What is Blockchain?

I’ve already posted about this here, but it’s worth going through again – at least as a spot of revision for myself. The benefits are clear, as I outlined earlier:

Maersk, the world’s largest shipper, faces unique challenges that incentivised it to trial blockchain, claiming that one container hauled from East Africa to Europe could require paperwork from as many as 30 different people, spread across over 200 interactions. Frank Yiannis, VP of food safety for Walmart explained that blockchain made it possible to call up tracking information of a product in 2.2 seconds — a process that would previously have taken almost a week [source]. This could really reduce costs and time spent on paperwork …

Blockchain is essentially a digital ledger. It creates an unalterable record of transactions without having to rely on a third party (such as an energy exchange). The WEF (World Economic Forum) calls it perhaps “the first truly digital economy concept” as it brings together economics and digital technology in a way that hasn’t previously been conceived.

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Blockchain has already been implemented in financial services, but has implications ranging from accountancy to supply chains, and of course – energy trading and distribution. So what does it mean for the government?

Government

Government has traditionally played catch-up with technologies, even after paving the way for the information age as we know it. Unfortunately, Blockchain scales the challenge. The rate of regulation and legal practice that could change is a pressing issue. And we don’t know exactly how things will change and how to work with that. Nobody does.

The internet has been a key driver of growth over the last few decades, and yet has more potential to make our society more efficient and prosperous. At the same time we are facing crises of the treatment of our data online, and the security implications of ‘smart’ technology – micromanaging the power grid through new or cheaper technology, installing smart meters, and controlling peak demand by interacting with consumer appliances. Regulators need to address these concerns.

Where Blockchain impacts other sectors, such as accounting, this will impact government regulation of energy. Auditing processes will need to be overhauled, as lines of code will have to be looked at in the same way that legal contracts, deliverables, and financial documents are looked through today. Where power exchanges no longer operate, new thoughts may be needed on the licensing process for traders and shippers. As digital technologies – not just Blockchain – become a greater part of what we do, thought will need to be given on how arbritation works. Delivering IT may become a greater requirement for some aspects of licencing, too.

It is not solely about preparing for or enabling how the private sector will use Blockchain, though. Governments are already using the technology to establish a closer dialogue with citizens, and enable trust. A strong perception of corruption in the Russian capital spurred the local government to use Blockchain in a community works voting app.

Delivering better public services should be a focus for digital policy, and innovation on this front is something I wrote about here. Countries like Estonia, which is taking a digital focus during its presidency, has achieved some inspiring results. Around ten years ago, following a dispute about a Soviet-era statue, the country – which had already by that point become incredibly tech-oriented – faced a cyber attack of an unprecedented scale. As Kertu Rus describes:

The aim was to overload Estonia’s computer servers with massive volumes of message traffic causing them to crash. The attacks in this period were highly sophisticated, with the perpetrators deploying “botnets” – software robots that hijack unwitting “zombie” computers from around the world, link them together in large networks and program the network to bombard the targeted e-system with millions of fake messages. Incredibly, it is estimated that a million computers were hijacked and mobilized globally for this distributed denial of service onslaught on the servers of a country of 1.3 million inhabitants. At their peak, the botnets were barraging Estonia’s computer systems with one thousand times their normal rate of incoming e-mail traffic. The messages were coming from every corner of the globe including China, Peru, the U.S. and Egypt. In fact, traffic was directed by Russian “botherders” who had manipulated tens of thousands of unsuspecting zombie computers and commanded them to clog Estonia’s servers and bring down the system.

Although ultimately no data was compromised, the attackers overloaded systems to send them offline. Estonia faced a wake-up call – it was no longer facing the prospect of purely conventional warfare. It had to secure its digital economy. Today virtually all Estonian public services are accessed through Blockchain, through secure digital identities provided to all residents. The system is shared securely, decentralised, and never duplicated. Blockchain forms only part of the system, but is a crucial part all the same. You can find out more about the government project, called X-Road, in the video below:

I remember going to an industry workshop at Ofgem recently, where one of the private companies told us that innovation from industry needs some direction from government. The conversation was about the impact of electric vehicles on the grid, but it has broader relevance than that. What stuck with me was them telling us that ‘you can’t just give industry a blank piece of paper and expect them to do something with it’. In this respect it may well be up to government to draw up frameworks and provide a foundation for innovation. Though, ultimately, the efficacy of this relies upon how much models are shaped for specific countries or industries.

 

Image source: Substation via American Public Power Association, Illustration of a Ledger via Flickr

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