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UK Government Report Advocates Use of Blockchain Technology

Reading Time: 2 minutes by on January 21, 2016 Business, News, Regulation, Tech
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The UK’s chief scientific advisor to the government, Sir Mark Walport, has advocated for the use of blockchain technology in a report released January 19th, including a recommendation for use of this technology to secure data in public services. For instance, the report stated that, “distributed ledger technologies have the potential to help governments collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.”

The decentralized nature of this technology is a clear benefit in the eyes of Sir Walport; he notes that current approaches to data management in government departments involve centralized systems with a “high-cost, single point of failure”. Also, the data is more frequently out-of-date, inaccurate or out-of-sync compared to a blockchain similar to Bitcoin’s. Existing systems are therefore relatively highly exposed to hacking and human errors. Loss of confidential data by public sector workers have been a recurring news story in the British press, highlighting the need for properly securing public data. Trials using this new technology are expected to start very soon.

The report looks at the opportunities for both the government and the private sector in detail. One of the recommendations made to the government is supporting the creation of distributed ledger ‘demonstrators’ for local governments, where a ‘demonstrator’ at the city-level would provide a good opportunity to trial and implement this technology. This report follows a recent development where Guardtime is working to protect a nuclear power station in the UK, amongst other infrastructure.

With regards to governance, technical code is not an optimal outcome according to the report, alluding to the recent rift amongst Bitcoin developers, indicating that there are some benefits of legal code. In a permissioned distributed ledger system, legal and technical authority lies with a single entity. The UK’s chief scientific advisor called on the government to recognize the respective strengths in legal code and technical code.

The key applications for the government are listed as protecting infrastructure against cyber-attacks, tracking eligibility for welfare, transparency of aid expenditures, reducing tax fraud, and increasing efficiency and innovation in small– and medium-sized enterprise’s. Concerning welfare, the report expects significant gains from the elimination of losses due to errors and fraud but indicates that a lot of education is needed for recipients and may create a ‘dual’ economy. Protecting infrastructure and reducing tax fraud are highlighted as the areas that are the most ready for application of distributed ledger technologies.

Praising blockchain technology, the report says, “the technology offers the potential for individual consumers to control access to personal records and to know who has accessed them.” But it also indicates that ensuring the security of distributed ledgers is a very important issue going forward. If someone can ‘legitimately’ change the entire history of the blockchain, it could then allow them to tamper with the ledger and control the network.

So while permission blockchains solve one security problem, it brings with it another security problem on a different dimension. Permissioned blockchains will be less resilient and robust compared to a decentralized system like Bitcoin. Therefore the governance of any government-backed implementation will require serious forethought regarding possible technical developments, including how to protect such systems from hostile takeovers or attacks; this will be the major obstacle for adoption of blockchain technology by the UK government going forward.  

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