A report from the Deloitte Center for Government Insights

Will blockchain transform

the public sector?
Blockchain basics for government
Will blockchain transform the public sector?

ABOUT THE DELOITTE CENTER FOR

GOVERNMENT INSIGHTS
The Deloitte Center for Government Insights shares inspiring stories of government innovation, looking
at what’s behind the adoption of new technologies and management practices. We produce cutting-
edge research that guides public officials without burying them in jargon and minutiae, crystalizing es-
sential insights in an easy-to-absorb format. Through research, forums, and immersive workshops, our
goal is to provide public officials, policy professionals, and members of the media with fresh insights that
advance an understanding of what is possible in government transformation.

ABOUT THE AUTHORS

JASON KILLMEYER

Jason Killmeyer is a manager in Deloitte Consulting LLP’s Federal Strategy and Operations practice,
working with government agencies to develop and implement supply chain risk management strategies
in a modern environment.

MARK WHITE

Mark White is chief technologist for US Consulting Innovation and brings that role into the US federal
market with a focus on advancing adoption for advanced and cognitive analytics and for blockchain
distributed ledger solutions.

BRUCE CHEW
Bruce Chew is a managing director with Deloitte Consulting LLP in the US Strategy service line Monitor
Deloitte. For more than 20 years, his work has focused on strategy development and implementation
and the building of organizational capabilities.

ACKNOWLEDGEMENTS
The authors would like to thank Ryan Luckay, Wendy Henry, Keith Podgorski, and Greg Cooil for their
contributions to this article.

Deloitte Consulting LLP’s Technology Consulting practice is dedicated to helping our clients build
tomorrow by solving today’s complex business problems involving strategy, procurement, design,
delivery, and assurance of technology solutions. Our service areas include analytics and informa-
tion management, delivery, cyber risk services, and technical strategy and architecture, as well
as the spectrum of digital strategy, design, and development services offered by Deloitte Digital.
Learn more about our Technology Consulting practice on www.deloitte.com.

COVER IMAGE BY: STUART BRIERS

 Blockchain basics for government

CONTENTS

Introduction:
Value creation for all kinds of transactions | 2

What is blockchain? A digital ledger with a

difference | 5

Why are people so excited about blockchain?  | 8

How would blockchain work in government?  | 10

Where could blockchain be adopted in

government? | 13

Conclusion: Moving forward | 16

CONTACTS

Mark E. White
Chief technologist, Innovation Office Wendy Henry
Principal Federal blockchain lead
Deloitte Consulting LLP Deloitte Consulting LLP
+1 571 814 7910 +1 202 213 1327
mawhite@deloitte.com wehenry@deloitte.com

1
Will blockchain transform the public sector?

Introduction
Value creation for all kinds of transactions

Back in 1995, Bill Gates attended a conference at which tech visionaries touted
the potential of an emerging technology of which many people around the
world hadn’t yet even heard: the World Wide Web. At the time, people couldn’t
do much online—there was virtually no shopping, no entertainment, no news,
very little traffic—but Gates returned to Microsoft headquarters and dramat-
ically shifted the company’s strategic plan to focus on the possibilities.1 He
recognized the Internet’s potential power as a platform for disrupting busi-
ness—and society—as usual. Not even Gates could foresee all the ways it
would be used, but he understood information technology well enough to rec-
ognize the emerging value proposition and resulting innovation that the first
generation of the Internet could enable.

B
LOCKCHAIN technology is unlikely to capture United Kingdom, Brazil, China, and India—are run-
the public imagination in the same way as the ning pilots, tests, and trials examining both the ar-
colorful initial wave of online innovation did; chitecture’s broad utility as a basis for government
its impact will be largely behind the scenes. Yet the service provision and procurement and developing
potential is enormous: Some see blockchain “bring- individual blockchain-based applications for inter-
ing us the Internet of value: a new, distributed plat- nal use. These applications, often unique to the par-
form that can help us reshape the world of business ticular circumstances of a country, state, or munici-
and transform the old order of human affairs for the pality, are in development around the world across
better.”2 an expanding range of use cases and asset classes.

