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Autonomy or Just Another Slavery?: Ukraine and Bitfury Start Full-scale Blockchain eGovernance Program

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The Ukraine and Bitfury test new frontiers! The State Agency for eGovernance signed a memorandum with Bitfury, which could be the beginning of the biggest and most ambitious blockchain project a government has started.

On April 13 Oleksandr Ryzhenko, head of the Ukrainian State Agency for eGovernance, and Valery Vavilov, CEO of Bitfury, signed a memorandum which could be a milestone in the digital transformation of the state. The memorandum aims to start a wide scoped project which aims to bring most parts of the governmental data streams of the Ukraine on a blockchain.

The “full-scale Blockchain eGovernance program” will start with a pilot project to test how the Ukrainian eGovernment platform can use blockchain technology. The main areas being explored are state registers, public services, social security, public health and the energy sector. “Once the pilot is complete, the program will expand into all other areas, including cybersecurity,” the press release notes.

According to the release blockchain technology “will help improve the protection of state databases against unauthorized interference, reduce cost to citizens, improve overall efficiency, improve investment in Ukraine, and help reduce corruption across the board.” Ryzhenko, head of the agency, adds: “Ukraine’s aim of reform in government sector is extremely strong … Blockchain has proved itself as a good ground for cost reduction, government efficiency & transparency to help reduce corruption. All these are among our goals. So we’re ready to bring blockchain as part of Ukrainian eGovernment strategy.”

Helpful for a Variety of Reasons

A country like the Ukraine can profit from a successful application of blockchain technology for several reasons. The country, which has still not fully recovered from the severe impact of the financial crisis in 2009 and the civil war, could use the most modern public service infrastructure in the world to attract investors, to strengthen the IT industries and to free resources for growth. The blockchain can also help to fight the epidemic corruption in the country. The Ukraine is the most corrupt country in Europe; the global index of corruption ranks it 131 out of 180.

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Further, the blockchain can help the Ukraine in a very specific historical and political situation. The country sits between Russia, which is not known for easily accepting established borders, and the European Union, which promises money and contracts, but has gloriously failed to help Eastern Europe to keep up with Western European standards. On top of this, there are the power plays of NATO and USA, which are alleged to hiddenly play Ukraine against Russia.

The political situation is, to say it cautiously, delicate. Blockchain-based public service and governmental data management could help to make the data immutable against every influence. Whatever Russia, Nato, the CIA, the EU says and wants – the data of the Ukrainian government will not be changed. This could be helpful in a lot of regards, for example, in the land registry, where owners of land can trust the government that what is agreed today will have, at least, some legal safety, no matter what new friends a new government will have.

A Complete Loss of Autonomy?

The project of the Ukrainian government and Bitfury has great potential and could turn the Ukraine into a pioneer in the digital transformation of governmental services. But it is hard to imagine a realization which does not end in a total disaster.

For example, what if Bitfury uses the Bitcoin blockchain? Due to the strictly limited capacity, this will make governmental data management slow and expensive. The result will be not more, but much less effective than today. Bitfury could fulfill its role as a “blockchain infrastructure provider” which uses its share of around ten percent of the global Bitcoin hash rate to make sure that the blockchain transactions of Ukrainian eGovernment go through. But this would make Bitfury effectively the notary of the Ukrainian government, and the whole country would be dependent on a private company to maintain governmental processes.

Even more terrible would be if Bitfury uses a private, non-public blockchain to manage the official data of the Ukraine. This would effectively make blockchain just another name for a cloud storage, and Bitfury would secretly become the master of the governmental data of the Ukraine. Since Bitfury does not just have an office in Washington D.C. but entertains a close relationship with the US government, it would be not too much of a stretch to call such a scenario the first hidden digital takeover of a whole country. Instead of preserving the autonomy of the state, the blockchain would make the Ukraine completely lose its sovereignty.

But at this time it cannot be said how the project will play out. Only time can tell what the cooperation of the Ukraine and Bitfury will result in.