Public services in blockchains III: the role of the state

30 August 2016

The role of the state is ever changing. Debates over the form and function of government have been hauled into the twenty-first century by disruptive technology. A silent watershed moment was reached earlier this month when the Department for Work and Pensions announced it would trial blockchain to track benefits payments.

Blockchain is a public ledger that tracks all transactions on its network and can produce a transparent record (explained here). It has been described as “as significant as foundational events such as the magna carta”. The power of this disruptive technology, however, means that policymakers must be clear about the role of the state.

Blockchain technology, at one extreme, has the potential to facilitate an omniscient state, where government can track and control the interactions of citizens. Nathaniel Popper of the New York Times has argued that “by creating this ledger through cryptography that was supposed to allow for extreme privacy, it has laid the groundwork that will allow for extra traceability” – every aspect of a citizens’ day-to-day life could be tracked: shopping habits, oyster card routes and mobile phone calls. Indeed, the Government’s chief scientific adviser has said that “[it] would be possible — with agreement from the benefit claimant in question — to set rules at both the recipient and merchant ends of welfare transactions”. Government controlling benefit claimants’ transactions – perhaps preventing the purchase of ‘banned’ goods, such as tobacco, alcohol or even unhealthy foods – could be just the start.

On the other hand, the technology could remove the need for the state to execute many of the key functions it now provides, reducing its role in citizen’s lives. Automatically documenting transactions can guarantee property rights and contractual agreements. Its use has been explored in Honduras – a country plagued by land-title fraud – to allow transparency of land ownership. Individuals have the option to document their marriage on the blockchain, via a smart contract that automatically expires after a given amount of time, in an attempt to avoid the consequences of divorce. More radically, libertarians argue that blockchain could reduce the need for a police force or a judicial system, as it could create a society where “identity and reputation will be the new currency”. Since blockchain is built on trust and all actions are traceable, the argument runs, people would not attempt to act fraudulently or criminally due to the risk of being found out.

Both scenarios overstretch the mark. The Libertarian view ignores the nuances of human interactions. It seems unlikely that the use of blockchain technology will prevent crime on a large scale (though it may help detection rates). The idea of ushering in an omniscient state is also at odds with the democratic values of western societies. Attempts at infiltrating private lives have previously been met with outrage: the so-called snooper’s charter found favour with only 6 per cent of the public.

Instead, government should utilise blockchain to create a more intelligent state. As discussed in previous blogs in this series, it can streamline the public-sector workforce, track procurement spend and reduce fraud. More radically, it could be used as a catalyst to reconstruct the centre of government. Patrick Dunleavy has, for example, questioned the split between taxation and welfare documentation in a world where “most citizens have become both taxpayers and recipients of state benefits.” A more efficient system could involve automating and combining both functions outside of the state: with blockchain issuing instructions to bank accounts to levy taxes and pay benefits in real time. This, Dunleavy explains, is “the ultimate ‘intelligent centre’ design for the welfare state”.

Blockchain impact on the role of the state is dependent on how policymakers employ it. Its possibilities have excited people across the political spectrum – as Nick Clegg once argued, radicalism can lie in the centre ground. Streaming public services through blockchain would be the clearest example of this yet.

Georgia Preece, Intern, Reform



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