Blockchain A promising technology for the Belgian public ... · A promising technology for the Belgian public administration Nov ember 2017. 2 Roland Berger . Focus – Blockchain

Blockchain A promising technology for the Belgian public administration

November 2017

2 Roland Berger Focus – Blockchain

are met. In the financial sector, this is the feature that has been exploited the most. Consider a simple asset transfer requiring multiple signatures to be authorized. The transfer can be embedded within a smart contract, which would automatically ensure that the assets are only transferred when all required authorizations have been granted.

A major consequence of the application of blockchain technologies is the reduction of costs. Thanks to process automation and cutting out intermediaries, govern-ments will be able to reduce the size of their workforce and avoid intermediaries, resulting in direct savings.

Up until now, most applications for blockchain technol-ogies have been concentrated in the financial sector and have produced two types of use cases that could be rep-licated by public administration.

The combination of decentralized features and smart contracts leads to the emergence of decentralized busi-ness models free of middlemen. In the public sector, where reliance on middlemen is heavy and detrimental to costs, blockchain technologies offer huge potential. Blockchain allows various types of transactions to be con-ducted with a high degree of trust without a middleman.

A second type of use case is process automation, both within and between companies. Many areas of the public services sector are already highly automated, but the in-dustry's data-driven nature and its constant production of new data make it ripe for further process automation.

Management summary

To put it simply, blockchain is a decentralized database of transactions, maintained by anyone with a computer who chooses to participate. Transactions or entries are stored in a block, which is linked to previous blocks, thus constituting a database. Still in the early stages of development, blockchain, with its numerous applica-tions in the financial sector, has already heralded new perspectives on what could be a world-changing technol-ogy. Yet, if the financial sector is a nice use case, could public administration be the best use case?

Like every system, blockchain operates on the basis of certain key features, in this case decentralization and immutability.

Decentralization allows the transaction history not to be managed by a central authority but to be distributed across many participants. Consequently, this makes blockchain-type technologies less susceptible to hacking as there is no single point of failure.

Once entered, records are verified and stored in a way that cannot be changed, therefore qualifying blockchain technologies as immutable. The network of computers is responsible for the quality of the new record through a process of consensus. Blockchain is thus a system where the initial entry or proof is time-stamped and can-not be tampered with.

Apart from these two features, one of the main benefits of blockchain-type technologies is their ability to sup-port smart contracts. A smart contract allows a series of conditions to be programmed for which predefined ac-tions are carried out automatically when the conditions


Blockchain: a technology to improve data security, bring further automation and reduce costs.

Blockchain – Roland Berger Focus 3

Contents

1. Blockchain ........................................................................................................ 4

Huge potential in public administration.

2. Belgium ............................................................................................................ 8

What is the future for blockchain in public administration?

3. Start now with pilots to better assess benefits and impacts ............... 12

New opportunities that can be derived from blockchain.

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Section 1:

BlockchainHuge potential in public administration.



Because of its heavy use of permanent data (social secu-rity numbers, income tax returns, medical histories, etc.), public administrations would appear to be ideal candi-dates for the use of blockchain technologies. This is rein-forced by the transactional nature of many public admin-istration activities, involving multiple stakeholders and therefore requiring trust across multiple players.More specifically, blockchain technology within public ad-ministration can be used for two main purposes: to sim-plify processes and interactions with citizens and to protect trusted records. The steps needed to implement the tech-nology for either of these purposes can range from a simple tweak to government processes to a profound change in the way most governments currently work.Simplifying interactions with citizens could involve ev-erything from easing the transfer of assets (money, prop-erty rights, land registry) and automating processes to re-engineering voting systems. Similarly, protecting trusted records could encompass things like enhanced government data protection (with decentralized data storage points, for instance) or assurance that any public data is immutable and time-stamped.

