As part of this study, Blockchain is considered as an integrated-distributed technology and a digital platform for transformation and development of e-government structures. There is conducted critical assessment of Blockchain technological characteristics and also, there are considered the consequences of its implementation into government organizations and their processes. At the same time, from the interdisciplinary point of view, it is regarded to transfer from a technology-oriented approach to a needs-oriented approach, which is adapted to Blockchain applications, ensuring and keeping the requirements for administrative and managerial processes. Based on the assessment, the authors’ substance the approach to investing the potential benefits of using Blockchain for e-government structures, as well as managing the architecture and applications of Blockchain in accordance with social needs and social values within the changing institutional paradigm conditioned upon the transition to a digital economy. On the one hand, the prospect of Blockchain technology management, in which government agencies use Blockchain technology for their own processes, such as the provision of public and municipal services, where Blockchain technology is used to manage transactions. Another perspective is called Blockchain technology management, which defines how the Blockchain should look like, how to adapt to changes and ensure the ability to implement the goals and objectives of public authorities, as well as the social needs of the population.
Keywords: Digital economyelectronic governmentcomputerizationBlockchaininstitutions
The result of the socio-economic revolution taking place in the modern world, according to some authors (Ioda, Bulavko, Khmeleva, & Ioda, 2013), is the construction of a post-industrial society, when information technologies, computerized systems, high production and innovative technologies play an important role. According to Semenov Y. A. "spreading digital technology increased the number of arguments about the formation of a new socio-economic relations and digital economy" (Semenov, 2017, p.128). In the context of the transition to the digital economy, the basic Blockchain technology is the innovative one, the universal technology for citizens, companies and governments to exchange information, carry out a variety of transactions, provide network services, and also contribute to the organization efficiency exchanging data in government agencies. Blockchain technology stores identical information on different nodes and new data is added only when the nodes reach consensus. However, although new transactions can be added, the previous information cannot be deleted, allowing all nodes to track history. Storing transaction information in different nodes is called a distributed registry. This reduces the dependency on the central node and the risk of data manipulation or system failure because all nodes have complete information. Blockchain technology can be used to record owner data and store important information and documents such as certificates, licenses, government decisions and legislation. Typically, the information stored in the Blockchain is transactional data, which can include not only information about monetary transactions, but also such data as ownership of land, birth and marriage certificates, vehicle registers, licenses, educational certificates, loans, social benefits and voting results.
Blockchain technology has the potential to be used for the benefit of government and society and can represent the next step in the development of e-government, as this technology can reduce costs and complexity, ensure reliable collaboration, increase the openness of audits and ensure the confidential processing of documents.
Most articles currently focus on technological development, solving technological problems using Blockchain technology for processes with peer-to-peer communication (P2P) or capacity proposed for reorganizing the transactions processes and information exchange for private purposes. However, there are currently no studies examining Blockchain technology in terms of its ability to address social needs. None of the potential applications based on Blockchain technology is considered in terms of possible usage within e-government. This study is devoted to solving this problem.
As a rule, most of the studies devoted to the Blockchain technology, on the one hand speak about the enormous potential and technological issues on the other, but usually ignores the peculiarities that arise between these two extremes, such as sales, trade-offs, limitations, materiality and aspects of management that can limit opportunities. As part of this study, we will review the potential benefits and identify new opportunities for government bodies related to the management of Blockchain technology, which could guarantee possible implementing of these technological advantages, as well as focus on the points that are currently underestimated in terms of the possibility apply in e-government and thus need more research. On October 31, 2008, the article "Bitcoin – peer- to-peer electronic cash system" by Satoshi Nakamoto (Nakamoto, 2018) was distributed in the electronic cryptography mailing list. The system was launched on 3 January 2009.
Since 2009, this digital currency system has gained over $ 150 billion in capitalization by May 2018 and now it is still the most famous Blockchain app, but more importantly, it has led to an innovative ecosystem technologies and services that go far beyond the financial sector.
Purpose of the Study
The main purpose of this study is to develop a mechanism for the Blockchain technology, based on the example of so-called “smart contract”, which can save an agreement on the terms of the participants, and after the conditions are fulfilled, the changes specified in the contract will be made. The smart contract defines the rules and penalties under the agreement and automatically fulfils the obligation in the contract. Such a contract can be defined as "a mechanism using digital assets of two or more parties, where some or all parties contribute assets and assets are automatically redistributed between those parties according to a formula based on certain data that hasn’t been unknown by the time when the contract starts (Buterin, 2014). Thus, it is a program that runs on the Blockchain and ensures the correct execution of the contract through the use of the consensus protocol. The smart contract contains information about the transaction and will be executed only if the conditions are checked by all network nodes.
