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Blockchains Unchained

The working paper Blockchains unchained blockchain technology and its use in the public sector, produced by OECD, tries to work as a guide to equip public servants with the necessary knowledge to understand what the Blockchain architecture is, the implications it could have on government services, and the opportunities and challenges governments may face as a result. Moreover, it also tries to clear what the Blockchain architecture is not to help policy makers look past the hype and determine whether Blockchain technology is something that may help them advance their missions.

The first section tries to describe Blockchain technology as an open, shared and trusted record of transactions among parties that is not stored by a central authority. Based on this approach, all users running Blockchain software constitute the nodes of the network and have a copy. This is in line with blockchain’ s main assumption is that all transactions will be visible to all nodes in the system at all times. To achieve this, all nodes hold identical ‘˜ledgers’ of transactions that are rapidly updated any time a new set of transactions is added. This enables consensus models where nodes in the system confirm the validity of transactions that occur on the platform, and flag inappropriate dealings when necessary. In this section, the authors also discuss possible ways in which governments could adapt to the emergence of this technology. Hence, a discussion around current blockchain initiatives, as well of the various types of use cases that may the most relevant in the public sector, is also being presented in this paper.

The following section focuses on the challenges that blockchain technology poses to public administrations, as well as its limitations which may make render the technology unsuitable for certain uses. These include a large set of aspects, such as data protection, governance, or confidentiality of information. Coding constraints and governance decisions also add to the overall complexity of the system. In addition to this, the format that some blockchains take today have inherent limitations, such outrageously high levels of energy required to power certain systems, as well as the slow pace of transactions processes. It is stressed that these challenges, limitations, and consideration must be well-understood by policy-makers as blockchain continues to expand into the public sector.

Finally, a series of appendices provide case studies from across the world, and across a variety of departments and agencies, as well as some more technical discussions of specific aspects of blockchain technology. It becomes clear that while blockchain technologies have mostly been used in the financial sector, predominantly for monetary transactions, this powerful tool is also being used for non-monetary matters. Digital identification, proof of land ownership, supply chain management, and even voting, are only a fraction of the disruptive impacts that blockchain could have on the public sector.

You can read the full working paper here.