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Govts role in Data61’s blockchain-enabled future

by Poppy Johnston •
Free resource

If regulation of blockchain can keep up with user expectations and technological advances, the technology has the potential to deepen citizen trust in online government services, according to Data61’s forecast into the future uses of the technology in Australia.

In an ideal world, Data61 envisions blockchain helping government reduce fraud, error and the cost of paper intensive processes, and providing new ways of assuring identity and ownership.

The technology could also facilitate more secure information sharing, which could encourage further collaboration in the private and public sectors.

Blockchain is a form of distributed ledger technology that allows users to make transactions or share information in a network that is completely transparent, and belongs to no one. This technology allows users “to prove where information has come and gone to”, eliminating the need for a trusted third party to validate the transfer.

Blockchain technology attracted attention in 2008 as a tool to support digital currencies, and has “quickly generated interest for its broad application across various domains such as health records, banking, voting, government services and provenance of data”, according to a Data61-issued press statement.

“It has potential to reframe existing industries like financial services and seed new ones like food provenance and personalised health”, said Data61 Chief Executive Adrian Turner in the statement.

CSIRO’s Data61 has spent the last 12 months investigating how this technology could transform the delivery of services and boost productivity, which resulted in two reports: one providing four potential adoption scenarios of blockchain technology in 2030 (Distributed ledgers - Scenarios for the Australian economy over the coming decades), and the other examining three case studies of how blockchain systems can support new markets and business models (Risks and opportunities for systems using blockchain and smart contracts).

The overall tone of the research is optimistic about the future applications of blockchain, while simultaneously pointing to the limitations and risks associated with the technology. Far from a “silver bullet”, foreseeable issues with blockchain include “disputed transactions, incorrect addresses, exposure or loss of private keys, data-entry errors, or unexpected changes to assets tokenised on blockchain”.

To help mitigate these risks, Data61 recommends industry and government consider both “sunny day” and “rainy day” scenarios in any research and development associated with the emerging technology.

Data61 provides four future scenarios which consider both opportunities and risks associated with blockchain adoption – these are “regulation on rails”, “the sheriff on the digital superhighway", “a bumpy ride”, and “a slippery slope”.

Image taken from Data61’s Distributed ledgers - Scenarios for the Australian economy over the coming decades published June 2017.

In each of these four scenarios, the public sectors’ principal involvement is in its ability to manage the regulatory environment to align with technological developments and user expectations. Only in the aspirational scenario – titled “regulation on the rails” – does government take a hypothetical “proactive position” and recognise distributed ledgers as essential to Australia’s growth and advancement.

According to the report, digital currencies, the Internet of Things, ‘Smart Contracts’ (computer protocols that replace contracts), and Regtech (ensuring compliance through technology) are among use cases that would dominate the aspirational scenario, with blockchain-enabled identity management and fraud control at the heart of this ideal future state.

In this best-case scenario, government would benefit from enhanced public trust in online services: “The positive regulatory regime in this scenario has enabled a digital transformation of service delivery resulting in red tape reduction, reduced transaction times and cost, and increased regulatory compliance,” prophesies the report.

The other three scenarios see government taking a less instrumental role in the future application of blockchain, with the transformational scenario (the sheriff on the digital superhighway) envisioning mixed regulatory support from government. In this scenario, industry steps in as the primary driver for standardisation and interoperability of blockchain-enabled services.

Similarly, the new equilibrium scenario (a bumpy ride) imagines a future Australia where the innovative potential of distributed ledgers is being explored in the absence of regulatory guidelines – prompting distrust from users which stops widespread adoption. In the collapse scenario (a slippery slope), user trust is broken completely due to the prevalence of crime, prompting the theoretical government to regulate against the use of blockchain.

In the implementation of regulation, the report recommends a “technologically-neutral” approach, which will stop the constraints from stifling innovation.

“For example, rather than imposing a blanket prohibition on public blockchains, constraints could be imposed on policies for admission of participants or transactions.”

Blockchain and open data

In the second report, Risks and opportunities for systems using blockchain and smart contracts, government open data registries were examined as one of the three use cases for blockchain application.

A blockchain-enabled platform could provide neutral ground to unite data sets from other sources, like university data, so that sites like data.gov.au are not exclusively managed by government agencies. This could potentially improve the integrity, availability, read latency, interoperability, and ease of integrating new data providers.

“This may mean more reliable integration across government services, improved mobility and business consistency across states and better regulatory oversight when blockchains record operational information in regulated industries”, states the Data61 website.

However, the report also identified problems with the two proposed blockchain-enabled models – a shared private blockchain operated by data providers, and a public blockchain – with both models exposing new risks, including access control problems.

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