Blockchain and Government
What are some opportunities and challenges of utilizing blockchain technology in developing countries?
Blogger: Mathilde Jault
It was in 2008, against the backdrop of the financial crisis that began in the United States with the fall of Lehman Brothers that blockchain technology was born with the publication of the white paper on Bitcoin by Satoshi Nakamoto. Defined by Killmeyer, White and Chew in 2017 as “a decentralized technology that creates an authoritative and uninterrupted log of events with no single point of failure”[1], blockchain technology has been a response to the financial crisis that had shown the limits of traditional banking systems. In other words, it allows information to be recorded in a secure and transparent way, without any single person or organization being able to control or modify it alone; guaranteeing the reliability and integrity of the data, without relying on a single central point that could fail or be hacked. This will lead us to show that the use of blockchain presents opportunities and challenges, because this technology can address specific issues but also raise structural barriers, especially in developing countries.
CorruptionMondiale[2] and the World Economic Forum[3] have highlighted that blockchain could bring innovative solutions to developing countries by offering a decentralized registry, which can enhance the transparency of government transactions, it reduces corruption and increases public confidence. In fact, one of the goals is to ensure a decentralized system where no one could falsify or control transactions alone (Killmeyer, White and Chew 2017). For example, in some countries land registers are not kept optimally, leading to corruption and spoliation. It is in this context that Ghana – a country with a corruption score of 42/100 according to Transparency International – launched the project with NGO Bitland to “develop digital cadasters using a blockchain” [4] to securely and tamper-proof property titles.
By enabling secure transactions, blockchain can also help support the local economy as it builds trust in trade. For small businesses or farmers, this means easier access to international markets without risk of fraud. And, for example, in Kenya, a leader in mobile payments, AZA Finance uses blockchain for cryptocurrency transactions, while Grassroots Economic is developing community-based cryptocurrencies for the local economy. It is also in this dynamic that Brey (2017) supports the idea that blockchain promotes financial inclusion and economic development in remote regions by providing decentralized financial solutions accessible to non-bank populations while bridging the digital divide between zones urban and rural. Many technologies have been used in Bangladesh, where many citizens do not have birth certificates and are therefore excluded from public and banking services. In 2021, Grameen Bank and UNICEF experimented with a digital identity on blockchain to allow citizens to access banking and social services without the need for a paper document.
Finally, this technology also allows an improvement in the efficiency of public services. Brey (2017) notes that automating bureaucratic processes through smart contracts on the blockchain can simplify administrative procedures, reduce operational costs and speed up the delivery of public services. Ethiopia has notably been innovative in public education with Cardono[5], a partnership with the government to create a digital identity system on Blockchain for students and teachers. A project that I also found extremely interesting – although there is currently no feedback on the results – has been implemented in Afghanistan. In a country where lack of transparency and corruption prevent humanitarian aid from reaching beneficiaries, the World Food Program has used blockchain to track the distribution of food aid to vulnerable populations, ensuring that the money goes directly to beneficiaries and not to corrupt intermediaries.
While this Blockchain technology seems innovative and brilliant, it nevertheless encounters several limitations, especially since it is not now old enough to prove real results. Its implementation is therefore not without challenges. Let’s take the example of Bitland in Ghana, which has encountered several limitations since its development in 2016 and has even “given little news since its deployment”. The first limit is technical (and this limit applies to many other initiatives that use blockchain) and lies in the fact that if blockchain is there to limit corruption, “where do we start? What description will be considered?” [6]. The second limitation is legal because for the example of Ghana, nowhere is a cadaster proof of ownership; it is only a tax instrument, which does not replace the existence of notarial «authentic» documents. If the state does not have a reliable notarial system, if generally justice, its officers and auxiliaries are corrupt or ineffective, it is unlikely that a blockchain will cure the problem. Finally, there is a political limit because most of the initiatives mentioned above are US (even for Bitland or Cordono, whose founders are US) or «foreign» to the country in question. They are also based on ideological assumptions. However, the idea that poorly registered or belonging to local communities’ land represents a «dead capital» worries more developed countries' ideologues and industrial interests than the local populations themselves.