Blockchain’s benefits—of security, efficiency, and In the United Arab Emirates, for example, the gov-
speed—are readily applicable to public sector orga- ernment is exploring a wide range of use cases, in-
nizations, and the technology’s potential helps ex- cluding for business registration,3 logistics,4 and
plain why so many government leaders are actively central bank operations.5 In Estonia, a country of-
exploring its uses in government. Indeed, block- ten cited as a leader in tech literacy and e-services,
chain experiments in the public sector are accelerat- the government is piloting blockchain-based solu-
ing globally. (See figure 1.) tions for voting,6 identity management,7 and health
care.8 In the United States, the state of Delaware,
From almost none three years ago, agencies in more
where many companies choose to incorporate, is
than a dozen countries—including Canada, the
piloting a blockchain-based corporate registry sys-

2
 Blockchain basics for government

Figure 1. Blockchain in the public sector, as of March 2017

Blockchain experiments in the public sector are accelerating globally, with a concentration in the US and Europe.

Finland Estonia
Sweden
Denmark 5 6 Russia
1 2 7 *
Canada 1 3
UK 10 3 4
Isle of Man * 4 3 Ukraine
Illinois 2 Georgia
2 * 3 New York Switzerland
1 1
3 8 Delaware
Tunisia, China 3
5 7 Nasdaq Senegal 7 *
Texas UAE 1 South Korea
USPS 1
*
Ghana India
2
6 HHS, FDA 2 Kenya, Nigeria,
Uganda, 1 1
Tanzania Singapore
2 Brazil

3
7 South Africa Australia

Top 10 most active public sector use cases* Color coding key

1. Digital currency/payments 7. Voting (proxy) In progress

2. Land registration 8. Corporate registration
Planned
3. Voting (elections) 9. Taxation
4. Identity management 10. Entitlements management Announced
5. Supply chain traceability * Measured by observing the
6. Health care number of public sector blockchain
experiments planned, in progress,
or stalled globally

Source: Deloitte analysis in conjunction with the Fletcher School at Tufts University.
Deloitte University Press | dupress.deloitte.com

tem in addition to exploring share issuance,9 a use

affirmed by the July 2017 passage of state legislation
approving the trade and maintenance of corporate
stock on a blockchain.10 Elsewhere in the United This proliferation of
States, several federal agencies—including the
General Services Administration, the Department experimentation and
of Homeland Security, and the Health and Human
Services Department—have announced blockchain discovery suggests that
programs. New York, Illinois, and Texas are among
the states that are piloting and/or testing blockchain
government leaders
applications. In each of the above cases, blockchain need no convincing
has the potential to create value regardless of the
type of asset or transaction involved.11 about the need
This proliferation of experimentation and discovery to learn about and
suggests that government leaders need no convinc-
ing about the need to learn about and from block-
from blockchain.
chain. This important period will likely inform the

3
Will blockchain transform the public sector?

investment and longer-term strategic thinking that But before those transformative effects can be
this new architecture demands. And the accelera- achieved in government, policymakers should learn
tion of projects noted in figure 1 suggests that agen- the basics of this new architecture, since, frankly,
cy heads will be working with blockchain-based even some straightforward explanations can be a
solutions sooner rather than later—after all, com- little daunting. This primer is designed specifically
mercial enterprises and venture capital firms have to offer a government executive—whether a chief
invested more than $1.4 billion12 in blockchain since technology officer, chief information officer, or non-
just 2014, rivaling Internet investments in the early technical leader—with key knowledge about block-
’90s. At the same time, government leaders should chain, and a simple framework for understanding
bridge the understanding gap within their own how blockchain may, or may not, bring value to an
agencies, helping them to understand what block- organization. To achieve that goal, we lay out the
chain is, why it matters, and why it will likely be rel- what, where, how, and—perhaps most important-
evant to them. Whether blockchain is revolutionary ly—the why of the architecture. As for the when: It’s
or evolutionary, it could be transformative. happening now.

4
 Blockchain basics for government

What is blockchain? A digital

ledger with a difference

W
HILE many government leaders are ac- chitecture, a process architecture, middleware, or
tively involved with blockchain proto- something else?
types, live pilots, and active use case de-
When thinking about blockchain, think transac-
velopment, more are not yet exploring blockchain
tions. Organizations have traditionally recorded
and likely have a limited—or nonexistent—un-
transactions in ledgers, kept under lock and key.
derstanding of what it comprises and what sorts
Those ledgers are typically isolated to protect their
of problems it aims to solve. They may have read
accuracy and sanctity, and when conducting busi-
a few articles about bitcoin and crypto-currency,
ness, each organization maintains its own separate
about the long-term promise of blockchain, or a
record, to independently verify information. Well,
description of a potential individual use case. They
at its heart, blockchain is a ledger, but one with a
may generally understand some of the features and
difference: built-in trust. Blockchain is a distrib-
benefits. But many doubtless remain fuzzy on key
uted consensus ledger, at once both shared and
questions: What is blockchain really all about? Is
trusted. Creating distributed trust through a collec-
it software or is it hardware? Is it an enterprise ar-
tively agreed-upon consensus protocol is potentially

