Using blockchain for effective governance: Decentralized disruption in authority

The technology behind cryptocurrency, blockchain is now seen as a disruptive innovation with ramifications across sectors ranging from governance, politics, supply chain, business, banking and even the environment.


In fact, a decentralization platform such as blockchain might just revolutionize our concepts of state authority, citizenship and democracy.

In the core concept of blockchain, there is fault-tolerant computation, and as Marcella Atzori elucidates in his paper, ‘Blockchain Technology and Decentralized Governance’, “The formidable innovation introduced by this technology is that the network is open and participants do not need to know or trust each other to interact: the electronic transactions can be automatically verified and recorded by the nodes of the network through cryptographic algorithms, without human intervention, central authority, point of control or third party (e.g. governments, banks, financial institutions or other organizations).” The traditional role of the state in democracies is based on the existence of centralized institutions. Blockchain allows for the recreation of governance, away from centralized concepts of coercion and hierarchies and towards mechanisms of distributed consensus.

The transparency offered by the blockchain technology offers wonders to an electoral system which requires seamless transparency to ensure fair elections. As Pramod Emjay, a blockchain consultant and expert says, “Decentralization works for more than just economics and finance - imagine elections where you can be 100% sure that the votes came from registered constituents, and imagine you can instantly verify vote tallies. Or consider a government where every scheme is implemented and evaluated transparently, without worries of money being siphoned or disappearing. The removal of trust from the equation is one of the fundamental changes that blockchains can bring”.

As elucidated above, transparency is one of the main factors which makes blockchain helpful in effective governance. With the ability to ensure policies are initiated and executed seamlessly within the system, and to ensure safety of records, blockchain has implications in identity-based governance as well. “Blockchain can introduce more trust into governance systems through tamper-proof, immutable recording of facts and such records being completely traceable to their origin. This wasn’t possible in the same way without blockchain. So if one were to implement the Aadhar, for one example, on the blockchain, it may be possible to trace all data flows of personal information from a central database and ensure against unauthorised data sharing. For another example, Zebi, a blockchain company we advise, helps governments manage land records”, says Anirudh Rastogi, Managing Partner, TRA Law.

One of the most fundamental elements of blockchaian is Proof-of-Work, which allows for true consent of the governed through voluntary participation and consensus. “This enables self-regulation that is taken up by each participant choosing to abide by the rule of consensus, leading to a new form of social accountability. Unlike traditional representative models of governance, where systems of checks and balance are exercised through third parties, under blockchain consensus model, accountability is distributed directly and exercised by all in the network”, says Sajid Jamal, Founder, Oryx Prive Investment and a blockchain expert. “As a result, we no longer have to worry about single points of failure and security of the system. Furthermore, due to blockchain's transparency, only those who do the honest working are rewarded, while those, looking for profit without work will have no place to run and no place to hide. Among the most interesting services built on top of blockchain is, which allow users to upload, store and search anonymously and securely an online distributed proof of existence for any document. It enables users to certify travel documents, diplomas, and potentially, even marriage certificates. In the long run, this can push for reconsidering some of the basic functions of public authorities including authentication and help them in effective governance”, adds Jamal.

Blockchain solves one of the fundamental challenges in governance, which is the chain of command, authority and transparency, and the platform it offers for decentralization can significantly increase public administration functionality. “With a clear shape of decentralisation, decision making doesn’t hoard to the select few, don’t get stuck in a lengthy chain where no one knows who is in charge... and Blockchain perfectly fits in governance!”, says Jamal. Another significant area where blockchain contributes to effective governance is in reducing corruption. As GV Anand Bhushan, Partner, Chennai Head, Shardul Amarchand Mangaldas & Co. says, “Corruption in India is widely reported and is viewed as endemic in the system. Any technology that can digitize and automate a transaction while at the same time removing any intermediary will be a boon to effective governance. Blockchain fits this criteria perfectly. The government has experimented pilot projects from land records to ease of registering vehicles. These are very early days but successful implementation can be a game changer for common citizens as well as for the ease of doing business in India.”

In terms of incentives and mechanisms of coordination which underlie governance, blockchain again offers significant advantages. In a world fraught with cases of fraud and theft and financial hegemony taking advantage of the common man, blockchain can immensely help in good and effective governance, especially corporate governance. “This technology increases the accountability and transparency, reduces corruption as it remove most of the middle men and eliminates all chances of the guilty fleeing leaving the tax payers and banks in the lurch. If for example, PNB had utilised blockchain, a Vijay Mallya or a Nirav Modi situation could not have arisen as all loans & assets would be on blockchain and smart contract monitoring would be running”, says Mitthan Meena, Founder of Laxmicoin and Rover Network. He also adds, “In the first instance of default, most of the guilty's assets will automatically move to the bank by smart contract as Value & Ownership is pre-verified by the blockchain resulting in no conflict and no asset valuation problem. Furthermore, even the passport details can be on blockchain which can be de-validated or alerted to the passport authorities on default for high value loans."

As Shivam Thakral, Co-founder and CEO of BuyUCoin says, “Blockchain technology can act as a great governance tool as it has the ability to provide a more customised and personalised effect to the government bodies at local and state level too along with the centre.The government can use Blockchain technology as a public records vault making it possible to store all kinds of government records including the legal documents, identification cards, property deeds and similar other documents or information. The technology ensures the storage and retrieval of these documents in a secure, inexpensive and decentralized manner”. Thakral also adds, “The Blockchain technology can be customised for all the above-mentioned purposes and open limitless possibilities from small business owners to SME for the global economy. The adoption of this technology allows the government to bypass the middleman totally and provide a safer corruption free experience. It has been predominantly used in money transactions but it has the ability to record all government deeds and records in the most cost-effective and secure way.”

Despite offering an efficient, decentralized and consensus-driven public repository, it is still important to note that blockchain does not offer a scenario which does not require effective functioning of the state itself. The state authority is still very much required, and does not offer a complete alternative to the functions of the government. Yes, the dependence of the citizens on the government and a centralized authority greatly reduces, but still very much requires their administration given that this is a new technology whose flaws still need to be explored. However it is apparent that blockchain greatly improves the efficiency and transparency in governance, and forms a disruptive technology, set to alter the very paradigm of governance 

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