The original app, based on Blockchain, is Bitcoin - focused primarily on crypt currency transactions. However, since its origins date back to 2009, since then the use of Blockchain has expanded to a wide range of economic sectors outside the financial one. Blockchain applications can be used for a wide range of tasks, from simple to complex transactions and information exchange, and smart contracts can be used to manage these transactions. In addition, the public sector has several areas of activity where the use of Blockchain technology could be useful or at least would allow exploring its potential as required. Therefore, understanding the potential benefits is a key aspect to determine areas that Blockchain technology can be effectively used within the digital economy. In order to understand these processes, it is necessary to consider this problem in relation to the public sector and, in particular, to e-government.
There are applied methods of system, factor analysis, empirical, diagnostic, retrospective, predictive, stochastic and others.
Blockchain technology can be used for any transaction or information exchange that the government is involved. Key features of this technology allow implementing automation of a processes wide range for the property register, inventory and information exchange on physical assets, property, intangible assets, such as votes, patents, ideas, reputation, health data, knowledge, etc. The essence of the Blockchain is that organizations can keep track of the registry data that organizations work together to create, develop and follow one unchanged transaction history and determine the sequence of events. Governments around the world are conducting pilot projects using Blockchain technology. The Blockchain projects diverse in nature and include a digital identification, storage of judgments, the construction funding and money tracing, data on marital status, electronic voting, licenses, business, passports, information about criminal records and even the tax records (Analytical statement, 2014). In this light, further research is advisable to compare the diversity of initiatives and analyze the positive aspects of this technological implementation. Blockchain technology is well suited for situations in which several unrelated parties are involved in a transaction. An example of such interaction is giving permissions to mass event’s organizers that require coordination with the structures that ensure the legitimacy, public order and security together with the police, firefighters, health care organizations, etc. Another example is the transfer of car ownership. To find the car owner, it must be analyzed the transaction history of the car, if it contains a unique identifier. The car owner can be identified by performing a search, as all data is uniformly considered in the structures of the Blockchain. The rule is prescribed in the chain that only the owner can sell the car. When a car is sold, you must create a transaction that the previous owner confirms the car sale, the new owner confirms the car purchase, and the Bank (or other party) confirms the payment of the title transfer. Another example is the retention permission sets granted to a public organization, and the ability to change permissions only if there is an agreement between nodes that are classified as higher in the hierarchy. Thus, Blockchain is a technology that replaces individual databases with a distributed general information register, which should lead to increase in security and availability. Each node in the network contains a full copy of the Blockchain data, transactions are written to the register, and each node has access to the entire transaction history. Access to the register may be restricted, therewith the number of nodes must be determined, as well as the type of consensus mechanism. This determines the leadership role of public authorities in deciding on the appropriate tolerances and types of mechanisms, which will be discussed in more detail below. Blockchain applications can significantly improve the efficiency of data exchange in government agencies. For example, in the case of Blockchain applications, cadastral organizations involved in land registration processes can interact directly with each other. This reduces the intermediary role of these organizations, which need to focus only on the development, maintenance and regulation of Blockchain technology. However, the need and procedure for converting such organizations into owners and operators of Blockchain applications currently remains an open question in terms of their powers and administrative regulations. Looking at this issue in terms of the context of governance technologies, it can be concluded that the Blockchain is in some form an institutional management technology that competes with other economic institutions of capitalism, namely firms, markets, networks, and even governments. Moreover, in a certain context, Blockchain can be seen as a technology that competes with the role of government in society. Despite the seeming abstractness of the issue, these trends should not be ignored, and further research is needed to formulate the issue more realistically, considering both technological and institutional elements. At a minimum, the Blockchain technology can offer distributed transactions on the platforms of the P2P, which are supported and provided by the authorities: the authors came to this conclusion (Melnikova, Lobanov, & Basha, 2014). This raises the question of who will create, develop and maintain this infrastructure, which is likely to belong to the public authorities, while the actual transactions can be carried out without their participation. On the one hand, Blockchain technology management means that the introduction of Blockchain technology at the government level ensures the information exchange and transactions between users according to the rules defined by the technology itself and implemented in the design of a system. Transactions can be fully automated and executed using Blockchain technology. This is similar to how the implementation of Bitcoin sets the conditions for digital money exchange. Blockchain technology management assumes that the government is developing a Blockchain system that implements the most appropriate type of Blockchain architecture. Surely, it is necessary to manage the development, implementation, maintenance and adaptation of the architectures and applications of the Blockchain. By this we will understand the management of Blockchain technology, which determines how this technology works and how users can interact with it. It is often the case that several experts dictate the rules in which an application manages users, whereas it is the developers who have an important role to play to ensure that the goals and objectives of public authorities and the social needs of the population are considered when designing and managing Blockchain architecture and applications. By the way, it is necessary to establish close cooperation between experts and policy makers, in order to develop the management of the Blockchain from one side, and to ensure compliance with social values and the achievement of social needs of the Blockchain for applications developed by other parties from another. Understanding these aspects and their implications to realize the benefits of this technology is an important task for improving the efficiency of the Blockchain architecture and applications. To do this, you need to assess the potential benefits of using Blockchain technology critically that will be discussed later. The main features of Blockchain technology, such as its distributed nature of P2P and a full copy of transactions on each node in the network, were discussed above. How can these features be used by public authorities for the benefit of society? Now, a large number of studies have revealed a significant number of such opportunities for the use of Blockchain technology to improve the efficiency of public authorities in the digital economy, which is summarized in Table
It is expected that the reliability of information will be improved through the use of consensus mechanisms that ensure that information is changed only when all parties concerned agree. Security is created through distributed registries, which are more difficult to manipulate. In the design process of the system, it is determined; the user is anonymous or uses a personalized access. For many applications in government, identity management will be a key aspect. Therefore, the Blockchain must be associated with identity management systems that can be used at the expense of other technological features, such as privacy. In this case, if there are a significant number of users, identity management will be very difficult, because in such circumstances it is difficult to ensure that the user who has the key is the one who should have the key. Table
Blockchain information infrastructure;
For e-government applications, institutional aspects play an important role and should be taken into account when Blockchain technology is used. As in cloud computing, the geographic location of servers and nodes will play a key role. In particular, in modern Russian realities servers should be geographically located in the territory controlled by the relevant authorities.