Figure 2. Moving toward the Internet of value

Web 1.0/ Web 2.0 Blockchain

Data is copied Ownership is transferred

VS.
User 1 User 2

Types of data Types of transactions

• Texts Intangible Tangible Obligations
• Images assets assets
• Videos
• Music • Currency • Real estate • Contracts
• Shares • Goods • Pledges
• Copyrights
• Patents

Source: Deloitte analysis. Deloitte University Press | dupress.deloitte.com

5
Will blockchain transform the public sector?

transformative, freeing the ledger from its isolation data in the block is tampered with, that hash key be-
constraints, in much the way that the World Wide comes immediately invalid, making the tampering
Web freed information and communications and immediately evident. When the new block is posted
transformed the way we do so much in business, to the ledger, it is linked to and from the preceding
government, and our personal lives. block using their respective hash keys. This forms
a fully traceable and verifiably untampered record
Blockchain is a distributed consensus ledger that
in a chain—hence blockchain. From any block, it is
is shared, thus creating a digital ledger of trusted
possible to access all previous or subsequent blocks
transactions maintained among and across partici-
linked together in the chain. So: A blockchain da-
pants. In place of multiple independent and isolated
tabase retains the complete and indelible history of
ledgers, there is a single shared record distributed
all transactions, assets, and instructions executed
across every party to the transaction. Early in-
since the very first one. With this, blockchain allows
stances of blockchain created trust between online
participating parties—and only those parties—to
strangers for digital currency transactions, but the
share accessible, transparent, and trusted informa-
parties to a blockchain can be any group of stake-
tion.
holders or members of a network—often in the form
of consortia—who are incented to resolve an existing Blockchain is a distributed ledger, but if many par-
gap in trust or similar inefficiency in authoritative ties have access, how do you maintain integrity?
recordkeeping, value exchange, or executor/trustee How do you trust it? Traditionally, trust across a
for ledger-based contract execution and settlement. set of independent parties has been established by
Each transaction—those that have taken place and a governing or intermediary institution or other ar-
those that are pending—is batched and stored in a rangement to mitigate counterparty risk: a bank, an
fixed structure called a block. escrow account, threat of a lawsuit, the days until a
check clears. Blockchain fulfills the trust-providing
When a block is verified as “true and trustworthy”
function of existing intermediary institutions by es-
via the consensus protocol, it is posted practically si-
tablishing consensus across all participants based
multaneously to each consortium member’s copy of
on a collectively agreed-upon protocol that is then
the distributed ledger. Each block has a unique hash
broadcast across the entire network of participants
key calculated based on the precise content of all
simultaneously and with minimal effort.
the transactions in the block. If the smallest piece of
How does this occur? All of the parties on the
blockchain have agreed to abide by some protocol
by which new transaction blocks are vetted and
validated. If a block conforms to that protocol, it’s
ajudged true and is posted. The characteristics and
specifics of the protocol vary based on numerous
factors. For example, is access to the chain “per-
missionless”—that is, open to anyone so that trust
in identity and intent is essentially nonexistent? Or
is it a permissioned chain in which there is some

WHAT’S IN A BLOCK?
The header includes metadata, such as a unique block reference number, the time the block was
created, and a link back to the previous block.

The content typically includes a validated list of transactions made, their amounts, and the addresses
of the parties to those transactions along with digital assets and instruction statements.

6
 Blockchain basics for government

tolerance, consensus and posting performance re-

quirements, and quorum structure for the network
members.
And more and more
The combination of visibility and prior consensus
organizations are also helps to ensure that blocks cannot be altered

learning that the after the fact—that transactions, once conducted,

are immutable. In the past, parties would maintain
benefits that blockchain separate records of events that would require recon-
ciliation and that, ideally, would reconcile at the end
offers to digital of a predetermined examination period. Now, the

currencies are far more transaction is the record.

