We are sharing the translation of an article by Magda Borovik, a specialist on fintech at the Ministry of Administration and the introduction of digital technologies in Poland, on how governments can use the blockchain and why they should not be afraid to experiment with distributed registries.
Fintech penetrated everywhere, from startups to government programs and in the last year it was joined by regtech (technology in regulation) and gostech (in government) and these terms are often used together.
It seems to me that it all boils down to transaction technologies that ensure the safe transfer of some value – monetary or non-monetary. Alternative financial technologies, modern computing and technology to ensure the reliability of operations will be useful to any government.
Not surprisingly, we see new implementation projects that regulators plan to use distributed registries and machine learning, and governments are introducing electronic payments to pay for public services or to distribute social security. The implementation of the project on pass-through digital identification begins in Poland – so that a person can “introduce himself” not only to government services, but also to his bank and other institutions.
It is important to note that the electronic identification scheme in Poland is based on a federative model, that is, the citizen’s “digital identity” is served not only by the state — banks, insurers and telecommunications service providers also contribute.
This is important because it uses special data structures that document the exchange of information, its confirmation or the exchange of values between the parties.
A small description of the event includes a timestamp and a numerical value and it defines the nature of the transaction as an agreement or an exchange of values — of a commercial or legal nature. We are talking very often about personal data or information constituting bank secrecy.
Government agencies are in contact with citizens to provide them with public services – and the parties must trust each other – and also interact with business and other government agencies. Sometimes citizens interact with the state through business intermediation. In addition, there is a strategic energy infrastructure and utilities, where transaction processing is the most important part of the work.
In an economy where data is becoming increasingly important, transactional data itself becomes something like a virtualized critical infrastructure, which means that the government and business need to focus on ensuring its reliability.
Thus, the blockchain and distributed registries can be considered as a way to ensure the integrity, immutability and reliability of data. This does not mean that everything in the world needs to be transferred to the blockchain; rather, an additional control channel should be added to the existing transaction processing methods that capture everything that happens within the critical infrastructure.
Meanwhile, they can be a tool for managing licenses and rights. The modern state mainly manages records of public relations, whether it is a register of property rights, a list of citizens who are entitled to social security or identification data identifying a citizen so that he can participate in political life.
This is a huge, important and unobtrusive work that the state is doing. Perhaps our trust in the state is not as great as it could be, but the invention of distributed registries allows us to obtain a new source of institutional trust – trust in the computer code instead of trust in the representatives of the institution. Now the traditional trust between people complements the trust in the relationship of a person’s car.
In order to continue to move towards information economy, it is necessary to provide a new type of digital trust and the corresponding investments should have the highest priority.
The first step will be an audit of existing data sources — their standardization and structuring — and only then can trusted transactions be performed on top, that is, an easy transition for large public data warehouses can be expected.
However, you can benefit from the advent of distributed registries. Reliable data structures arising from the processing of information using decentralized consensus mechanisms can be beneficial in implementing many “horizontal” tasks, for example, in e-commerce and lawmaking (where reliability and the ability to control the state of document versions are very important).
Ultimately, value transfer protocols and distributed registries can lead to a complete “digitization” of the public services area, and we are not talking about blindly transferring each operation to the digital world, but about a sequential transformation of the entire system. In particular, if we consider the value transfer protocols as digital public services, it becomes obvious that the state should use them.
Governments around the world will work more and more closely with transaction processing technologies in the coming months and it is very important that experiments in this area be legal.
Understanding this truth is only the first step, although it is very important. I wish all colleagues from governments of different countries to make it as soon as possible – we need to be ready for the future, because it is getting closer.