While blockchain ensures information that is accessible to all, it also poses problems with the confidentiality of information that is permanently stored and publicly available. Its transparency through decentralized registers is an asset, but the anonymity of transactions facilitates illegal activities such as terrorist financing. For example, ransomware is targeting hospitals, and some states, including North Korea, have reportedly used stolen cryptocurrencies to fund their missile program.
Finally, in a world where the environment must be protected at all costs, the increasing consumption of electricity to run blockchains has a very worrying environmental impact. An article in the newspaper Libération illustrated this by a graph showing that Bitcoin consumed in 2022, 20 times more electricity than in 2017, in other words, the electricity needed is comparable to the entire consumption of Thailand[7]. In fact, a single bitcoin transaction would consume the equivalent of watching 170,000 hours of YouTube videos. Faced with this waste, China has banned this activity[8], pushing the miners to countries like Kazakhstan and Iran, the former having a surplus of electricity and the latter dependent on fossil fuels and looking for currency, they initially welcomed these operations and saw an influx of miners – in blockchain. However, their excessive consumption caused massive power outages and in both countries these disturbances contributed to violently repressed riots. In fact, this energy overconsumption is due to the «proof of work» protocol, which secures transactions by forcing miners to solve complex calculations, and the more the blockchain grows, the more difficult and energy-consuming these calculations become.
To conclude, we can say that blockchain offers major opportunities for developing countries, especially in terms of transparency, efficiency and financial inclusion, and the different examples illustrate this. However, its adoption requires overcoming technical, regulatory and human challenges. It is also worth noting that blockchain, although innovative and interesting, is not the only technological solution. In some cases, less energy-intensive alternatives, better adapted to local legislative frameworks, or easier to implement could be considered. For example, instead of using blockchain for financial inclusion, other approaches exist such as M-Pesa in Kenya which is a mobile transaction system that works with traditional databases but is secure and widely adopted in Africa. And then, in another registry, there are centralized systems – just like blockchain – but more transparent and in some cases, a government or NGO can use a centralized but auditable database to ensure transparency without going through the blockchain as illustrates Open Government Data that operate via open platforms where all transactions published and accessible to all.
Questions:
1. For the sake of clarity, details on the failure of some initiatives that are struggling to produce concrete results (ex: Bitland) have not been detailed. But why do you think they fail or how could they be improved?
2. The environmental footprint of blockchain is often criticized. Do you think that the benefits it brings justify its energy cost?
3. The development of blockchain in some countries often relies on foreign initiatives. How could blockchain be developed to further consider these risks of foreign interference? According to you, how will blockchains change the world of tomorrow?
References
Favier, Jacques, et al. 2019. « Chapitre 2. Ce qui se passe réellement sur une blockchain : transaction, certification, time-stamping ». Bitcoin et protocoles à blockchain : Comprendre l'avènement de la seconde ère numérique. Mardaga. CAIRN.INFO. shs.cairn.info/bitcoin-et-protocoles-a-blockchain--9782804707729-page-57?lang=fr.
Forbes Afrique. 2022. « L'aventure afro de la crypto Cardano ». https://forbesafrique.com/laventure-afro-de-la-crypto-cardano/
Killmeyer, J. Jason, M. White, and B. Chew. 2017. "Will Blockchain Transform the Public Sector?" Deloitte University Press.
Libération. 2022. "Les cryptomonnaies, si gourmandes en électricité." Libération, 8 février.
Portnoff, A., and J. Soupizet. 2018. "Artificial Intelligence: Opportunities and Risks." Futuribles 426(5): 5–26. https://shs.cairn.info/journal-futuribles-2018-5-page-5?lang=en.
World Bank. 2017. “Internet of Things: The New Government to Business Platform: A Review of Opportunities, Practices and Challenges”. Washington, DC: World Bank Group.
World Economic Forum. 2024. “Navigating Cyber Resilience in the Age of Emerging Technologies: Collaborative Solutions for Complex Challenges”. White Paper.