SIMPLIFYING PROCESSES AND INTERACTIONS WITH CITIZENSThis sub-section illustrates two real-life examples, which range from pure process simplification to facilitating interactions with citizens.In March 2017, Sweden's land registry authority, Lant-mäteriet, launched a test of the first land registry sys-tem running on blockchain technology. Using an identity verification system, it employs smart con-tracts to facilitate the transfer of documents and deeds from one party to another (seller, buyer, banks and government agencies) during the process of sell-ing a house. This enables the process to be accelerated and facilitates better tracking of transaction progress for all parties.

Making democracy more participative is another way of facilitating interactions with citizens. In the South Korean province of Gyeonggi-do, local authorities used a block-chain platform to enable people to vote on community aid projects. Local residents could propose ideas through the platform, whereupon the government would award bud-gets to fund those projects. The use of such a system al-lows governments to cut the cost of maintaining a central agency, save time spent collecting the results of the vote and ensure the immutability of the results.

PROTECTING TRUSTED RECORDSProtecting trusted records relies on two main benefits of blockchain. Firstly, it means that there is no single point of attack. Because it is decentralized, blockchain doesn't depend on a single computer/network of computers, rendering it less susceptible to hacking. Secondly, it means that documents are immutable. States can guar-antee that documents on blockchain are time-stamped and therefore genuine.In Australia, for instance, governments are looking at using blockchain for storing police camera videos to en-sure that video evidence is not tampered with and as a means of easily verifying where and when the video was taken. Similarly, they use blockchain to improve coordi-nation across government departments as it increases trust in the documents issued.In Singapore, authorities are looking into stopping trad-ers defrauding banks using fraudulent invoices. They plan to create, via blockchain, a unique cryptographic signature for every invoice.Through their Delaware Block Initiative, this US state's authorities have the ambition to store some corporate acts on blockchain. This includes acts such as company registrations, share issuance documents, capitalization tables, shareholder communication documents and fund-raising documents for start-ups. In combination with smart contracts, this technology would allow for


efficiency gains (documents would be filled in automat-ically, saving time for lawyers and government officials) and ensure more trustworthy documents thanks to their immutability.The following figure outlines some of the main gov-ernment actions in implementing blockchain-type technologies. A

FIVE PREREQUISITES TO DEFINE A MEANINGFUL USE CASE OF BLOCKCHAINAcross the globe, public administrations are testing blockchain technologies, pushing the limits of what currently exists, unraveling new possibilities and look-ing at new ways of working and of interacting with cit-izens. However, governments must be careful not to get carried away by the perceived trendiness of the technol-ogy and not to invest taxpayers' money in applications that could be better served by different technologies. Five questions must therefore be answered in the pos-itive before considering using blockchain for a given project: Do you need a database – and do you need a shared database? Do you need read and write access for multiple users? Do users mistrust each other? Do you want to avoid an intermediary? As figure B shows, blockchain can, for instance, be ap-plied to store vehicle insurance records and make them accessible to numerous competing insurers. The technol-ogy is not, however, suitable for sharing patients' medical records among multiple hospitals in the same chain.

A: Blockchain technology can be used for two main purposes. Simplification of processes and protection of trusted records.

Source: Roland Berger

Simplifying processes and interactions with citizensSweden is currently placing all real estate transactions on a blockchain-type basis to hasten processes, limit paperwork and allow all parties involved to easily follow the progress of the agreement.

Georgia's government launched a project to register land titles on a blockchain-type technology.

Antwerp has established proofs of concept on e-government, lifecycle (birth registration) and digital identity to improve security, mobility, sustainability and administrative efficiency within the city, as well as to inform its citizens better.

Province of Gyeonggi-do has implemented a voting system based on a blockchain technology for its residents to vote on community projects.

Protecting trusted recordsIn Delaware, efforts are focused on transferring state records to a more open ledger, allowing better transparency and efficiency.

Singapore is looking at blockchain to prevent traders from defrauding banks using fraudulent invoices. Blockchain would allow a unique cryptographic signature to be created for every invoice.

Australia is looking at using blockchain for storing police camera videos to ensure that evidence is not tampered with.


