Sci-Tech

In politics and authorities: How the blockchain is used in practice – economics

What was considered a dream of the future a few years ago is now slowly coming into practice: Blockchain technology is finding its way into administration. Consultants at BearingPoint have already identified 52 projects in the public sector. To this end, they asked the federal and state governments to summarize the result in a study available from Tagesspiegel Background Digitization & KI, which will be published next week.
The largest drivers of the blockchain at the federal level are the Ministries of Economics and Energy (BMWi) and Education and Research (BMBF) with five and seven projects. At the state level, North Rhine-Westphalia excels with a total of ten projects. According to the authors of the study, most of the initiatives are still in their infancy. 31 of the 52 projects are currently in the idea and planning phase. The maturity of projects is on average 2.42 on a ten-point scale.
Alexander Schmid, Executive Consultant at BearingPoint, was positively surprised by the number of projects, although the practical implementation was “very scalable”. In particular, he advocates the “demystification” of this technology and the involvement of public employees: “Because the modernization of the administration – also with a blockchain – is not a technology, but an interdisciplinary joint project.”

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Blockchain or distributed ledger technology is basically a decentralized public database. Blockchain users have common write, read and save rights. This differs from the conventional database, which is usually maintained by one or more central authorities. Thanks to blockchain technology, transactions between companies, individuals or public institutions can be performed and verified in almost real time – no need for an intermediary. The potential in the administration is therefore great.
According to the study, blockchain offers the greatest advantage in the field of automated identity verification and security against process manipulation. In addition, data is faster via blockchain. Distributed traffic also provides a high level of security in terms of failures.
According to the study, the biggest challenges lie in the three areas of organization, culture and budget. From a cultural point of view, the biggest problem is that the public sector still lacks a basic knowledge of blockchain technology, which is why the authorities are often skeptical. Organizationally, the challenge is that the sophistication of technology in the public sector is not yet assessed as sufficient, and therefore there are no clear decisions for new platforms. At the household level, the authors identify unclear business cases as a major challenge, and therefore the benefits to authorities are still unclear. In addition, there is generally no pressure to address this issue.
Helmut Nehrenheim, head of the blockchain coordination project on the Federal State Committee for the IT Planning Council, would like to see a reassessment: “The motto in the discussion is often: Blockchain is the solution, we are now looking for a problem.” Because blockchain technology certainly has the potential to create “new ways of working together” at national and European level. “An example is user-centered digital identities, along with digital evidence based on new standards.”

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Ministry of Development with a demonstration project

At the federal level, according to the authors, there are currently a total of 19 blockchain projects. The demonstration project comes from the Federal Ministry of Development (BMZ): A tool based on the TruBudget blockchain is intended to increase the transparency of funding and development funds. According to BearingPoint consultants, the project that is part of the federal government’s blockchain strategy is the only project already in operation at the federal level (maturity level 8).
With TruBudget, development projects can be managed “transparently and without counterfeiting for all project participants” on a common platform. All purchases or payments within the project are mapped in the blockchain. TruBudget was piloted and introduced this summer by KfW Development Bank in the Georgian financial administration. According to the current situation, two development projects in the amount of around 200 million euros are represented on the platform. According to experts, Germany could introduce software as a condition for German development aid in the future.
At the federal level, the following are two Federal Ministry of Transport (BMVI) projects: on the one hand, a blockchain-based digitization of waybills project (maturity level 7; live operation with a limited group of pilot users) and an initiative to standardize communication protocols and truck interfaces; surrounding road infrastructure through smart contracts (maturity level 6; minimum viable product). The Federal Office for Migration and Refugees (BAMF) ‘AnkEr’ project, which aims to ensure a safer and more transparent asylum process through blockchain, shares an intelligent energy contract register with BMWi (both maturity levels 5; proof of concept or prototype available) fourth place.

Successful country projects

At the state level, although most projects take place in North Rhine-Westphalia, Bavaria has the highest average level of maturity of its six identified projects. The most advanced project is “blockchain certificate verification” (maturity level 7). In addition, a blockchain-based notarial power of attorney and certificate of inheritance project is already being prepared (maturity level 5). However, the flagship project at the state level comes from NRW. This is a project for the validation of open data (maturity level 7).
The authors of the study are going to Saxony again. In June 2017, the Blockchain Competence Center in Mittweida was launched here, which is funded by the State Ministry of Economy, Labor and Transport. “Saxony should become a beacon for blockchain technology in Germany,” the study said. This goal was reiterated in the updated state digitization strategy in 2019, and the provisional conclusion is about the plan for 2021. “The national lighthouse,” experts write, “will metaphorically be more regional as a landmark at Lake Cospuden until then.”

International examples

The study also cites other successful examples from German-speaking countries and other parts of the world. For example, the Viennese “culture token”, which is nominated for this year’s e-government competition, which will be awarded next Tuesday in Berlin. The project allows residents of the Austrian capital to collect points via mobile phones while walking, cycling or using public transport. The collected tokens can then be used in cultural institutions such as a museum or theater. The application and point system run on a blockchain basis.
Another Austrian blockchain project is also participating in the e-government competition: The municipality of Scheibbs has developed a virtual reality solution for the participation of digital citizens together with the Austrian Federal Computing Center (BRZ). During the virtual tour, citizens can view new construction projects in a 3D environment and electronically vote for the preferred model. Voting is only possible for Scheibbs residents, as they will receive a token before the voting phase begins. The token acts as a voting card, can only be used once, and guarantees anonymous voting.
An electronic voting project based on a blockchain in the Swiss city of Zug is also mentioned. There, digital identities have been created in the public blockchain network that citizens can use to vote. An international model example outside the German-speaking area comes from the Philippines. The Ministry of Education, with the help of the German Society for International Cooperation (GIZ), launched a project on digital teaching certificates.

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