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Survey: Government Has Big Plans for Blockchain

While blockchain technology doesn't have the highest profile among senior executives, those government and business leaders who do understand it have big plans for putting it to use.

In terms of awareness, blockchain is not exactly topping the charts. In a recent survey, Deloitte found that 40 percent of senior executives in the private sector, which tends to be ahead of government tech-wise, have little or no knowledge about the electronic ledger system.

At the same time, enthusiasm for blockchain is strong among those who do claim some knowledge of the technology. Blockchain presently underlies some digital currency and could one day serve to support electronic voting and other government needs.

The Deloitte study coincides with the release of an IBM survey, Building Trust in Government:
Exploring the Potential of Blockchains. And both surveys reach similar a conclusion: Those government leaders and business executives who understand blockchain have big plans for its implementation in the not too distant future.

As a ledger system, blockchain has some unique features that make it appealing to government users. It is decentralized, so there is no vulnerable hub, no one keeper of the keys. It’s transparent to all users, and proponents say that makes it almost impossible to alter or fabricate entries.

IBM spoke to government executives who self-identified as having blockchain projects on the books. Nine out of 10 said that by 2018, they expect to make blockchain investments in the areas of financial transaction, asset management, contract management and regulatory compliance.

And seven in 10 government executives said they expect blockchain to deliver cost, time and risk reduction benefits in the area of regulatory compliance. “When you look at the opportunity for transparency in transactions and the ability to conduct audits, blockchain naturally supports those," said David Zaharchuk, global industry research lead at IBM. "That makes a shared ledger a natural fit in support of compliance."

While the IBM survey took a global view, researchers also took a look specifically at attitudes in North America, where 96 percent of blockchain-savvy government executives say they plan to use the digital ledger for financial transaction management by 2018.

All these findings suggest that, at least among the early adopters, blockchain’s star is rising.

“There is an understanding and an appreciation among many organizations that there is a real opportunity here," Zaharchuk said. "This is a real technology, not hype, not a fad, and they are taking a real interest in finding out how the capability can match their missions."

Deloitte’s findings show a parallel evolution in the corporate community. Among 308 business leaders familiar with blockchain, 55 percent said their company would be at a competitive disadvantage if it failed to adopt the technology. Forty-two percent believe blockchain will disrupt their industry.

Many respondents indicated they have actively started spending in support of the technology. Twenty-eight percent said their firms have already invested $5 million or more in blockchain technology, with 10 percent investing $10 million or more. Looking to the near future, another 25 percent of respondents expect to invest more than $5 million in blockchain technology during the next calendar year.

In a trend they say “defies conventional wisdom,” Deloitte researchers note that corporate interest in blockchain has gone beyond financial services, where the technology first gained traction. “Although the financial services industry was early to show interest in blockchain, and accounts for a significant amount of investment and activity, the survey revealed that other industries may be even more aggressive in pursuing blockchain strategies,” they write.

Along these lines, 42 percent of executives surveyed in the consumer products and manufacturing industry said they plan to put $5 million or more toward blockchain in the coming calendar year. Technology, media and telecom executives follow at 27 percent, and financial services at 23 percent.

Government executives showed a similar breadth of interest, a finding that raised eyebrows among IBM researchers. “Government is usually slower to move on new technology,” Zaharchuk said. “So I was surprised at the level of experimentation that has been happening across governments.”

In addition to gauging the general interest level, IBM researchers also were able to ferret out a range of best practices for government leaders looking to move toward blockchain deployments.

  • Passion. Zaharchuk pointed to Estonia, where enthusiastic support from government leaders has led to the creation of a secure means for citizens to access government-issued digital identity services. “The success of blockchain will depend on the culture of the organization,” he said, adding that because blockchain is still in its formative stages, “it has to be a culture that supports experimentation, a culture that is willing to innovate.”
  • Buy-in. Australia is conducting limited-scale rollouts of blockchain-based voting as a way to develop citizen acceptance. “It’s going to be important for leaders to build trust among constituents,” Zaharchuk said. “It’s in the nature of the applications. When you talk about using a new technology to do financial management, to manage transactions and public funds, when you are talking about applications around voting, there is going to be greater scrutiny around those kinds of things.”
  • Partners. The most successful early adopters “are the ones who are defining and understanding the stakeholder ecosystem, all the institutions and vendors and citizen organizations that are going to be a part of implementing this broader solution,” he said. “You need identify those and early on and collaborate early on so you have a common alignment in the vision.”
The IBM survey identified 14 “trailblazer” governments that are leading the way on blockchain. While the United States didn’t make the cut, researchers did single out the U.S. Postal Service and Department of Homeland Security for their research into blockchain’s potential.

“There has been a greater degree of activity around specific pilots in other countries,” Zaharchuk said. “But when you look at the scale of the United States government compared to some smaller countries, it is understandable that there would be somewhat of a longer lead time.” 

Adam Stone is a contributing writer for Government Technology magazine.