Distributed ledgers will not replace governments, but that is no reason to write them off
It is nearly two years since the Government's then chief scientific adviser Mark Walport published his report Distributed Ledger Technology: beyond blockchain. In the meantime, the idea that an encryption technique which protects value digitally by, paradoxically, sharing it across a large community, may be of use in the public sector has gathered a great deal of traction.
A good example is the five-year plan from HM Land Registry, which suggests that a blockchain based register could be distributed among trusted parties such as lenders and conveyancers, "giving them the ability to operate and update in a secure and tamper-proof manner".
According to analyst TechMarketview, other bodies investigating distributed ledger technology include the Ministry of Justice, the Home Office and HM Revenue and Customs. One of the most senior judges in England and Wales is urging colleagues to become “suitably educated” about blockchain enabled smart contracts.
Of course the interest is not coming only from the public sector. Last week, six financial services institutions, including Barclays, Credit Suisse and UBS, revealed they are testing blockchain enabled smart contracts to help verify identity checks in transactions as required by the Markets in Financial Instruments Directive (MiFID II) from 3 January.
But according the influential thinktank Reform, this is not enough. Late last month it published a report, What is the potential of blockchain? and called on the UK Government “to embrace this technology and remain a truly entrepreneurial, digital state”.
Reform is interested in the potential of blockchain as a way through the looming crisis in identity authentication. (Its report sponsor, Accenture, would presumably like some of that business.)
The concept is for a blockchain network across departments, acting as a thin layer on top of current databases. “This layer would enable citizens to view their data, via an identity app on their smartphone, and grant government access to it,” the report says.
In addition, its distributed nature makes it very difficult to break into, as it would require simultaneously hacking into a majority of the devices used by the members.
According to Reform, the distributed nature of blockchain means control of public service identity can be moved from government to the individual.
“The new model would be highly secure as blockchain is safer than centralised databases. Information stored on the ledger is encrypted at all times," it says. "The citizen would no longer simply be a data subject but become the controller.”
All this “could radically change the relationship between the individual and the state”. If this sounds familiar, it may be because we were talking about much the same thing at the turn of the millennium, in the go-go years of “dotcom government”, in which citizen oriented online services were apparently set to replace the central state.
It didn’t happen: if anything, technology proved a driver towards centralisation. Data tends to be shared when it suits the state, not the client.
The judge who last week enthused about blockchain, Sir Geoffrey Vos, chancellor of the High Court, also reminded his audience to be wary of those who would say that the technology would end the need for a central authority.
“You cannot have 3 trillion contracts per year globally without expecting some of them to give rise to a dispute,” he said. Hence the need for judges to understand these things.
But just because blockchain will not abolish government does not mean it is not worth applying. The possibilities of efficiency savings from distributed certainty are too great to be ignored.
Image by Toni Lozano, CC BY 2.0 through flickr