How does Blockchain support transparency among communities?

Lauri Haav leads Estonia’s e-Residency Programan Estonian government startup.

Trust in governments, and indeed in democracy as a concept, is not in particularly good shape. For example, Cambridge University’s Center for the Future of Democracy reported in 2020 that the majority of people are dissatisfied with democratic governments, a sharp increase from the 1990s when most people were satisfied. This discomfort is also reflected in data from the Organization for Economic Co-operation and Development (OECD), which shows low levels of trust in governments worldwide.

Of course, while Francis Fukuyama famously argued that we had reached the “end of history” when the Berlin Wall fell in 1989, the trust required in people and institutions to underpin democracy has always been fragile. I feel that in Estonia we are aware of this, as trust in the post-communist countries entered (the pay wall) in the 1990s at a low point.

A possibility

However, this low starting point offers an opportunity for progress, and the Cambridge report illustrates that while most large democracies have seen growing discontent, a number of small democracies have improved, particularly in Scandinavia and post-communist Europe.

I think a key part of the improvements made in Estonia was the exploration of blockchain technology to underpin various public information systems. As a technology, blockchain was tested as early as 2008, with early experiments predating the bitcoin white paper that gave voice to the term “blockchain” itself. In fact, in the early days the technology was internally referred to as “hash-linked time-sampling.”

One of the earliest demonstrations of this is the Keyless Signature Infrastructure (KSI), which is a blockchain-based technology developed in the wake of a series of major cyber attacks on the websites of Estonian government agencies, banks and newspapers.

These early experiments proved successful, and blockchain has been in use in the country to protect national data, e-services and smart devices in both the public and private sectors since 2012. Although this cannot explain improvements in trust in government seen . in Estonia, I think it has certainly played a significant role.

I think its success in public applications shows its significant potential across different industries. For example, in agriculture, blockchain technology can prove the supply of products as they move from field to store. Research from Deloitte highlights how similar gains can be achieved in supply chains across multiple sectors, and the researchers explain that this can be particularly valuable when supply chains are complex and global.

Supports transparency

As the OECD highlights, transparency is a key part of building trust, especially at a time when misinformation has caused many to doubt what they see and hear. This is doubly so when corruption and poor accountability do far more damage in terms of erosion of trust in those in power than they do in direct economic costs. In fact, the World Economic Forum claims that public corruption is the biggest challenge in many parts of the world because of its ability to stifle social, economic and environmental development. They point to blockchain technology playing a role in tackling this challenge.

Once again, there are many potential use cases for blockchain in commercial settings when it comes to transparency, including real-time settlements, smart contracts, supply chain traceability, and improved purchase order management. These all have the ability to improve trust and transparency in processes that may otherwise be opaque.

In Estonia, for example, we use blockchain to substantiate property registers. By using blockchain, citizens get a secure and publicly verifiable record system where they can prove their land rights. This then reduces any potential for manipulation of registers and strengthens land ownership. Blockchain is also being deployed to register property and businesses and within healthcare and digital legal systems. In each case, blockchain provides invaluable tools to ensure the integrity of data across each distribution. While this has obvious implications for building trust between the public and government, it is equally valuable when it comes to establishing trust between industry and government. This is especially important for small businesses that don’t have large legal teams to call on.

Build trust

While blockchain is by no means the only way to build trust, it is a lever we can use. As IBM explained in a recent paper, blockchain has the ability to secure shared data between citizens and agencies and can reduce any concerns people have about the use of their data.

Economist Kenneth Arrow already pointed out in the 1970s that a lack of mutual trust undermines the functioning of any economic system, but as the UN claims, it is also crucial for society itself to function effectively: “Trust in each other, in our public. institutions, and in our leaders are all essential ingredients for social and economic progress, so that people can cooperate with and express solidarity for each other.”

Blockchain is not the big bullet for these challenges, but I see great potential in it to help improve efficiency, reduce translation costs. In a time where democracy is in a state of crisis, it is perhaps something for more of us to consider with companies in a position to be part of this experiment and movement.

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