Blockchain is a distributed consensus ledger, and

broadly applicable, as in the traditional leatherbound ledger from ac-

to a wide range of counting class, the digital ledger records transac-

tions—that is, transfers of value between two or
transaction types more parties. The first items of value to be traded
over a blockchain, the first assets, were digital cur-
and asset classes. rencies such as bitcoin. And more and more organi-
zations are learning that the benefits that blockchain
offers to digital currencies are far more broadly ap-
plicable, to a wide range of transaction types and
pre-vetting of membership, meaning that less work
asset classes.
must be done to trust a proposed transaction block?
The more work required to assure trust, the more Governments are exploring blockchain usage in
robust and demanding the consensus protocol must land registration on every continent but Antarctica.
be to create consensus across participants with- The business events—the registration or transfer of
out the need for a central authority or third-party a land deed or title—are the transactions that are
intermediary. recorded on the ledger, providing certainty for all
stakeholders. The less complex but equally valued
Other factors that drive the design of the consen-
transaction of casting a vote is the focus of ongo-
sus protocol for a ledger in which a single authority
ing testing or completed pilots in New York, Texas,
does not govern transaction finality include trans-
Denmark, Estonia, Ukraine, and South Korea, and
action and participant authentication, integrity, pri-
planned in Australia for 2017.
vacy, and non-repudiation, as well as ledger fault-

7
Will blockchain transform the public sector?

Why are people so excited

about blockchain?

I
N their pursuit of offering attractive environ- layers of redundancy, ease regulatory compliance
ments for investment, many of the governments burdens, introduce recordkeeping efficiency, and
experimenting with blockchain seem to recognize generally smooth government operations across a
the inherent advantage of being first movers in an number of areas. Harnessing those advantages and
emerging area. However, the gains will likely not applying them toward public institutions’ mission
just go to those who attract industry. What many goals provides an opportunity for realizing both
public sector actors are realizing is at once profound agency-specific and whole-of-government benefits
and simple: Technology need not be revolutionary that can foster more efficient and effective mission
to be highly impactful. By reducing dependence on delivery in these challenging times.
existing intermediary institutions and their accom-
Three key characteristics of blockchain may help
panying layers and costs, blockchain can potentially
to explain the depth of public sector interest in the
eliminate significant resource burdens. And by ac-
topic and many of the pilots taking place around the
celerating transactions and simultaneously lower-
world.
ing their costs, blockchain can help to eliminate

Figure 3. The three characteristics to remember

Decentralized and distributed

Ledger storage and integrity

• Ledger replicated across parties, each keeping a full record of transactions

• Distributed system operation, no single point of failure
• Transactions verified cryptographically and updated immediately across all parties
• Provides unbroken and timely recordation of authoritative truth

Irreversible and immutable

Each transaction record is indelible

• The ledger is append-only, invalid transaction errors are surfaced and rejected—immediate reconciliation
• All transactions encrypted and include time, date, participants, and hash to previous block
• Trust is enabled via consensus protocols, cryptography, and collective bookkeeping
• Allows trusted value exchange

Near real time

Transactions verified and settled in minutes vs. days

• Parties interact directly—no third-party intermediary

• Moves parties from information exchange to value exchange
• A transaction may include code to run against the ledger
• Enables smart contract automation and enforcement

Source: Deloitte analysis. Deloitte University Press | dupress.deloitte.com

8
 Blockchain basics for government

Decentralized Near real-time

The decentralized nature of blockchain prevents Finally, the transaction settlement time allowed
there from being a single point of failure, thus creat- for by stakeholders working together over a single,
ing an authoritative and unbroken record of events. trusted ledger is minimal compared to traditional
Since all parties on a ledger share the responsibility systems of value exchange. Blockchain offers the
and benefits of maintenance, deviations from the potential to settle and verify transactions in min-
rules of the protocol can be easily and quickly recog- utes rather than days, making it a near real-time
nized. Importantly, the ledger is readily accessible mechanism for the transfer of value. The enhanced
to blockchain members speed and elimination of
and has internal point- third-party risk mitiga-
ers that allow transaction tors can mean significant
records or individual as- real-world savings. Any-
sets to be followed re- What many public one who has purchased
liably across time and
ownership.
sector actors are a home, for example, can
attest to the significant
realizing is at once costs associated with
third parties ensuring
Immutable profound and simple: clear title, handling the

