Governments, blockchain and the race for digital space

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In 2015, The Economist magazine hailed blockchain as “the trust machineCapable of replacing governance structures, moving institutions and bringing a new level of transparency to transactions and information, with implications for public life.

In the years that followed, technology produced trillion dollar decentralized financial markets and a host of blockchain innovations, especially in financial services, with the rise of bitcoin, stabelcoins, finance. decentralized or DeFi, central bank digital currencies (CBDCs) and other industries such as shipping, logistics, and supply chains are starting to expand use cases.

OECD research, however, shows little breakthrough in blockchain innovation in government and minimal impact in the public sector – the technology is often described as a solution in search of a problem. As technology matures rapidly, we are starting to see governments take an interest in blockchain and distributed ledger (DLT) technology in areas such as taxation, standards and certification, digital identity and privacy. Datas.

For governments, assessing the disruptive potential of blockchain is both a practical and a philosophical challenge. The purpose many public institutions are the provision of public goods, the guarantee of rights, and the social contract – functions that blockchain pioneers sought to replace with cryptography, networks, and protocols. Whether this technology will be used to replace or complement traditional governance models is open, as is its ability to achieve such a transformation.

This year’s opening discussion at OECD 4e Annual Blockchain Policy Forum addressed several of the key opportunities and challenges at the intersection of technology and governance to disentangle the promise of blockchain from reality and explored the extent to which technology can and should be guided by governments towards better models of social and economic connection.

Indo-Pacific leads global trade with blockchain

“In global commerce, the leaders of blockchain technologies are the Indo-Pacific governments like China and Singapore. Trade is the lifeblood of this region which is considered to be the hub of world trade. China and Singapore were early on in understanding the benefits of blockchain for supply chain management, not only for the provenance and tracking of goods, but also for taxes, customs, and digital rights.

“The blockchain increased considerably on the 14e century Venetian innovation of the double ledger into a theoretically infinite multidimensional ledger that is public, open, transparent and immutable, and secures access using cryptography. It’s like another layer of the Internet, with greater resilience against cybercrime, and integrates multiple stakeholders into a much better management of the economy ”, explains Alex Sandy Pentland, professor at MIT and director of MIT Connection Science.

In a world characterized by geopolitical turbulence and trade headwinds, digital leadership in sectors such as central bank digital currencies and supply chains using new digital technologies is really important. Welcome to the race for digital space. Blockchain intellectual property, technologies and standards are now being used to gain a foothold in global commerce. Most importantly, it helps drive rapid adoption with low friction use cases and easy-to-access services.

Blockchain helps countries that are among the first players and leaders in this space to position themselves to generate decades of industrial, societal and economic growth.

The opportunity of blockchain for governments

“Governments must learn to embrace and adapt to polycentric governance models to better engage the wide range of actors and stakeholders needed to compete in the digital world without having to create new, overarching bureaucratic institutions,” says Primavera di Philippi, permanent researcher at the National Center for Scientific Research in Paris (CNRS) and associate professor at the Berkman Klein Center for Internet & Society at Harvard University.

Most DLT blockchain technologies are developed as open source with large pools of developers participating by voting through digital protocol governance models that extend across many protocols to other entities becoming governance nodes. It is akin to a large mutual and is risk-adjusted both by the volume of participants and experienced speakers and by its polycentric nature.

“There are two big advantages for governments that build their programs on the blockchain; the first is COLLABORATION – governments can attract a wider and more diverse range of stakeholders to develop and adopt digital infrastructure for commerce, taxation, identity, financial services, etc., and use power from the crowd – this is markedly different from large enterprise software projects which present significant concentration risks, including the number of business players who can engage. The second is CERTIFICATION – governments can move away from the use of “sticks” by offering “carrots” to stakeholders who exhibit measurable compliant behaviors – this could radically change the way we think about regulation and compliance.

“All of this is achievable through smart contracts on the blockchain and can be accomplished now without New contract law if we adopt a “functional equivalence” for smart contracts, just as we adopted it by moving from paper contracts to electronic contracts. The only big decision governments need to make up front is to use public or private blockchains, or a mix, and that decision deserves careful consideration of the specific use case, ”said Di Philippi.

Pentland adds, “There is a great transfer of ‘soft power’ that takes place with blockchain technologies, and when it comes to commerce, it is led by the Indo-Pacific. As systems develop, it is important that they focus on a level of interoperability between them through standards, to ultimately deliver the benefits offered by distributed ledger technologies – multidimensional participation . If countries seek to take the ‘walled garden’ route, interoperability will be lost and the world trading system will be opened up to new arbitrage opportunities by those who seek to exploit this situation. ”

The race for digital space

Governments and industry must recognize that blockchain is now mature, here to stay and ready for use today. The technology is over ten years old, and the underlying technologies of distributed databases, cryptography, and peer-to-peer networks have been with us since the dawn of computing.

Software developers are bringing blockchain use cases to market faster than most industries, governments, and regulators can keep up – that’s the power of the polycentric network crowd. There is more innovation outside your four walls than inside, and you need to know how to plug into it.

As is often the case, it is the systematic factors associated with institutional biases that prevent governments and managers from understanding how and when to mobilize new technologies and innovative methods for society, and in many cases few really are. encouraged to get there.

The blockchain revolution provides “the platform” to involve a large number and large size of actors in the economy through shared mutual governance – the main incentive is already there, it is integrated into the governance model – greater and more efficient economic participation in the economy.

Governments would be well advised to prioritize the race for digital space. If the revolution is symbolized, it will be because large public blockchain consensus protocols symbolize it and large swathes of global businesses and consumers are using it.

You can watch this panel and learn more about it and much more from the OECD 4e Annual Blockchain Policy Forum.


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