B: A blockchain system must check five key questions.Comparison between two cases.

Source: Gideon Greenspan, Roland Berger

Blockchain Shared database

Do you need a shared database with read and write access for multiple users?

Yes, all insurers must be able to access the data provided by others but must also be able to create and/or modify existing data

Yes, all hospitals in the chain should be able to access patient information and create/modify it when the patient visits a given hospital

Do you need a shared database?

Yes, as customers can easily contact multiple insurers they must share the information available with their peers

Yes, as some hospitals are in the same region the same patient could use multiple hospitals

Do you need a database?

Yes, to store all vehicle insurance records in one easily accessible database

Yes, to store the identity and complete medical records of all patients

Do you want to avoid an intermediary?

Yes, no intermediary currently exists and the cost of creating one is best avoided

Do users mistrust one another?

Yes, insurers collaborate on this topic but remain competitors and do not trust one another in modifying their data

No, all hospitals are in the same chain and work for the patients' wellbeing and therefore their economic and political incentives are aligned

No, potential intermediary provide value to the whole system by analyzing the data for public health purpose

Proof of InsuranceCreate a repository of vehicle insurance records, shared by numerous competing insurers to prevent multiple-insurance fraud

Data sharing in hospital chainShare patients' medical records among multiple hospitals in the same chain to ensure up-to-date information for all parties

Section 2:

BelgiumWhat is the future for blockchain in public administration?



Belgium's state, with its numerous powers spread across its federal government, its three regional governments and its "communautés", is fertile ground for administra-tive simplification. Within each area of government au-thority, multiple use cases can be imagined. To illustrate specifically what blockchain could bring to these govern-ments, we have decided to look at four applications that could drastically change the way governments work and interact with their citizens: finance/tax, transportation, employment and what is known as cadastral administra-tion, in other words land registry.Within the Ministry of Finance and Tax, one could imagine tackling the issue of tax evasion between European coun-tries. For instance, a multi-country blockchain would facil-itate the sharing of tax information between countries (in-come tax returns, property taxes, shareholder taxes, etc.). Any information put into one of the countries' systems could be accessible to all other members of the blockchain. In this case, the benefit of a blockchain over a centralized

database, which would also enable the sharing of informa-tion, is the absence of intermediaries and thus of running costs for all countries involved in the blockchain. CTurning now to the ambit of the Ministries of Transpor-tation, multi-modality across Belgium has been an ob-jective for many years, especially in Brussels where traf-fic jams weigh heavily on the entire economy. However, achieving this aim is difficult as Belgium has four public transportation services (SNCB, STIB, Tec, De Lijn), not counting the numerous, more recent, public and private alternatives that have sprung up (Cambio, Villo, Drivenow, Zenbus, etc.). Ideally, people would be able to pay for a certain mobility budget allowing them to ac-cess any transportation service whenever they needed it. That would clearly require a shared database between all transportation services, which would incur implementa-tion and maintenance costs. With a blockchain, the costs could be reduced, with implementation facilitated among the different contributors. D

C: A multi-country blockchain would facilitate the sharing of tax information between countries. Without blockchain, countries need an intermediary, increasing therefore costs and complexity.


Bilateral exchange of information exists between some countries through centralized databases. However, a shared database is expensive to implement and operate.

Any information input in one of the four countries' systems is accessible to all without any intermediaries.

Decentralized; ImmutableWithout blockchain With blockchain


dating the description of these properties and their le-gality and being the point of contact for citizens (calcu-lating their cadastral taxes and answering any inquiries). As we have seen piloted in several countries so far (Swe-den, Georgia and Ghana), one could imagine a block-chain where the registration of real estate properties was done automatically by citizens. Members would be able to access real estate plans, follow up on the progress of a sale and be directly in contact with the administration, significantly reducing the importance of the cadastral administration. F These four applications vividly illustrate two ways in which a public institution could benefit from block-chain. Public institutions can either add new services to an existing offer (e.g. transportation and tax) or elimi-nate an existing low value-adding activity to refocus on higher value-adding activities (such as employment and cadastral administration).