[1] J. Killmeyer, Jason, M. White, and B. Chew, (2017), “Will Blockchain transform the public sector.” Deloitte University Press
[2] World Bank. 2017. Internet of Things: The New Government to Business Platform: A Review of Opportunities, Practices and Challenges. Washington, DC: World Bank Group, pp. 9-27
[3] World Economic Forum, (2024), Navigating Cyber Resilience in the Age of Emerging Technologies: Collaborative Solutions for Complex Challenges. White Paper
[4] Chapitre 2. Ce qui se passe réellement sur une blockchain : transaction, certification, time-stamping, J. Favier, J.S. Lécrivain, A. Takkal-Bataille, pp. 57-90
[5] Forbes Afrique. 2022. « L'aventure afro de la crypto Cardano »
[6] Favier, Jacques., et al. « Chapitre 2. Ce qui se passe réellement sur une blockchain : transaction, certification, time-stamping ». Bitcoin et protocoles à blockchain Comprendre l'avènement de la seconde ère numérique, Mardaga, 2019. p.57-90.
[7] Libération. "Les cryptomonnaies, si gourmandes en électricité." 8 février 2022.
[8] Portnoff, A. and Soupizet, J. (2018) . Artificial intelligence: Opportunities and risks. Futuribles, No 426(5), 5-26. https://shs.cairn.info/journal-futuribles-2018-5-page-5?lang=en.
This blog was a very good read. I was interested in the emergence of blockchain technology as a response to the financial crisis. What intrigued me was its ability to offer a decentralized and transparent system to record transactions securely which I believe was not only timely but relevant. I liked how blockchain has been recognized for its potential to address corruption, inefficiencies, and financial exclusion, particularly in developing countries.
ReplyDeleteIn answering the question focused on the environmental footprint of blockchain often criticized and whether or not the energy cost of blockchain justify its benefit. I would like to attempt my response by highlighting its benefits in terms of financial inclusion to determine if this outweighs its environmental impact. In relation to financial inclusion, anti-corruption efforts and secured transactions, it cannot be ignored that blockchain provides undeniable value especially in developing nations where trust in institutions is low. On the other hand, for speculative cryptocurrency trading for example, the environmental costs are harder to justify. So, taking all of this into context, a possible solution is to use renewable energy like what some mining operations are moving to solar or wind to lower their environmental impact. Additionally, governments could incentivize energy-efficient blockchain models and penalize wasteful mining practices. To put it briefly, blockchain has the capacity to completely transform governance, finance, and transparency; yet, in order to prevent a recurrence of previous mistakes, its development must give local ownership, sustainability, and useful use cases first priority.
Mathilde's blog provided a well-balanced and inclusive opinion on blockchains. What can be appreciated are the examples that include the advantages and disadvantages for developing countries, as this allows us to really understand blockchains' impact on this scale.
ReplyDeleteFor the first question I believe that the blog in itself provided some answers. To add another one I would say that relying more on private blockchains could be one step towards greater process control. Regular reports on these projects also need to be made as even blockchains can not guarantee great results only by themselves. A follow-up is then crucial.
The environmental question is highly relevant, as it first and foremost allows us to question the rise of transaction liberalization (for example) as promoted by the use of blockchains. The automatic and simultaneous action of blockchains makes it all the more practical for users, but erases the question of its environmental impact. beyond this field, the environmental issue is increasingly present everywhere, making it imperative to change general habits. However, as the digital/internet revolution is a more recent phenomenon, the environmental issue will unfortunately be slow to take hold even though we can definitely affirm that energy costs for this are much more important.
Finally, I think that some countries (most of them developing countries) mostl rely on foreign initiatives because they lack internal investments, financial and human resources. In order to get their control back over their blockchains system more investment is needed to develop local engineering skills to best meet the needs of initiatives. The need for healthier and more willing political involvement must be met by pushing forward concrete public policies to hopefully implement solid blockchain systems.
Thank you Mathilde, your blog has explained blockchains and its growing importance in contemporary society.
