BY Capgemini
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Capgemini IT: GROWTH ACCELERATOR

IT trends spotted and checked by experts

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What happens

After the UK government's chief scientific officer Sir Mark Walport argued for the potential advantages of blockchain in the public sector, Capgemini releases its eGovernment Benchmark report urging Europe's governments to accelerate their push into digital platforms.

so what?

Enterprise Architect - Tax and Welfare Solutions at Capgemini

Nick is a technologist with wide business sector experience, practising 'business architecture' ? blending consulting, commercial and technical skills, both for both public and private sector groups...

Head of Digital for Banking and Capital Markets, Capgemini

While the private sector is already grappling with the opportunity presented by this rapidly emerging technology, European governments are still slow to embrace its potential. On one level, cryptocurrencies have the ability to create alternative value transfer mechanisms, which support the localisation of services and promote sharing economies, whilst at another level blockchain technology itself can create new services and reduce the need for traditional, centralised, high-power processing platforms.

As highlighted in this month's Capgemini study, governments must put greater emphasis onto developing digital services to empower people and business in order to seize the advantages available.

How could blockchain be used by governments and other organisations?

Cliff: I would characterise the way that blockchain is being looked at in three levels. The first of these are applications that are leveraging the public blockchain, using the bitcoin environment. They are using it in areas like new versions of loyalty schemes, new versions of coinage, ways of exchanging foreign exchange, through to putting Smart Contracts onto that public chain.


I think that is a very practical way forward. We've seen experimentation in a number of areas. One of those areas is Land Registry where Smart Contracts are being trialled on the blockchain for the management and visibility of land titles and changes to them.

There is a second tranche around permissioned or private blockchains where people are experimenting with new technology combinations to address some of the public bitcoin blockchain's performance limitations. We are seeing a lot of startups created that are experimenting with different variations of how to use the technology. There are several consortia being created in different areas, such as R3 and its Corda platform and with IBM's Hyperledger project. These consortia are conducting many experiments with different types of business applications, for example in the area of Trade Finance.

A third area is ultimately in banks and their core processing platforms. The centre of their IT investment is mainframes and transaction processing around ledgers. One question people are asking is: "If I look forward 10 years, will I be able to replace my mainframe and core processing platform with distributed processing platforms in the cloud using the technology that blockchain has driven?"

What are the benefits and drawbacks of blockchain for the public sector?

Cliff: One of the benefits of blockchain in the public sector is its clear focus around "my data" and possession of "my data". The focus has been around decentralisation of data. There are a lot of opportunities to make use of the technology there. 

At the same time, one of blockchain's biggest issues is that it is not just the technology, there is also quite a different operating model. In the Chief Scientific Advisor's paper, it tended to talk a lot about the technology when actually it is a very different paradigm in terms of the way one needs to think about business operations as well. With some of the experiments we have seen, if they are seen as too technological without understanding how people work, there is a problem.

For example, there has also been a bit of debate in the press about some ideas the welfare authorities were having around using a blockchain ledger, and people were worried about the fact it was immutable. What privacy controls were in place given that you can't remove information from it?

How could blockchain change the way government works?

Nick: That could happen in two ways. Firstly, the indirect influence on government of what is happening outside the public sector, in say, financial services, or consumer adoption. That will have an influence on what the public sector does in response. Secondly, there is the direct use of blockchain to improve government and the public sector itself.

The direct influence of decentralised operations in financial services will have an impact on the public sector. The public sector is a huge user of banking services: lower transaction fees benefit everyone. However, tax and welfare agencies typically depend on many information sources and financial intermediaries such as banks and the banking network to obtain taxpayer data. If the world is decentralised and some of those banks and networks are dis-intermediated in the longer term, there are going to be different mechanisms needed to get the data. Public sector organisations, including regulators, are going to have to link up differently and engage actively in the evolution of blockchain technology in the private sector.

Secondly, for government itself, Cliff already mentioned opportunities for the government to use the technology to decentralise its processing. Much of what government does is hugely centralised at massive scale, and that drives cost. You can imagine the infrastructures that we see around us for, say, a self-assessment where we all update   and view at the last minute at the end of January. There is a huge peak and a cost for the centralised infrastructure and staffing to handle that. 

What if a lot of that processing was both decentralised and more automated? A lot of those tax records could be maintained by organisations and individuals working more collaboratively with government, and by sharing information. That would take the load off a lot of the central government infrastructure and solutions: Government would govern decentralised applications and infrastructure, doing that securely on a cryptographically-protected distributed platform, focusing its efforts on the exceptions to the largely automated rules.

This is a promise for the longer term. How you get there is the problem. It needs a change in thinking about the traditional, centralised operating model. The business change will be more of a challenge than the technology change.

A lot of the technology work focuses on PoCs (proof of concepts). It is all very well to experiment, but a lot of this is about how you move from something that is centralised, in a business sense, to something that is decentralised. For example, how would you manage to get taxpayers to trust intermediaries such as employers or tax agents, or even the people you regularly trade with, to share information securely about your circumstances and transactions? It would be a network of trust, not reliant on some centralised service from the tax authority. 

We will see a lot of opportunities for distributing the load but that's going to take time to develop, limited by the pace of internal process change and taxpayer acceptance.

Who cares?

  Government will need to understand how blockchain can extract value from technologies such as big data and the Internet of Things.

The key to the growing interest in blockchain technology is its use of complex and immutable cryptography that proves resistant to hacking. This opens up a range of possible new applications and more open government.

- The Isle of Man is currently working on government initiatives to store information and make contracts using blockchain applications. One of the initial projects involves the Department of Economic Development in the Crown dependency using a blockchain registry as a record of which companies on the Isle of Man actively use cryptocurrencies. 

- There is a blockchain-as-a-service offering available to public sector organisations through the GDS Digital Marketplace on G-Cloud 8. The platform is offered by Credits, a startup formed in 2014. Capgemini also has a public sector blockchain consultancy offer on G-Cloud. These services together offer a range of blockchain services to UK public sector bodies including health, local government and education.

- In Singapore, the government is looking to blockchain to stop traders from defrauding banks. Fraudulent companies used duplicate invoices for the same goods to obtain millions of dollars from banks. This has led the Singapore government to develop a system with local banks focused on preventing invoice fraud by using blockchain to create a unique cryptographic hash (a unique fingerprint) for every invoice.

- An e-residency program has been established in Estonia to allow anyone worldwide to apply to become an e-resident of Estonia to set up a business, for example. Residents obtain a digital ID card with a cryptographic key to securely sign digital documents, removing the need for ink signatures on government forms. Full Estonian citizens can vote and see what data is held by government about them, who has accessed it and why. It's one of the few countries today where citizens' trust in government has been increasing.
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