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Originally devised for Bitcoin, the distributed ledger is essentially a shared asset database that is trusted via immutability encoded into the security by design, and that everyone can inspect. Assets can be financial, legal, physical, or electronic. As the history of transactions is built upon and reflected within seconds, data amendments are only allowed according to strict rules and require the consensus of all involved in previous transactions. The promise of the technology lies in the creation of trust and the transparency of its distributed record keeping capability.
Take Airbnb, the use of blockchain technology could eliminate the company. Imagine booking a room directly with anyone in the world, from any location, with the same security and convenience: except without the intermediary fees. Their services would no longer be bound to a single online authority that offers a free platform, while skimming off every transaction. Rather than getting access through traditional consumer-to-business services, access could be organized via direct peer-to-peer transactions. Furthermore, these relationships could be managed autonomously by algorithms on distributed computing engines beyond the control of any one organization or individual. The promise of a “platform-less platform” unlocks possibilities far beyond rendering Airbnb and similar centralized companies obsolete.
Originally created to bypass centralized authority, ironically, the technology has found big backers in governments. In fact, Brian Forde, a blockchain expert at the Massachusetts Institute for Technology, posits governments will be driving its implementation. In order to explore blockchain in German Government, on July 5th 2017, Pencho Kuzev organized the Konrad Adenauer Foundation’s (KAS) first panel of experts and practitioners working with the technology. The panel featured Marcus Dapp of the Technical University of Munich-based fortiss, Björn Wagner of Parity Technologies, and Walter Palmetshofer of Open Knowledge Foundation Deutschland, who discussed the implication of this new technology for governments. Kuzev opened the panel with The Economist’s coinage in 2015 of the technology as the “Trust Machine” that would have transformative implications in the global economy. He also mentioned the UK government’s initiative articulated in a blockchain report in 2016 written by the country’s Chief Scientific Adviser. The report makes policy recommendations to facilitate the technology’s potential in redefining the relationship between government and the citizen in terms of data sharing, efficient and personalized services, trust and transparency. While the foundation of the technology remains antithetical to all third parties in the “trust business” (centralized institutions, companies, and authorities), in practice, this technology has proven to hold a viable framework for governments to reduce fraud, corruption, error, and bureaucratic costs.
This point was highlighted by panelist Marcus Dapp, who stated that the more decentralized a solution to a concept, the more sense it makes to use blockchain. However, he sees greater potential in the technology to offer an immutable, failsafe and transparent system for any transaction. In theory, all types of information safeguarded by the state from birth certificates to business transactions can be stored into a blockchain, sealing off any possibility of tampering by corrupt administrators. Panelist Walter Palmetshofer remained cautious, underlining that as the code and input rely on human designers and human collected data, the designs of blockchains are inherently prone to error. Further, while the technology is revolutionary, there are limitations to its applicability and implementation. The underlying importance lies in the construction of the inputs and designs. Palmetshofer quotes Thorsten Dirks: “If you digitize a bad process, then you have a bad digital process.” Even presuming state authorities do not adopt the technology, governments should take action to facilitate the technology’s growth and scalability, and develop the technical and legal oversight and clarity to avoid possible harm. Panelist Björn Wagner further emphasized that the key disruptive quality of blockchain technology lies in its open source basis and its open availability to all literate in code.
Government offices in Georgia, South Korea, the United Arab Emirates, Sweden, and Estonia have spearheaded state experimentation and employment of blockchain technology. They have launched pilot programs to offer more efficient, secure, and transparent services to their citizens in areas from voting and land registration to welfare payments and identity management. A recent survey by the World Economic Forum (WEF) of experts and executives in the informational technology sector expected at least ten percent of global GDP to be stored on blockchain platforms by 2025. Meanwhile, Germany continues to lag behind in adopting new digital technologies. It ranks a lowly 11th - with little progress from the previous year - on the 2017 European Commission Digital Economy and Society Index (DESI), a composite index that tracks the evolution of EU member states in digital competitiveness. As demonstrated by the panelists and participants at the KAS panel, the country report highlights that German citizens and companies eagerly take part in the growing opportunities of new technologies, but face setbacks when dealing with the eGovernment services. In 2017, only 19% of the population are eGovernment users, in this regard Germany’s ranking falls to 23rd. Moreover, this percentage has not changed since 2015 and yet there are still no coherent, nationwide eGovernment services. The DESI Report highlights the country’s greatest challenge lies in improving its digital government services.
Even with the fallibility of input data and security flaws inherent in human design, indicators still point to growth in the technology’s experimentation, adoption, and usage, in both private and public sectors. This growth will require governments to keep an eye on their exploration, especially in these early stages in order to set robust standards and take full advantage of their potential. Meanwhile, on June 29th, 2017, the first federal blockchain association (Blockchain Bundesverband) has been launched.
Following September’s federal elections, Germany’s political leaders will have an opportunity to seize their mandate and blaze a new digital agenda for the country and the rest of the European economy that maximizes technology. German citizens would benefit from greater trust in their government and services, as their relationship is redefined through increased transparency and cost-cutting bureaucratic overhaul. By adopting tech-centered policies that increase security, spur innovation, and stimulate the economy, policy makers will ensure that Germany stands to remain at the forefront of the global economy.
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