Distributed Ledger Technology: beyond block chain
by Héctor Ugarte
On January 2016, a report by the UK Government Chief Scientific Adviser was launched.
It sets out how this technology could transform the delivery of public services and boost productivity. It gives an interesting overview of blockchain technologies, and points over how UK governments plans to make use of it. I recommend before reading this text to be familiar with Blockchain technologies like Bitcoin.
The chapters that are covered:
Chapter 1: Vision
Chapter 2: Technology
Chapter 3: Governance and Regulation
Chapter 4: Security and Privacy
Chapter 5: Disruptive Potential
Chapter 6: Applications in Government
Chapter 7: Global Perspectives
Recommendation 1: We recommend that government should:
• Provide ministerial leadership to ensure that government provides the vision, leadership and the platform for distributed ledger technology within government. Specifically, the Government Data Service should lead work in government as a user of distributed ledgers and the DCMS Digital Economy Unit should lead work on government as an enabler of distributed ledgers (working with the Department of Business, Innovation and Skills and with Innovate UK).
• The Government Digital Service and the DCMS Digital Economy Unit should develop a high-level capability road map and a supporting outline plan based on the work of this report and very early stage activity already underway in departments, and deliver this in a timely fashion; and continue to oversee the recommendations made in the rest of this report, to maintain momentum and rapid action. In undertaking this work, they should work closely with other government departments and with industry and academia and should consider setting up a time-limited expert advisory group in support.
Recommendation 2: The UK research community should invest in the research required to ensure that distributed ledgers are scalable, secure and provide proof of correctness of their contents. They need to provide high-performance, lowlatency operations, appropriate to the domain within which the technology is being deployed. They need to be energy efficient. The newly-created Alan Turing Institute, working with groupings such as the Whitechapel Think Tank, could play an important role in co-ordinating and ‘self-organising’ the public and private research and development sector interested in this and related technologies. The private sector should consider investing in the Alan Turing Institute to support the precompetitive research that will ultimately facilitate new commercial applications that are robust and secure. This includes work on obvious areas such as cryptography and cybersecurity but also extends to the development of new types of algorithm.
Recommendation 3: Government could support the creation of distributed ledger demonstrators for local government that will bring together all the elements necessary to test the technology and its application. A demonstrator at a city level could provide important opportunities for trialling and implementing distributed ledger technologies. Innovate UK could use its work with cities in the development of ‘city deals’ to implement the development of a city demonstrator.
Recommendation 4: Government needs to consider how to put in place a regulatory framework for distributed ledger technology. Regulation will need to evolve in parallel with the development of new implementations and applications of the technology. As part of the consideration of regulation, government should also consider how regulatory goals could be achieved using technical code as well as legal code. The DCMS Digital Economy Unit could take ownership of this recommendation.
Recommendation 5: Government needs to work with academia and industry to ensure that standards are set for the integrity, security and privacy of distributed ledgers and their contents. These standards need to be reflected in both regulatory and software code.
Recommendation 6: This recommendation is linked to Recommendation 5. Government needs to work with academia and industry to ensure that the most effective and usable identification and authentication protocols are implemented for both individuals and organisations. This work needs to go hand in hand with the development and implementation of international standards.
Recommendation 7: Understanding the true potential of distributed ledgers requires not only research but also using the technology for real life applications. Government should establish trials of distributed ledgers in order to assess the technology’s usability within the public sector.
Recommendation 8: As well as top-down leadership and coordination, there is also a need to build capability and skills within government. We recommend the establishment of a cross-government community of interest, bringing together the analytical and policy communities, to generate and develop potential ‘use cases’ and create a body of knowledge and expertise within the civil service. GDS and the Data Science Partnership between GDS, Office for National Statistics, Cabinet Office and the Government Office for Science could act as the convenors of this community of interest. There are important opportunities for government to stimulate the business sector by acting as a smart customer in procuring distributed ledger applications.
Some interesting ideas and concepts extracted:
- Ledgers are in commerce activities since ancient times. Computers offered a simply transfer from paper to bytes. Now algorithms, enable the collaborative creation of digital distributed ledger, with powerfull properties.
- Distributed ledgers may help governments to collect taxes, deliver benefits, issue paspports, record land registries, assure the supply chain of good, and generallty ensure the integrity of government records and services.
- Estonian government has been experimenting with distributed ledger technology know as Keyless Signature Infrastructure (KSI).
- Everledger, provides a distrivuted ledger that assures the identity of diamonds, from being mined and cut to being sold and insured.
- The governemnt office of science establish a senior group of experts from business, government and accademia to asset the oportunities for distributed ledgers to be used within government and the private sector and to determine what actions goverrment and others need to take to facilitate the benefitial use of distributed ledger technology and to avoid possible harms.
- Distributed ledger technology provides the framework for government to reduce fraud, corruption, error and the cost of paper-intensive propcesses.
- Has the potential to redifine the relationship between goverment and the citizen in terms of data sharing, transparency and trust. It has similar posibilities for the private sector.
- Benefits: Distributed extremely widely, higlhy efficeint, equally robust, smart contracts.
- Challenges: Privacy, security, performance and scalability.
- Offer government service more personal, inmediate and efficient.
- It should lead to improvements in compliance, cost efficeincy and accountability.
- We need to understand the ethical and social implications of different potential uses and the financial costs and benefits of adoptions.
- The cryptographic codes of the digital world are extremely hard to break, but they can be vulnerable to being bypassed. Bypass mechanism rnage from the human who might give away the key accidentaly or deliberately, to the presence of black doors, due to deficciency in the software code.
- Privacy and confidentially are key issues. The ledger may hold personal confidential records that could range from financial to familiar and helath.
- In cyberspace trust is based on authenitcation and authorization.
- Five uses cases: 1) Protecting critical infraestructure against cyber attacks. 2) Reducing operational costs and tracking eligibality for wellfare supprt, while offering grater financial inclusion. 3) Transparency and traceability of how aid money is spent. 4) Creating opportunities for economical growth, bolstering SMEs and increasing employment. 5) Reducing tax fraud.
- Benefits to governments and financial services: 1) Reconciliation through cryptography. 2) Replicated to many institutions, 3) Granular access control, 4) Granular transparency and privacy.
- Smart contract: Application layer that makes much of the promise of block chain technology a reality. Are being consider for a wide variety of users, particulary for regulators compliance, product traceability, and service managemnets, and also to defeat counterfeit products and fraud in the following sectors: Food, financial services, energy, pharmaceuticals, helath, aerospace, aviation, telecomunications. IT and communications, transport, utilities, agriculture, oil and gas.