The Blockchain: Possible uses for the Efficiency of Public Administrations

There is a broad consensus among technicians that blockchain development can represent an important step forward for the economy, being a technology that can have applications far beyond the cryptocurrency sector. For this reason, there is great attention on the issue and there are significant investments by banks, large companies, states and even the European Union. Despite some pilot projects and several applications being tested in the public sector, actual applications are currently almost non-existent. In this note we ask ourselves why a technology known since the nineties, which found popularity in the early 2000s, and so rich in potential, had applications that were still so modest and we find that there are significant problems that essentially concern the environmental impact and cyber security. We ask ourselves then, in the light of the most recent research, what the potential of this technology may be in the economic sector: it seems that they are truly remarkable, given that it is possible to overcome the current limits. Finally, we report a case of application of the blockchain for the fight against tax evasion (in Thailand), also in light of the fact that some authors claim that the evasion can be effectively combated and even eliminated through the use of the blockchain.

What is blockchain?

Blockchain is a technology born in the nineties and applied in the early 2000s, which has found popularity thanks to its recent application in the world of cryptocurrencies, in particular crypto cash. This technology has been listed as one of the six mega trends that will change society by the Global Council on the future of software and society at the World Economic Forum, made up of over 800 industry experts and academics globally. The European Union has invested over 340 million Euros to launch projects with the aim of making the public sector efficient through blockchain systems, and is ready to invest another 100 million in the first quarter of 2020.

The blockchain functions as a decentralized and encrypted register, in which countless operations are recorded in real time. It works like a ledger, in which however no one can modify what is written centrally, but any modification or update can take place only after having received the consent of all the parties involved in the operation to be registered or modified. The blockchain therefore places itself as the third actor in exchanges, potentially replacing the functions that we are used to attribute to notaries today. Being a distributed and non-centralized register, to register any transaction or exchange, the transaction must be approved in advance by all parties to the agreement, which in the blockchain context is defined as a “smart contract”, i.e. a contract that is terminated automatically when certain conditions occur, according to an automated programming code. Once the smart contract is approved, a block is created in the chain (hence the name blockchain), which represents a set of chronologically ordered transactions, which can no longer be eliminated from the network, i.e. from the block chain. As said previously, this mechanism is mistakenly associated only with bitcoins. In reality, it is the world of cryptocurrencies that exists and works thanks to the blockchain system, and not vice versa. Bitcoin is an application, while blockchain is the system through which many other applications can work.

The possible role of the blockchain in public administrations

The main reason that pushes many States to bet on the development of blockchain applications is to collect, verify and share data of various kinds in a secure and transparent way, in order, in particular, to implement the “Once Only Principle” (principle “a once only “) mentioned in the 2016-2020 action plan of the European Commission. According to the Once Only principle, public bodies should share information with each other, in compliance with the rules of confidentiality and data protection, both at national and cross-border level, to prevent businesses and citizens from having to provide the same data several times to the public administration. Furthermore, according to the European Blockchain Observatory, an organ created by the European Commission in order to monitor blockchain initiatives in Europe and create knowledge on the subject accessible to all.

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