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How Is Blockchain Supporting Transparency Among Communities?

Lauri Haav heads up Estonia’s e-Residency Programme, an Estonian government startup.

Trust in governments, and indeed in democracy as a concept, is not in particularly good shape. For instance, the Cambridge University’s Centre for the Future of Democracy reported in 2020 that the majority of people are dissatisfied with democratic governments, a sharp rise from the 1990s when most were satisfied. This malaise is also seen in data from the Organisation for Economic Co-operation and Development (OECD), which shows low levels of faith in governments across the globe.

Of course, while Francis Fukuyama famously argued that we had reached the “end of history” when the Berlin wall fell in 1989, the trust required in people and institutions to underpin democracy has always been fragile. I find that in Estonia, we’re aware of this, as trust in the post-communist countries entered (paywall) the 1990s at a low point.

An Opportunity

This low starting point, though, offers an opportunity for progress, and the Cambridge report illustrates that while most large democracies have seen a rising rate of discontentment, a number of small democracies have improved, notably in Scandinavia and post-communist Europe.

I think a key part of the improvements made in Estonia was the exploration of blockchain technology to underpin various government information systems. As a technology, blockchain was being tested as early as 2008, with early experiments predating the bitcoin white paper that gave voice to the very term “blockchain.” Indeed, in those early days, the technology was referred to internally as “hash-linked time-stamping.”

One of the earliest demonstrations of this is the keyless signature infrastructure (KSI), which is a blockchain-based technology developed in the aftermath of a series of major cyberattacks on the websites of Estonian government agencies, banks and newspapers.

These early experiments proved successful, and blockchain has been in use in the country to protect national data, e-services and smart devices both in the public and private sectors since 2012. While this can’t account for improvements in the trust in government seen in Estonia, I believe it has certainly played a significant part.

I believe its success in government applications shows its considerable potential across various industries. For instance, in agriculture, blockchain technology can prove the providence of produce as it moves from field to store. Research from Deloitte highlights how similar gains can be made in supply chains across multiple sectors, with the researchers explaining that this can be particularly valuable when supply chains are complex and global in nature.

Supporting Transparency

As the OECD highlights, a key part of building trust is transparency, especially at a time in which misinformation has prompted many to doubt what they see and hear. This is doubly so when corruption and poor accountability do far more damage in terms of the erosion of trust in those in power than they do in direct financial costs. Indeed, the World Economic Forum argues that public-sector corruption is the biggest challenge in many parts of the world because of its ability to stifle social, economic and environmental development. They point to blockchain technology playing a role in tackling this challenge.

Once again, there are numerous possible use cases for blockchain in a commercial setting when it comes to transparency, including real-time settlements, smart contracts, supply chain traceability and enhanced purchase order management. These all have the ability to improve trust and transparency in processes that can otherwise be opaque.

For instance, in Estonia we use blockchain to underpin land title registries. By using blockchain, citizens are provided with a secure and publicly verifiable record system whereby they can prove their land rights. This then reduces any potential for manipulation of records and bolsters land ownership. Blockchain is also being deployed to register property and businesses and within healthcare and digital court systems. In each instance, blockchain provides invaluable tools to ensure the integrity of data across each deployment. Whereas this has obvious implications for building trust between the public and government, it’s equally valuable in terms of establishing trust between industry and government. This is especially important for small businesses that don’t have large legal teams to call upon.

Building Trust

While blockchain is by no means the only way to build trust, it is one lever we can apply. As IBM explained in a recent paper, blockchain has the ability to secure shared data between citizens and agencies and can reduce any concerns people have about the use of their data.

Economist Kenneth Arrow pointed out back in the 1970s that a lack of mutual trust undermines the functioning of any economic system, but as the UN argues, it is also crucial to the effective functioning of society itself: “Trust in each other, in our public institutions, and in our leaders are all essential ingredients for social and economic progress, allowing people to cooperate with and express solidarity for one another.”

Blockchain isn’t the silver bullet to these challenges, but I see a lot of potential in it to help improve efficiency, reduce translation costs. At a time when democracy is in a state of crisis, it’s perhaps something for more of us to consider with businesses in a position to be a part of this experiment and movement.


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