An 88-page report was released by the UK Government's Science Office on Tuesday, setting out the findings of a review exploring how distributed ledger technology can revolutionise services, both in government and the private sector.
Along with several guest experts from both the public and private sectors, Sir Mark Walport has produced one of the most comprehensive governmental reports on the subject of distributed ledger technology. While covering many different aspects of this new field, from security to world outcomes, several use cases are provided, and recommendations for immediate action are outlined.
“Distributed ledger technology provides the framework for government to reduce fraud, corruption, error and the cost of paper-intensive processes. It has the potential to redefine the relationship between government and the citizen in terms of data sharing, transparency and trust. It has similar possibilities for the private sector.”
- Professor Sir Mark Walport, Chief Scientific Adviser to HM Government
Knighted in 2009, Professor Sir Mark Walport is the UK Government Chief Scientific Adviser (GCSA) and the Head of the Science and Engineering Profession (HoSEP). Alongside managing the Government Office for Science, the GCSA has a clearly defined role within the UK Government. Sir Walport is responsible for “providing scientific advice to the Prime Minister and members of Cabinet” as well as “advising the government on aspects of policy on science and technology.”
"Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services."
- Professor Sir Mark WalportAn accompanying video to the report provides an enticing intro to the report itself.
The forward was authored by two relevant Members of Parliament (MP); the Minister for the Cabinet Office and Paymaster General, Matt Hancock, and Minister of State for Culture and the Digital Economy, Ed Vaizey.
The MPs point out that the UK is in a unique position to reap the rewards of this new technology, and even placed a high level of importance on doing so: "It is vital that our key assets – including the Alan Turing Institute, Open Data Institute and the Digital Catapult – work together with the private sector and with international partners to unlock the full potential of this technology."
The report states that there is an opportunity for government to enable a future where the delivery of government services is more personal, immediate and efficient. At the same time, the UK is not alone in recognising the importance of distributed ledger technologies. “However, there is still time for the UK to position itself within this leading group — indeed, it is essential for it to do so, given the importance of the financial and services sector to the UK economy.”
“The first role for government in supporting the development of distributed ledgers is to develop a clear vision of how this technology can improve the way government does its business and is able to deliver services to citizens. This needs to be followed by government acting as an expert customer to implement the technology — procuring distributed ledger solutions where they are applicable. In doing so, government can support and influence the development of economic activity in this sector, including new and growing businesses as well as larger incumbent businesses.“
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Throughout the document there are helpful illustrations that help clarify the topic. The Distributed Ledger Taxonomy chart explains the different types of blockchains. It simply shows what distributed ledgers are by their permissions.
The Vice President of Blockchain Research and Development at Barclays, Simon Taylor, wrote the Reports first chapter, about the vision for distributed ledgers and smart contracts: "It is possible to envision a future where this technology creates a form of ‘glass government’ that is more accountable to the citizen. There are a number of use cases, and as the technology progresses it is almost certain more will emerge."
He spends most of the chapter speaking about changes that can be made to the world with smart contracts and distributed ledgers, punctuated with highly detailed illustrations and lists of affected public and private sectors.
Although the report only briefly touches on Bitcoin, Chapter three uses the digital currency in several examples. Authored by Vili Lehdonvirta, of the Oxford Internet Institute at the University of Oxford, and Robleh Ali, Digital Currencies Manager at the Bank of England, the chapter starts with a clear distinction between legal code, “rules consisting of legal obligations,” and technical code “software and protocols.”
The current financial system is ruled via legal code, while distributed ledger systems are ruled via technical code. “For example, the Bitcoin software allows participants to spend only balances that they can prove they own with cryptographic keys. The Bitcoin software also regulates how new currency is issued, and places an absolute cap on the size of the money pool. There are no bylaws or other legal documents stating these rules, and no humans to enforce them — distributed ledger systems are solely governed by their own technical code.”
“Distributed ledger systems such as Bitcoin have shown that they can function without legal rules. Instead, the rules that each participant must follow are defined and enforced only by technical code.”
- M. Angela Sasse, University College London
“Technical code, comprising software and protocols, can also emerge from the public sector.” the authors point out. “For example, TCP/IP and some other core internet protocols were the result of government funded research projects.”
“The public sector could develop a permissioned system that allows public regulatory influence to be exerted through a combination of legal and technical code,” the report argues, “rather than exclusively through legal code as at present.” Not leaving anything to doubt, they extend this sentiment further. “Governments should therefore also consider ways of regulating distributed ledger systems by influencing the technical code that defines their rules.”
“Although no nation state actor is interested in disrupting Bitcoin, they might be interested in attacking a UK national digital currency.”
- M. Angela Sasse, University College London
Chapter five, penned by Phil Godsiff, a Senior Research Fellow at the University of Surrey, focuses on the possible disruption that distributed ledgers could bring to the economy, governments, and industries” “Distributed ledger technologies (DLTs) have disruptive potential beyond innovation in products, services, revenue streams and operating systems within existing industry frameworks. They have the potential to disrupt the whole economy, and society.”
Godsiff makes it clear that changes brought about by distributed ledgers will be more far-reaching than the innovations we typically see in products and services, while specifically mentioning sharing economy innovations Uber and Airbnb. “Like any radical innovation, DLTs provide opportunities to incumbents, and also threats to those who are unable or fail to respond.”
Chapter six, all about the applications for distributed ledgers within government operations, offers a long list of suggestions. Written by a team lead by Research Fellow Catherine Mulligan, of the Imperial College London.
“The eventual impact of DLTs on British society may be as significant as foundational events such as the creation of Magna Carta.”
- Catherine Mulligan, Research Fellow, Imperial College London
The 15 suggestions that follow, primarily aimed at cost savings and greater transparency, were followed by six use case examples that go into more detail. Some were simple intradepartmental changes, while others provided a much wider view, including the use case for replacing Europe’s VAT tax.
Other chapters focused on the technology behind distributed ledgers and the potential changes to society. All throughout the document were various case studies that highlighted businesses and uses for the blockchain that are already underway in the private sector. Everledger’s diamond tracking application is mentioned, as is Estonia’s various experiences with the blockchain.
The key message is that by fully understanding the technology, government and the private sector can choose a distributed ledger solution that best fits a particular purpose, balancing security and central control with the convenience and opportunity of sharing data between institutions and individuals.