The transactions con- Technology need not associated paperwork,

and so on. As an added
ducted across this resil-
ient record are append- be revolutionary to bonus, it is possible to
include code that can test
only; there can be no
editing after the fact. The
be highly impactful. for specific conditions to
be met and act accord-
cryptographic protocols
ingly. This enables “if X,
that confirm the validity
then Y” actions to be built
of pending transactions
into the transaction in
are permanently timestamped. Those that are con-
the form of smart contracts that foster automation
firmed create a record of transactions that is im-
and enforcement. The elimination of inefficiencies
mutable. Confirmed transactions cannot be erased
and market opacity lower the barriers to transaction
and become an immutable part of the record shared
and create a clarity that allows for automated trans-
across the entire network—a record that serves as a
action execution upon satisfaction of agreed-upon
constantly auditable paper trail. This combination,
conditions between parties to the ledger.
of trusted transactions maintained across an unbro-
ken record, creates a powerful security dividend.

9
Will blockchain transform the public sector?

How would blockchain

work in government?

I
N this section, we move beyond the basics to look hardware components, machinery to print money,
at how blockchain technology could transform or airport control-tower electronics—the slightest
government processes and experiences. delay, error, or fraud could have catastrophic rami-
fications.
To illustrate, consider customs in international lo-
gistics, which spans a number of government op- Utilizing a distributed, secure ledger, blockchain can
erations and the commercial world and involves improve security, data transparency, recordkeeping,
multiple transactions. A prominent pain point for inspection rates, and visibility of inbound interna-
many parties involved is the absence of effective tional shipments. Between the numerous forms, li-
traceability, transparency, and
predictability of shipments com-
ing in through the nation’s ports.
This lack of information can add
to costs and sap operational per-
formance. As traditional supply Utilizing a distributed, secure
chains become more digitized,
though, the shipping process ledger, blockchain can improve
generates and captures many
new data points, offering possi-
security, data transparency,
bilities for improving the process recordkeeping, inspection
and sharing information. Using a
blockchain for transparent, end- rates, and visibility of inbound
to-end manifesting could have
transformative impact through- international shipments.
out the supply chain. For customs
agencies around the world, it
could mean eliminating delays in
definitively identifying shippers
moving through customs, and improving inspection censes, and certificates often required for passage or
target compliance via greater data accessibility. entry, a secure ledger on a blockchain can capture
all the necessary information and provide an audit
With customs agents, shipping lines, shippers, con-
trail to all participants in the blockchain, even with
signees, brokers, and booking agents all involved,
an increasing or variable number of participants
there are any number of actors in international
working from different legacy systems, and even as
shipping that could defraud the others. Similarly,
business processes change or grow more complex.
one or more of these actors could err in their report-
Figure 5 illustrates how this would work in practice,
ing to the others, causing miscounts, slipped dead-
examining this common use case that governments
lines, and impacts throughout a supply chain. When
around the world are exploring.
delivering critical, sensitive goods—such as military

10
 Blockchain basics for government

Figure 4. When is blockchain useful?

Core characteristics

Shared data Need for a structured repository of information

More than one entity writes or reads the database. Access may be
Multiple parties
permissionless (“public”), permissioned (“consortium”), or private

Less than complete trust between the entities (readers,

Low trust
writers, nodes, witnesses, etc.) in the ecosystem

Transactions are immutable—once written, they cannot be modified

Auditability
or deleted. Participants have digital identity on every transaction

Value-add characteristics

Disinter-mediation No central gatekeeper to verify transactions; cost of intermediary may be reduced

Smart contract code runs on the ledger for interaction, dependency,

Transaction interaction
or “settlement” between transactions from different entities

Transactions are immutable—once written, they cannot be modified

Auditability
or deleted. Participants have digital identity on every transaction

Deloitte University Press | dupress.deloitte.com

The international shipping and customs example gration, and more, and blockchain may not be part
illustrates how understanding blockchain and its of the solution set in all situations. Where a trans-
potential impact is as much an exercise in think- action is simple, trust is high, and few are parties
ing through transformative business models as it is involved, blockchain’s benefits may be too insignifi-
about technology solutions. Challenges remain in cant to warrant its use.
the areas of data standardization, IT systems inte-

11
Will blockchain transform the public sector?

Figure 5. International shipping and customs

As a new shipment is prepared, specific identity elements are validated for the shipment and captured
digitally. All parties agree in advance to record and share specific metadata related to their role in the
shipment’s life cycle that provides relevant transaction data but protects critical IP or proprietary
processes from being revealed. No new enterprise architecture is created, only APIs to connect
stakeholders via a distributed consensus ledger.