ReplyDeleteQuestions:
1. For the sake of clarity, details on the failure of some initiatives that are struggling to produce concrete results (ex: Bitland) have not been detailed. But why do you think they fail or how could they be improved?
I think Bitland failed because as you mentioned the legal, infrastructural and political factors. I also do believe that this example should be studied to improve the data available. Implementation of blockchain initiatives will require accountability framework to ensure that future projects can be successful.
2. The environmental footprint of blockchain is often criticized. Do you think that the benefits it brings justify its energy cost?
I found this aspect of the blog very interesting because it highlights technologies effect on the environment. I don't believe that the end justifies the mean in this case because although this technology is revolutionizing the financial sector, it will cost the environment dearly.
3. The development of blockchain in some countries often relies on foreign initiatives. How could blockchain be developed to further consider these risks of foreign interference? According to you, how will blockchains change the world of tomorrow?
An international body should established that would provide rules and regulations for blockchains to protect the developing countries. In addition, countries will need to implement legislature and best practices to standardise a system that may take over the finacial system in the future.
Trisha Bowes Green - This blog was an interesting read! Just to look at how it could benefit us here, these are some additional points. Blockchain technology seems to be the answer to many issues that Jamaica is currently facing. The transparency of blockchain technology has the potential to completely change how government transactions are tracked and seen in Jamaica. To administer and monitor government contracts and procurement procedures, for instance, a blockchain system may be implemented, which would increase accountability and decrease corruption. This would increase public trust in public institutions by enabling citizens to observe how money is being distributed and spent.
ReplyDeleteDue to financial or geographic constraints, many Jamaicans do not have access to typical banking services. Through mobile-based blockchain wallets, blockchain technology could close this gap by facilitating simple and safe financial transactions without requiring bank accounts. Initiatives such as Jamaica's central bank digital currency (CBDC), known as "Jam-Dex," are designed to increase financial inclusion by offering a safe and effective cash substitute (Bank of Jamaica, 2022).
Blockchain may be used, for example, to handle copyrights and royalties for Jamaican musicians and artists, guaranteeing that they are fairly compensated for their labor. Small-scale farmers might also utilize blockchain to improve their access to international markets, as a transparent supply chain would increase consumer confidence in the products' source and quality.
One of the major technical obstacles to blockchain adoption in Jamaica is the requirement for a strong digital infrastructure to support blockchain technology efficiently. The widespread adoption of blockchain-based solutions may be hampered by rural areas' potential lack of connectivity. Jamaica's blockchain legislation is still in its infancy. To create an atmosphere where blockchain projects can flourish without uncertainty, regulations must be clear. Clear laws are necessary for blockchain-driven financial products like the Jam-Dex in order to guarantee user confidence, security, and compliance (Financial Services Commission, 2021).
Significant prospects exist for boosting financial inclusion, increasing transparency, and assisting Jamaican small business owners thanks to blockchain technology. But overcoming significant obstacles including infrastructure construction, legislative changes, cultural acceptability, and environmental sustainability will be necessary for successful implementation. By carefully tackling these problems, Jamaica may use blockchain technology to empower its people and spur economic growth.
Trisha Bowes Green @ Dr Wilson, is there a way that these blogs could be downloaded for persons who would like to have them when this course comes to an end? I am learning new things that I can apply to my day-to-day job functions.
DeleteTrisha, you should be able to download by printing the page/article etc as a pdf
DeleteThis blog presented some insightful details on the utilization of blockchain technology being branded as the new digital ledger for governments. Country examples were provided to further solidify the usage of blockchain in developing countries who equipped with the potential to enhance transparency of government transactions, reduce corruption and increase public confidence. The benefits are well balanced between limitations and benefits some of which I seek to highlight by answering the questions posed.
ReplyDelete1. Having only recently emerged, blockchain technology might not be as widely recognized or understood as a tool for recording transactions. To fully realize its benefits there needs to be education on the benefits to be derived from it against whatever barriers may be preventing its full-scale utilization.
