The distributed ledger technology, blockchain, has been touted for its ability to potentially revolutionize business models. Since being used in 2009 as the underlying technology for the digital crypto-currency bitcoin, blockchain has been a buzzword on Wall Street and beyond. Now blockchain is trending across both industry and government.
Blockchain is an information storage and transmission technology for data and transactions that uses a secure, distributed ledger and is valued for its potential to generate cost savings. The term “blockchain” comes from how transactions are stored. A block is comprised of a set of transactions, which are validated by specific members of the chain (miners). After the transactions are validated, blocks are recorded in a continuously expanding ledger and linked to the previous block. This forms a chain of verified, unalterable transactions and enables data sharing across a decentralized ecosystem of participants without requiring a central authority.
Blockchain offers a new paradigm for digital interaction and data exchange in federal programs that doesn’t rely upon a trusted third party to maintain a centralized record of transactions. Blockchain thus has the potential to help agencies assure the quality of goods in a supply chain and ensure the integrity and cryptographic security of data-driven records and services. However, as with any new technology, barriers remain. Common standards, regulatory governance, and the computational requirements to manage at scale are still being developed.
With this evolving technology ecosystem, federal agencies have the opportunity to realize several clear benefits from the implementation of blockchain technology to drive digital transformation:
- Security and increased trust – Blockchain technology offers agencies tamper-proof validation capabilities. Transactions are validated and trusted by virtue of consensus and cryptographic links. In a digital paradigm, metadata concerning unique data or documents are captured, stored and unchangeable on the blockchain, which allows the government to trust the information—critical to verify validity of user identification, supply chain source of technology or weaponry components or authenticity of a vote.
- Compliant records management – Blockchains have a high fault tolerance, and records cannot be changed or removed once they are entered into the ledger. Each user has a unique digital identity associated with each transaction they participate in, improving traceability and auditability. This makes blockchain suitable for permanent digital records preservation and highly relevant for document provenance (e.g., clinical trials data, visas/passports, birth certificates and land titles).
- Preventing fraud and abuse – Blockchain records improve data quality and integrity through built-in transparency and validation. Transactions are validated to the rules of consensus and previous transactions cannot be altered. For example, working with a consortium of banks and a government agency in Singapore, CGI participated in the first ever trade finance Blockchain proof of concept. Using blockchain technology, a use case was engineered to prevent duplicate financing of export invoices by different banks and to allow third parties, such as customs houses or shipping companies, to validate invoices against actual trade transactions. (Read more in my colleague Kitt Carswell’s blog, Riding the Blockchain Wave in Trade Finance.)
- Operational efficiencies and cost savings – With its inherent trust model, blockchain can decrease the administrative burden associated with multiple organizations or agencies collecting (and verifying) the same data. By allowing stakeholders to share the same view of the data, reducing data replication and improving the information exchange across organizations, Blockchain can improve government productivity and citizen experience.
Government agencies should engage with industry and other government leaders in learning more about blockchain, focusing their attention on those organizations that already have created proofs of concept (POCs) and have relevant lessons learned for multiple use cases. CGI is well-positioned to support government agencies in evaluating the potential value of blockchain to their missions. Look for our next blog in our blockchain series, focusing on why the time for blockchain POCs within the government is now.
Learn more about CGI’s blockchain services for the federal government.
About this author
Director, Federal Emerging Technology Practice
Sean leads the Digital Innovations team within CGI Federal’s Emerging Technologies practice. He is an experienced architect and strategist with a background delivering highly available, accredited cybersecurity and cloud solutions for complex environments. The Digital Innovations practice develops innovative, data-driven solutions in emerging technology areas ...