Action
As the shipment is prepared, the Action
shipper creates a new digital
record (the shipment ID) through Customs officials validate the
an application that verifies certain shipment ID and check that the
elements of the shipment, metadata represented in the
Action transaction match the physical
including the anticipated identities
of the stakeholders that will be The freight forwarder scans the shipment. The officials certify that
participating. shipment for the shipment ID the package meets all applicable
affiliated with the shipment and standards and release the shipment.
verifies that the package has been
Transaction loaded and left port.
Transaction
The shipper initiates a transaction
to record the generation of the The customs official uses a
Transaction smartphone app to record the
shipment record onto the
blockchain, which is broadcast to, The freight forwarder initiates a certification of the shipment onto
and validated by, the other parties transaction using the shipment ID the blockchain.
to the transaction. to record the fulfillment of its role
in the shipment. Here, as at every
transaction, all parties validate the
transaction.

At each transaction, a new block is generated and added to the

blockchain. Each time this takes place all parties validate the
transaction through an agreed-upon cryptographic protocol.

Action
At predetermined points, the
shipping line verifies that the vessel
remains on course and schedule, or
logs any deviations due to weather
or unforeseen circumstances.

Transaction
The shipping line records these
updates using the shipment ID to
log the shipment’s progress.

The blockchain
generated by this
Action shipment
Action
As the shipment arrives into the customs
station of the end-destination country, The wholesaler receives physical All parties now have access
those officials verify via the shipment ID custody at the port and uses the to an immutable record. In
record that each preceding step happened, shipment ID to verify that both the
outbound and inbound customs
the event of any future
check the timestamp for each to look for
any discrepancies, and certify the incoming certifications took place. disputes between
shipment. stakeholders, the record
Transaction contains timestamped
Transaction The wholesaler initiates a final evidence of each transac-
The customs official uses the shipment ID transaction referencing that tion that was validated by
to record the clearance of the shipment shipment ID recording their custody
into the end-destination country. of the shipment. all parties in near real time.

Source: Deloitte analysis. Deloitte University Press | dupress.deloitte.com

 Blockchain basics for government

Where could blockchain be

adopted in government?

F
EDERAL, state, and local governments are Government’s responsibility—fiduciary, legal, and
awash in data. The emergence of electronic to the taxpayer—creates an incentive for ensuring
databases, as opposed to file folders and filing accurate transfers of value between relevant stake-
cabinets, dramatically improved the efficiency and holders—within and between agencies, between
cost of managing all that information. But it took the government and third parties, and between
the Internet to unlock the greater value by mak- government and the citizenry. This is true at the
ing the data more accessible and transparent. The federal, state, and local levels from congressionally
creation and exchange of that ocean of informa- allocated funds down to the road grader purchased
tion take place via a tsunami of transactions each by a small municipality. In an era of cost pressures,
year: collections, disbursements, transfers, pro- agencies that ensure data integrity while reducing
curements, sales, fees, fines, certifications, approv- internal cost and friction could emerge as exem-
als, and many more. Wherever those transactions plars, improving their reputations to boot. With
involve, or could involve, a digitization of assets major investments in accountable property systems
and decentralized exchange, there exists a potential already under way as a result of congressional atten-
blockchain opportunity. tion, being audit-ready should be a continuous real-

Figure 6. Blockchain delivers business value in three primary areas—individually and

in combination

• Low-cost and near real- Examples

time • Domestic and international remittance
Value transfer • Internal payments settlement
• Without an intermediary
• Clearing and settlement of securities
• Beyond “money” • Exchange of low liquidity assets

• Software protocols Examples

• Digital cheques/IOUs
Smart • Based on ledger content
• Automatic financial instruments
contracts • Execute when the • Parametric insurance contracts
conditions are met • Automated market making

• Create immutable record Examples

• Digital certificate of ownership for physical assets
• Under agreed consensus
• Transaction validation of digital assets
Recordkeeping protocol
• Financial accounts
• Without reliance on a
trusted third party

Source: Deloitte analysis. Deloitte University Press | dupress.deloitte.com

13
Will blockchain transform the public sector?

For the purposes of considering where blockchain

could likely be adopted within and across
government, three business values of
blockchain—recordkeeping, value
transfer, and smart contracts—provide
broad cases for possible adoption.