2. The weight between electricity overconsumption and the benefits of blockchain weighs more to the benefits of blockchain to governments. Blockchain has become the new digital ledger bringing about advantages in government such as security, efficiency and speed which has led governments to actively explore its uses in government. The move away from traditional ledger of record keeping has now been further complemented by a digital ledger built on trust. While energy consumption threatens to present a case of unsustainability, the benefits in large part are welcomed by governments fixed on transformation of how business is conducted.
3. For governments who embark on the path of blockchain utilization, the question is posed, will blockchain transform the public sector? To understand the stance that governments have taken on this point, it serves to provide country examples such as Estonia which has undergone the process of Voting, healthcare and identity management through blockchain solutions. Foreign interference and influence present barriers such as cybersecurity checks, however, influence in the form of international cooperation characterises blockchain as a resilient tool. With like attributes of the utilization of the internet, Blockchain promises to transform business models and processes, and reshape the set of stakeholders and their roles.
Thank you Mathilde for your article which really made me think.
ReplyDeleteI'm curious to see what impact the blockchain project launched in Ghana will have on public trust and transparency. It would be interesting to see if the country's corruption score actually improves in the coming years.
You also mentioned the fact that some projects, such as the one between Grameen Bank and UNICEF in 2021, have not yet produced concrete results. I think it would be interesting to know how long it takes, on average, for a blockchain project to produce tangible results. This would make it easier to assess whether these initiatives, which are very costly from an energy point of view, are worth setting up and whether they are really effective.
In terms of technical capacity and financial costs, we can see that it is important for countries to have the necessary technical skills to implement these technologies. Also, the financial cost of implementing a blockchain is still a big issue, especially in regions with limited resources.
I really liked the fact that you used concrete examples to illustrate your analysis and the nuances you added. The comparisons you make to highlight the energy footprint of blockchain are also very telling and important, especially when you say that a single bitcoin transaction is the equivalent of watching 170,000 hours of YouTube videos.
When it comes to the energy cost of a single transaction, I wonder if it's worth the cost of implementing this technology, given that while it could potentially solve one problem, it would also exacerbate another: climate change. Energy consumption is already one of the main drivers of climate change due to its huge production of greenhouse gases, and demand is growing. Given that 80% of the world's energy supply comes from fossil fuels, I don't think it makes much sense to develop blockchain on a large scale. In my opinion, we should first prioritise the development and use of renewable energy to reduce our carbon footprint before implementing initiatives that consume so much energy, especially when the positive effects have not yet been proven. In addition, I don't think it makes sense to use this technology in regions where resources are already limited.
This was a thoughtful and interesting blog, Mathilde. Picking up on the previous responses, I wanted to reflect a bit more critically on your inquiry of why some blockchain initiatives such as Bitland have failed. While others pointed to an often weak infrastructure or legal context, I feel that institutional trust and stakeholder alignment are also highly significant. Olnes et al. (2017) provide useful insight into the conditions for a blockchain solution to be successful in the public sector, which is how well the blockchain alternative fits within the existing administrative norms and the extent to which it enables users to be involved in co-design. While Bitland's technology has unique merits, I think the project fell short of meaningfully integrating into Ghana's formal and structured land registry system, and struggled to bring together institutional buy-in to lend credibility to its outputs.
ReplyDeleteWith respect to the environmental critique, I believe the World Economic Forum's (2024) white paper gives us a relevant starting point and notes cyber resilience and sustainable innovation as key aspects of emerging technologies. To me, this indicates we need to think about energy use not as an isolated fact, but as the question of whether blockchain systems are designed with adaptive, context-aware protocols, especially in data-rich domains such as identity and supply chains where blockchain is to reduce duplicity and wasteful practices.
Finally, regarding foreign-led projects, I believe that the concern is less the foreign involvement and more about governance asymmetry. Killmeyer et al. (2017) argue that in order for blockchain to transform the public sector, governments need to retain control over the standards for the blockchain platform and the transparency mechanisms that are in step with their local socio-political context; otherwise, these systems would merely reflect an entrenched digital dependency instead of advancing local innovation.