Within the Ministries of Employment, government au-thorities currently ask unemployed citizens to provide proof that they are actively seeking a job ( job applica-tions sent, rejection emails received, etc.) However, fal-sification of such proof is very common. One could imagine a blockchain system operating between govern-ments, companies and citizens, where employment agencies could immediately see how many applications had been made and where, and view their status for ev-ery unemployed person. Smart contracts could link the payment of unemployment benefits to the existence of job applications without human intervention, allowing civil servants to focus more on supporting the reintegra-tion of unemployed people. E Like most other developed countries, Belgium has, for several decades, been monitoring its portfolio of real es-tate through its cadastral administration (land registry). The administration currently has three main functions: inventorying all real estate properties (new and old), up-

D: Multi-modality has been an objective for many years. To facilitate multi-modality in Belgium, a blockchain approach could be recommended.


Centralized database managed by an intermediary.

Decentralized

One multimodal solution.

Without blockchain With blockchain

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SNCB - NMBS Mobility Zen Car

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E: Smart contracts could facilitate the control of the unemployed citizens. And the regional agencies could focus on high added value activities.


F: Blockchain could significantly reduce the importance of the cadastral administration. Registration could be done automatically by different stakeholders (notaries, government bodies, contractors, ...).


Immutable

Cadastral administration

Buyers

Buyers

Sellers

Sellers

Third parties (notaries, government bodies, contractors, ...)

Third parties (notaries, government bodies, contractors, ...)Centralized

datbase

Without blockchain

Without blockchain With blockchain

Smart contractsWith blockchain

VDABForemActiris Refocus on high

value-adding activities (developing high-value partnerships, better preparing unemployed citizens to job interviews, ...)

Other activities (training of unemployed citizens, developing partnerships with companies, administration, ...)

Accompanies & controls unemployed citizens (checking number of proofs, making sure unemployed citizens understand fully their task, ...)

Checks proofs with employers (validity of proofs, time-frame, ...)

VDABForemActiris

Other activities

Section 3:

Start now with pilots to better assess benefits and impactsNew opportunities that can be derived from blockchain.



Blockchain holds both opportunities and challenges and therefore has to be addressed in the right way. Below are a number of steps recommended for every adminis-tration planning to implement blockchain.

As a company embracing digitization, we can only advise governments to study the new opportunities that can be derived from blockchain and build business cases across government agencies to assess and realize the benefits of this promising new technology.

As a company embracing digitization, we can only advise governments to study the new opportunities that can be derived from blockchain.

Firstly, administrations have to prepare themselves for block-chain initiatives. That means allocating resources to block-chain, including putting blockchain on their agenda and edu-cating the stakeholders.

Secondly, assess frequently the potential impact of block-chain on the organization as blockchain is permanently evol-ving. If you believe that the impact of blockchain on your ad-ministration will be positive, start gathering blockchain insights and best practices; take a look at similar administra-tions using blockchain.

Next, pilot some of the most promising ideas to assess where and how blockchain could be useful.

Finally, implement the successful blockchain initiatives and focus on streamlining and digitizing processes end to end. This will increase the speed of implementation and help you avoid roadblocks.


AUTHORS

Stephan Janssens Partner+32 470 213 [email protected]

Pierre Bastien Principal+32 476 446 [email protected]

Kevin de Patoul Senior Consultant+32 0 476 44 63 [email protected]

Sylvain Burniaux Consultant+32 476 44 63 [email protected]

This publication has been prepared for general guidance only. The reader should not act according to any information provided in this publication without receiving specific professional advice. Roland Berger GmbH shall not be liable for any damages resulting from any use of the information contained in the publication.

© 2017 ROLAND BERGER GMBH. ALL RIGHTS RESERVED.

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Blockchain A promising technology for the Belgian public ... · A promising technology for the Belgian public administration Nov ember 2017. 2 Roland Berger . Focus – Blockchain