BLOCKCHAIN AND PUBLIC ADMINISTRATION
An opportunity or a risk?
By Leonardo Ortenzi
The following article is intended to illustrate and analyze the main argument of the Blockchain Technology, focusing on making an examination of this technology applied on the Public Administration Sector.
There’ll be a in-depth analysis of all the opportunities and risks that this new technology could generates when its applied on the P.A. field.
This is of course a total innovative field, because the blockchain technology was invented in 2009, with the firs application in the Bitcoin system, but the experimentation of it into the public administration sector are even more recent, so its important to adopt a “case by case” approach because we can’t already understand the consequences or the risks that this new world can provoke, so we need to procede carefully and don’t get caught up in the enthusiasm of discovery.
What is the Blockchain technology?
First of all we need to explain what is this new technology and how it works.
The blockchain technology is a sort of distributed database that give the possibility to register shared transactions among the net’s nodes.
Speaking in an easier way, we can imagine it as a lot of blocks, that contain a huge amount of data and information, and that are chained one to another, generating the “block-chain”.
This technology constitutes a part of the so called “DLT’s” (distributed ledger technology) and its applications can involve three fields:
– internet of value, where happens the exchanging of cryptocurrency
– Blockchain for business, where traditional business processes are replied in blockchain technologies.
– Decentralized web, which involves the NFT’s world
The blockchain technology is characterized by the immutability of the blocks; so any block that is part of this chain cannot be modified or alterate, because a simple interaction whit a single block could affects the entire chain.
Also the blockchain technology can be divided in some different categories, like:
– Blockchain “permission-less”or “pure”, characterized by the absence of barriers for the entrance. This type of blockchain is freely accessible for everyone, hasn’t a property figure, is based on removing all the institutional figures inside the network, and promote the decentralization. The main problem of this category is that needs a huge expenditure of energy and digital resources;
– Blockchain “permissioned” or private, which is managed by a restricted circle of people that manage all the system. So this category doesn’t need a huge consumption of energy and resources but on the other side could represent a risks for the promotion of the decentralization’s principle;
– Blockchain “hybrid”, which includes a private system that operates in a public environment.
So, as we can understand, we’re talking about a new technology that is innovative and important, but at the same time delicate and complex for the public administration sector. But first of all, before we start to make some criticism about the argument, let’s see why this new technology is to important.
Which are the advantages that this new technology can give to us, especially on our public administration sector?
I’ve read a huge amount of articles about the blockchain technology and its implementation on the P.A. sector, and I’ve understood that there are a lot of advantages that it can give to us, like for ex:
– An higher security and protection for the personal data that are treated inside the blocks;
– It can gives to us also an higher speed and simplicity on the decision-making process. It can respects the accountability principle , sharing an high level of transparency on the processes.
– It can promotes the creation of decentralized systems where citizens can be involved, especially in the management of public services;
– It can respects also the “Good administration principle” .
And now… which are the risks?
Analyzing the functioning of this technology and its implementation on the P.A. field, it’s easy to understand that there are some risks, which cannot be underestimated.
1) First of all the huge expenditure of energy requested by the functioning of a blockchain permission-less; if we are in front of a Bitcoin system, it wouldn’t represent a problem because the consumption of the resources would be divided and distributed among the large number of users, but now we are in front of the public administration and in this case this huge expenditure would costs all on the P.A. treasury. So for many of you the solution would be easy: “move to the permissioned one”; but adopting a blockchain permissioned technology maybe would affects the much desired “principle of decentralization”, being a system managed by few people. At the end, the conclusion would be that adopt an hybrid blockchain system could represent not the better solution but the only one, and its so limiting;
2) then, the second problem is represented by the “immutability” of the blocks. Let put us in a situation in where we want to access to some data or maybe request the remotion of some our personal informations that are stored inside those blocks; it will be impossible, due to the immutability of the blocks and the facts that this action could affects all the chain. So maybe this fact could represents an obstacle for the exercise of the “right to be forgotten, an important right expressed in the art 17. of the GDPR, a right that gives the possibility to the citizens to request the remotion of their own personal data, in accordance to the following conditions:
a) If personal data aren’t necessary anymore
b) If the data subject retires his consent or reject this treatment
c) If personal data are treated in an illegal way
d) If personal data have to be cancelled for a juridical obligation
3) the third point represents mostly a personal observation then a critique, I’m talking about how important is to make an accurate regulation that understands how delicate is the situation and its able to be applied on all the problems and possible scenarios. In Europe we don’t have a uniform regulation yet, we only have experimentation fields, like for example the European Regulatory Sandboxes of 2023.
This is a delicate argument that interests non only the European Union, but also the States all over the world. We need to focus our attention to every kind of risk that the Blockchain technology, applied especially on the P.A. sector, is able to generate, avoiding a situation that the actual legislation couldn’t manage.
To support this observation I takes an example: the Dao Investment Fund.
Breevly, this investment fund used a blockchain technology, implemented by an algorithm, that allows the subscribers of the fund to vote the allocation of the investments, promoted by the algorithm, but leaving to the system the capacity to make the last decision. Then, an unidentifiable octowriter managed to write a program capable of interacting with the smart contract used by the algorithm to conclude operations. In this way, through hundreds of continuous transactions, approximately $55 million was drained from the fund in just one day.
The main problem of this event, wasn’t the attack per se, but the fact that this attack was considered totally legal; the hacker found a way to have a dialogue with the algorithm, respecting the code written by the founders, and leaving the users without any form of protection. This example shows us the tension between the use of this blockchain’s technology and its regulation.
There was also the experimentation of the “Bitlience regulatory framework” in the New York State. This blockchain’s based system was created and applied to improve the efficiency of the P.A. sector, especially talking about job and public services.
The only effect, resulting from the attempt by the State of New York to regulate blockchain-based services rendered within the state through a “Bitlicence Regulatory Framework”, was to force the majority of operators in the sector to move their headquarters to other states without regulation.
As i mentioned before, we’re in a totally new world, and being in a new world means that we must be careful about every move that we make in it. It would be to much easy to consider only one side of the medal, thinking that this new technology can bring us a lot of advantages, and consequentially neglecting all the other aspects. We are talking about something that of course represents an important innovation and an important step forward for the general welfare, but we’re also talking about something that is also able to cause a lot of problems, especially if we’re applying it on the P.A. sector. So it’s important to promote this new idea but with the right accuracies.
S.Mahula: “With blockchain or not? Opportuni7es and challenges of self-sovereign identity implementa7on in public administration;
M. Matassa: “Blockchain e Pubblica Amministrazione, stato dell’arte e prospettive”; M.J. Casey, P. Vigna: “la macchina della verità. La blockchain e il futuro di ogni cosa”; S.Ippolito, M. Nicotra: “diriQo della blockchain, intelligenza artificiale e IOT”;
C.F. Iaione, S. Ranchordas: “SMART PUBLIC LAW. AUTOMATION AND DECENTRALIZATION OF PUBLIC POWER: SMART CONTRACTS AND THE BLOCKCHAIN AS STEPPING STONES FOR A DIGITAL AND POLYCENTRIC GOOD ADMINISTRATION?”
 Art. 24 of GDPR: “the data controller implements appropriate technical and organizational measures to guarantee, and be able to demonstrate, that the processing is carried out in accordance with this Regulation”;
 Art 41. ECHR: “Every person has the right to have his or her affairs handled impartially, fairly and within a reasonable time by the institutions, bodies, offices and agencies of the Union.