ity, not a series of individually arrived-at milestones three areas in which government’s current active
or a source of uncertainty. interest in blockchain potentially leverages the use
case characteristics and business values shown in
Across those many transactions and business events,
figures 4 and 6: identity management, land registra-
numerous use cases for blockchain present them-
tion, and voting.
selves; for many others, there will be other enabling
technologies adopted instead. Where the value pro-
IDENTITY MANAGEMENT14
vided by a blockchain approach exceeds the costs of
adoption, in terms of enhanced efficiencies, greater Digital identity is both a use case for blockchain and
security, and/or reduced latency, an agency should the enabler that allows each of the other assets dis-
further explore adoption. The great challenge in cussed for blockchain integration to exist. Whether
both government and industry is rapidly identify- cryptocurrencies or cars, each asset needs to be ren-
ing those use cases in which the value add is both dered digitally to be transacted on a blockchain, and
explicit and provable, in situations where the level the owner or transactor also needs a digital identity
of trust is typically higher than between parties to engage in those transactions. The magnitude of
exchanging open-source cryptocurrencies. For the this challenge is recognized by public sector actors
purposes of considering where blockchain could around the world—a world in which one-fifth of the
likely be adopted within and across government, world’s population lives without a legal or officially
three business values of blockchain—recordkeeping, recognized identity.15
value transfer, and smart contracts—provide broad
cases for possible adoption. When there is the need Existing pain points:
to do one or more of these three things, blockchain
• Lack of standards for establishing digital identity
may emerge as part of the solution.
• Differing attestation processes and identity “en-
The map in figure 1 displayed many of the an-
try points” prevent economic engagement and
nounced areas in which public sector leaders are
can hinder public sector service provision
considering using blockchain—including, in partic-
ular, digital currencies and the payments industry. Blockchain value proposition:
The government must wrestle with these applica-
• A secure, self-sovereign identity could enable
tions simply to continue to keep pace and interact
efficient transactions across a wide variety of
with the commercial sector, as evidenced in the
asset classes
SEC guidance on securities published June 2017.13
Since the general press on blockchain covers these • Individual and explicit control over which iden-
applications comprehensively, we’ll focus more on tity elements are shared for which purposes

14
 Blockchain basics for government

LAND REGISTRATION16 VOTING19

Deeds and titling not only provide critical protection This critical and legitimacy-granting public func-
for homebuyers in developed nations—they serve as tion has been the source of much activity among
a basis for investment and economic growth across those working with blockchain. Citizens can cast
many developing nations. By securing a unique and votes the same way they initiate other secure trans-
non-corruptible record on a blockchain and vali- actions and validate that their votes were cast—or
dating changes to the status of that record across even verify the election results. Potential solutions
owners, a reliable property record can be created, are currently working to blend secure digital identi-
whether for a piece of land that heretofore had no ty management, anonymous vote-casting, individu-
owner or as a link between stovepiped systems. alized ballot processes (for example, a vote “token”),
and ballot casting confirmation verifiable by (and
Existing pain points:
only by) the voter.
• License and registry processes are paper-based
Existing pain points:
and fragmented, making transactions costly, in-
efficient, and vulnerable to tampering • High costs related to ballot printing, electronic
voting machines, maintenance, etc.
• In the United States, landowners spent $800
million in 2014 and ’15 on title insurance to cov- • Increasing threats of cyberattacks compromis-
er risks associated with real estate titles17 ing election results

Blockchain value proposition: • Lack of transparency due to a centralized pro-

cess of election results audit
• A decentralized, standardized system for land
registration records could reduce the number of • Voting delays or inefficiencies related to remote/
intermediaries required, increase trust in iden- absentee voting
tity of transacting parties, increase process effi-
Blockchain value proposition:
ciencies, and decrease time and cost to process
• Potential cost savings through blockchain-
• Recording property rights via blockchain would
enabled voting
enable $2–4 billion in annual cost savings in the
United States alone for title insurers through a • Potential for enhanced security and audibility
tamper-proof ledger18 of votes

• Potential for greater participation in elections,

including remotely

• Greater transparency meeting citizens’ needs

15
Will blockchain transform the public sector?

Conclusion: Moving forward

A
NALYSTS project that blockchain will save ment agencies are likely to look for opportunities
$15–20 billion annually in the financial ser- for the technology in the public sector. What is not
vices industry by 2022,20 and others have ad- yet clear, and what forward-thinking public sector
vanced similar predictions for other industries, in- leaders around the world are driving toward, is who
cluding the insurance industry and health care. And will take the lead in applying this new, value-laden
based on the prototypes, trials, and other experi- approach as part of efforts to cut government costs,
mentation happening around the world, govern- improve security in an era of cyber uncertainty, and
enhance mission delivery.

