The California Department of Motor Vehicles (DMV) has partnered with the Tezos Blockchain and Blockchain software company Oxhead Alpha to create a private blockchain dubbed “shadow ledger,” which will serve as a blockchain copy of the agency’s current database. Oxhead has already completed a successful proof-of-concept, allowing the DMV to use smart contracts to ensure compliance, reduce processing time, and securely transfer vehicle titles. The DMV also plans to roll out digital wallets, allowing vehicle owners to keep and transfer their titles as NFTs. This recent development by the DMV exemplifies a use-case of blockchain technology in government and how blockchain is indeed the solution to institutions lagging with a lot of bureaucracy.
Why Is Blockchain Important In Government?
The blockchain is, by several metrics, an incredible piece of revolutionary tech; therefore, governments must understand and integrate it into their various workflows. Several blockchain companies have actively engaged governments in discussions regarding what value the blockchain can offer and how it can be customized to meet the specific needs of these governments. Immutability is a key feature of the blockchain that forms the nexus of these conversations.
A blockchain typically records data on registers or ledgers which are public and cannot be altered. In foresight, this simple yet important feature can help tackle corruption, forgery, and other forms of manipulation which are rife in most governments. That translates to increased transparency, renewed faith in governments, and a huge plus for legitimate democracies. Other features include these blockchains’ cost-effectiveness, energy efficiency, and scalability. In what applications can these features help a government?
How Can The Government Implement Blockchain In Its Operations?
Below are some of the ways the government can implement blockchain technology in its operations:
Public Registration And Accreditations
Managing registries with blockchain-supported distributed ledgers provides the needed transparency to eliminate fraud and corruption while simultaneously offering the potential for real-time updates. It also exponentially increases the points of contact for wide-scale registrations. For instance, in government elections, voter registrations, accreditations, and eventual voting can easily be done from multiple centers that are easily accessible to the citizens. Governments can also introduce Digital Identities, as in South Korea, where one single ID is obtainable for a citizen, granting them full access to all government services. A one-for-all ID system powered by the blockchain and interoperable across every service available in the country. Similarly, blockchains can significantly reduce or eliminate ghost government workers when enforced in the public service sector.
Blockchain registration systems can also be employed in public healthcare systems, land and property registries, and in patent protection, where records are generated, stored, and transferred as non-fungible tokens (NFTs), similar to what the DMV of the state of California is doing with titling. Another instance is in the Republic of Georgia, which was the first nation to implement blockchain-based land registries; the now 1.5 million registered land titles in the blockchain-supported distributed ledger can, with the correct multiparty digital signatures, be legally transferred in a matter of minutes. This functionality can lower the time and cost of completion for secured home loans, meaning real-estate deals can be completed in days rather than months.
Central Bank Digital Currencies (CBDCs)
Central Bank Digital Currencies offer a great way for central banks to improve the management of the money supply by, for example, quickly and efficiently getting money into the hands of citizens and businesses in the event of a liquidity crisis. CBDCs also make it possible for governments to offer a higher level of transparency into the money supply, even potentially introducing hard limits on money issuance and government spending. CBDCs also bring about resilient banking systems as money can be easily transferred and accounted for better than what is currently obtainable in traditional settlement networks.
Countries like the Bahamas have introduced CBDCs. The Central Bank of the Bahamas issued the Sand Dollar in October 2020. It was the first nationwide CBDC in the world. Immediately after that, Nigeria became the first country in Africa to launch a CBDC called the eNaira. The eNaira is stored in a digital wallet and can be used for contactless in-store payments and for transferring money. Several countries like China, Sweden, Jamaica, Ukraine, and many others currently have a CBDC rollout in the works.
Today, it is hard not to find cases of public fund mismanagement across governments. Contracts are awarded behind closed doors, and budgets are easily bloated and laundered. The trustless nature of smart contracts can be leveraged in Public Sector Procurement. Money such as CBDCs can easily be disbursed and tracked, resulting in more transparency and effective management. Also, this aids in setting up a system of government with proper checks and balances since anyone with access to the blockchain can see what everyone else is doing in real-time. Smart contracts also can come in handy in government grant disbursements and sending and receiving foreign aid transactions.
Efficient Data Management
Communication systems generally become more efficient and secure on the blockchain without losing the inherent speed in most currently available communication protocols. That makes the blockchain a useful tool for governments in tax collection and corporate auditing. Data preservation and permanence, a quality of blockchains, will make storing government data (like inventory and records) more frictionless and enduring.
For instance, The UAE government has launched several initiatives to promote the use of blockchain in the country. One of the most successful initiatives was the UAE Blockchain Strategy 2021, which helped the UAE government adopt blockchain applications in government and the public sector to carry out its transactions. Also, Chile currently uses Ethereum to track the money and data from the energy grid to curb corruption by making the data available for its citizens to see.
Supply Chain Tech
By utilizing blockchain networks’ fast communication and universality, governments can better track their defense supplies and other trade components. That reduces the risk of losses related to theft and misappropriation. In this regard, the UAE government is also working on several pilot projects, including a system to track the movement of goods across the country.
Real Time Gross Settlements (RTGS)
Real-time gross settlement is the continuous process of settling interbank payments in central bank records instead of settlement at the end of each day. Blockchain enables a significant increase in transaction volume and network resilience which enables central banks to process RTGS faster, with heightened security. Blockchain-supported RTGS can ensure transaction privacy, provide settlement finality, and improve resiliency by eliminating the single point of failure inherent to legacy systems.
Blockchains are customizable, making it possible to create blockchain layers tailored to meet specific needs. Governments of the world need to realize the benefits of the blockchain, including but not limited to cost reduction, transparency, efficient data, and banking systems, and not hesitate to integrate this relatively novel technology into their operations.
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