However, it is not clear at this stage how the Blockchain implementation will meet this requirement of adaptability and update management in the implementation and management process. Further experiments are needed to explore this interaction between the technological characteristics of Blockchain systems and the specific requirements of processes in government.
Another important aspect should be noted. Russian President Vladimir Putin after a meeting with Ethereum project co-founder Buterin (2014) set the government a task to develop a framework for regulating the market of digital currencies and Blockchain. In Russia, a draft law "on digital financial assets" has been developed, as well as changes in the civil code, which provides for restrictions for unqualified investors, purchase and sale only on registered national platforms, mining is qualified as entrepreneurial activity with mandatory implementation of the extracted on national exchanges, cryptocurrency is considered as a digital asset, but not a legal payment means.
The results of the study confirmed that the modern global economy is an information network, intellectual and psychological economy with its inherent Hyper-competitive technologies and methods of information and psychological, programmable and controlled impact on the consciousness, psyche and people’s will (producers and consumers) (Dyatlov, Bulavko, Balaovskaya, Nikitina, & Chudaeva, 2016). Within this research work, it is proved that the Blockchain technology is a fundamental innovative technology that offers new ways of recording transactions, events, certificates and access rights. Blockchain is a form of distributed computing in which transactions are democratized by introducing consensus mechanisms that allow a transaction to be made. As the application ways of this technology for personal reasons is extremely frequent, the Blockchain, according to study’s results (Dyatlov & Lobanov, 2017b) offers significant advantages when it is used as a basic e-government technology at the Federal and regional levels. However, from a practical point of view, this approach is difficult to implement, and the possible results of its application for e-government should be explored through interdisciplinary research that goes beyond the generally accepted technology-based approach. The study identified potential benefits in terms of strategic, organizational, economic, information and technological aspects. However, the practical implementation of the proposed concepts can be a much more complex process than theoretical development. In this study, we identified two perspectives for public authorities regarding Blockchain architecture and applications. On the one hand, the prospect of Blockchain technology management, in which government agencies use Blockchain technology for their own processes, such as the provision of public and municipal services, where Blockchain technology is used to manage transactions. Another perspective is called Blockchain technology management, which defines how the Blockchain should look like, how to adapt to changes and ensure the ability to implement the goals and objectives of public authorities, as well as the social needs of the population. Both perspectives imply a deep understanding of Blockchain technology in the context to develop digital economy institutions, which was emphasized in this study. The process of test implementation in public authorities Blockchain applications is paramount in order to gain a deeper understanding of the Blockchain as a complex socio-technical system and to find, may be redefined, its own role and functions within the changing institutional environment and economic paradigm. Based on the analysis of the emerging patterns of digital transformation in the world and national economies, it can be concluded that the results of the study made by some authors (Dyatlov, Lobanov, & Selischeva, 2017) the recent large-scale processes of digital transformation, convergence and information spaces integration, as well as the widespread introduction of Blockchain technology, launch the process of "creative destruction" in the out-of -date world financial and economic system and its institutions, as well as forming a neuro-network of the global hypercompetitive economy.
We thank the Russian Foundation for Basic Research as within it, this research work was prepared (project № 19-010-00318).
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20 March 2019
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Dyatlov, S., Bulavko, O., Nikitina, N., Lobanov, O., & Efremova, Y. (2019). The Blockchain As A Digital Technological Platform For Electronic Government Development. In V. Mantulenko (Ed.), Global Challenges and Prospects of the Modern Economic Development, vol 57. European Proceedings of Social and Behavioural Sciences (pp. 1396-1407). Future Academy. https://doi.org/10.15405/epsbs.2019.03.142