Again, choosing to leverage blockchain is not just a

technology question—it is a decision that can trans-
Again, choosing to form business models and processes, and reshape

leverage blockchain is the set of stakeholders and their roles. Like any
emerging concept with significant potential benefits,
not just a technology blockchain is not a silver bullet: It is not applicable
to every situation, and users and developers are
question—it is a decision still sorting out challenges both technological and

that can transform managerial. On the technology side, there are ques-
tions of platform scalability, validation methods,
business models and data standardization, and systems integration. On
the managerial side, the questions include business
processes, and reshape model transformation, incentive structure, and
transaction scale and maturity.
the set of stakeholders
But the most fundamental question for government
and their roles. leaders may be this: Do you want to be positioned to
capture the benefits of the new, potentially transfor-
mative technology that is blockchain?

16
 Blockchain basics for government

ENDNOTES

1. Dylan Love, “This 1995 memo from Bill Gates predicts smartphones, Web videos, and Internet ads,” Business
Insider, July 28, 2011, http://read.bi/oT1jQk.

2. Don and Alex Tapscott, Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and
the World (N.Y.: Penguin Random House, 2016).

3. Nikhil Lohade, “Dubai aims to be a city built on blockchain,” Wall Street Journal, April 24, 2017, www.wsj.com/
articles/dubai-aims-to-be-a-city-built-on-blockchain-1493086080.

4. Tom Arnold, “Dubai government, companies team up with IBM on blockchain project,” Reuters, February 7, 2017,
http://reut.rs/2leyn9x.

5. Stan Higgins, “Emirates NBD enlists UAE central bank in blockchain check trial,” CoinDesk, March 29, 2017, http://
bit.ly/2vNZppx.

6. Anna Irrera, “Nasdaq successfully completes blockchain test in Estonia,” Reuters, January 23, 2017, http://reut.
rs/2jIHDyZ.

7. Vivienne Walt, “Is this tiny European nation a preview of our tech future?”, Fortune, April 27, 2017, http://for.
tn/2q1kfQ6.

8. Ian Allison, “Guardtime secures over a million Estonian healthcare records on the blockchain,” International Busi-
ness Times, March 3, 2016, http://ibt.uk/A6UXX.

9. Ian Allison, “Consensus 2016: State of Delaware open for blockchain business,” International Business Times, May
2, 2016, http://ibt.uk/A6XGd.

10. Jeff John Roberts, “Companies can put shareholders on a blockchain starting today,” Fortune, August 1, 2017,
http://for.tn/2w1S0Uq.

11. Deloitte Spring 2017 analysis via collaboration with the Fletcher School at Tufts University.

12. CB Insights, “Deals to bitcoin & blockchain startups fall below 2014 levels,” February 3, 2017, www.cbinsights.
com/research/bitcoin-blockchain-startup-funding/.

13. Jeff John Roberts, “The SEC’s big digital coin ruling: What it means,” Fortune, July 26, 2017, http://for.tn/2uXkp0i.

14. Deloitte Spring 2017 analysis via collaboration with the Fletcher School at Tufts University.

15. World Bank, “Identification for Development,” www.worldbank.org/en/programs/id4d, accessed August 17, 2017.

16. Deloitte Spring 2017 analysis via collaboration with the Fletcher School at Tufts University.

17. American Land Title Association, “2015 year-end title insurance industry market share executive summary,” April
15, 2015, www.alta.org/industry-research/15-04/2015_Year-end_Title_Insurance_Industry_Market_Share_Execu-
tive_Summary.pdf.

18. James Schneider et al., Profiles in innovation: Blockchain, Goldman Sachs, May 24, 2016, https://msenterprise.
global.ssl.fastly.net/wordpress/2017/07/Goldman-Sachs-Blockchain-putting-theory-to-practice.pdf.

19. Deloitte Spring 2017 analysis via collaboration with the Fletcher School at Tufts University.

20. Santander and Oliver Wyman, The fintech 2.0 paper: Rebooting financial services, 2015, http://santanderinnoven-
tures.com/fintech2/.

17
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