensus on given facts. A distributed ledger doesn’t necessarily have to be a blockchain; there are other methods to create shared ledgers, which multiple different parties can access.
How can it be applied in government?
At the Whitechapel Think Tank, we started with the distribution of welfare. In the UK, we have several million people without access to appropriate financial services but who do have access to government support. One of the challenges of being in the cashless economy is what happens if you don’t have the ability to have an online bank account? We developed a project where a private sector company would create a virtual bank account in a distributed ledger, where the citizen would be able to manage the virtual account underpinned by real pounds sterling.
What this enabled the UK government to test was: if someone can’t access appropriate financial services? Could a new system be built that would allow them access? The friction in the distribution of welfare in the UK is around £4 billion ($5.25 billion USD) a year. That’s a huge cost and a significant challenge. But we met it in this small test environment.
What was the feedback from citizens?
What we heard was, “I like the fact I can get money instantaneously, seven days a week” and “I like the fact I know exactly how much money I have and exactly how much I’ve spent.”
Probably one of the most fascinating aspects was that the users started to ask for functionality, such as the ability to create savings accounts, for electricity, gas, whatever. The flexibility of the technology centred on the users and creating a different form of financial service for them. What we’ve seen through this experiment is that the technology solves certain problems, is more inclusive and reduces cost and risk.
How is the data secured?
I’ve seen far too much judgement by decision-makers that this technology is bad, which demonstrates a lack of understanding of what the technology actually is. When the word blockchain is thrown around, someone in a decision-making position would say, “We can’t use blockchain in welfare distribution, as everybody’s welfare information would then be on the internet for anybody to see.”
That’s completely wrong: it protects the user, and provides more protection than existing payment networks or traditional banking. The real damage is done through this misunderstanding.
It’s about access. For instance, if I wanted to share patient records with six different doctors at six different hospitals, rather than have six different databases that need protecting, I could have one lockbox with my data in it, and I could have a registry system that allows people with keys to access it. You have one data store and multiple keys.
Where this gets really interesting is how you share the keys to access the lockboxes. In that lockbox could be my biometric data. With blockchain, you create a key from that to another box, and from that to another box. The question is, can you trace the keys back? In cryptography, which gets awfully complicated awfully quickly, going backwards against keys is difficult to near-impossible. You’ll see a number that means nothing unless you have the key.
So what are the key areas where we can apply blockchain?
There are six areas where this technology can have a transformative effect:
- Payments (such as welfare)
- Supply chain management
- Credential management (such as driving licences and permits)
- Cybersecurity (the biggest application: people shouldn’t have to remember lots of passwords when machines can do this work for us)
- Record management/sharing (such as healthcare)
- Smart cities and Internet of Things
Applying it in unserved areas is a challenge and an opportunity because when there’s nothing there, it’s a less crowded field. The challenge for change is that there are very big and expensive systems already in place that have to be altered.
It’s interesting that in our project in the UK, it wasn’t a contract with the government, it was the creation of a standalone service which citizens could choose to use. The problem is who finances it. That’s the challenge.
(Picture credit: Flickr/niXerKG)