Training Course on Blockchain Application Session 10: Utilization of Blockchain in the Public Sector Kenji Saito, Ph.D. Professor, Graduate School of Business and Finance, Waseda University, Japan Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.1/14 

In This Session, We will show how blockchain technology is being utilized in the public sector to enhance governance, improve service delivery, and promote transparency, accountability, and citizen participation Challenges and considerations associated with implementing blockchain solutions in government operations and the potential implications for future public administration will be explored However, participants will learn why blockchain technology should not be applied to the public sector as it is, and yet what blockchain is supposed to do is essential for the public good This session will also discuss how public services can be achieved with equivalent provenance without the use of blockchain Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.2/14 

Outline Why blockchain should not be used in the public sector Why what blockchain is supposed to be able to do is needed in the public sector What potential applications are and how to implement them Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.3/14 

Why Blockchain Should Not be Used in the Public Sector Strength of the blockchain, whether it is based on proof of work or proof of stake, depends on the high market price of its native cryptocurrency (cf. session 4) ⇒ This would mean that if the market price of a particular cryptocurrency crashes, public services could become unavailable ⇒ It could also mean that the government would have to prop up the market price of that particular cryptocurrency If the government must work to serve the holders of a particular cryptocurrency rather than the legal tender of the area, it would be no longer considered public But then again, another option would be to make the cryptocurrency the legal tender of the country This way, they still have autonomy over their own monetary policy compared to, say, pegging it to the U.S. dollar Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.4/14 

Why What Blockchain is Supposed to be Able to do is Needed in the Public Sector Blockchain provides censorship resistance in the broadest sense (cf. session 5) ⇒ Integrity of information about citizens, residents, and the community must be protected, especially from government attempts to falsify or censor the information In a democracy, people need to monitor their government, and censorship resistance and trustless provenance are tools for this But we must do it without using today’s blockchain, which depends on the price level of a particular cryptocurrency Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.5/14 

What Potential Applications are and How to Implement Them There is a wide range of potential applications Local currencies / tokens for specific services provided by the government / grants with monitored usage / government bonds / driver’s license / traffic ticket / voting ticket / real estate and corporate registration / passport / visa / health insurance card / certificate of residence / certificate of in fact anything . . . In all cases, it is essential that everyone be able to verify the authenticity and integrity of documents issued by government agencies or agents At the same time, to spend the tax payer’s money carefully, the registration of documents and verification of their existence must be inexpensive enough, and it must be possible to process many documents in a unit of time Let us think how we can do it Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.6/14 

Two Levels of Problems Level 1 For any of the large volumes of documents that are produced daily in one of your government ministries, Please devise a mechanism by which a requester can verify that any document disclosed in its entirety according to a disclosure request is authentic and has not been tampered with since it was produced Level 2 Please come up with a mechanism to achieve the above for documents that contain information that is not disclosed i.e., parts of the document would be blacked out if it were on paper When these parts are later disclosed, it must be possible to verify that the parts are also authentic (i.e., parts of the same document first disclosed) and have not been tampered with Documents must be digitalized Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.7/14 

What Are the Implicit Requirements? The documents of government ministries are positioned at the foundation of shaping your country You must use a system that is sufficiently trustworthy, and You will want to assume that it is sustainable enough to continue to be used as long as the country continues to exist ⇒ Again, is blockchain useful? Risk of crypto-technology compromise or native currency crash making it less secure And the strangeness and unfairness of dealing with the latter as a country But the techniques used in blockchain applications can be a hint Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.8/14 

General Model of Provenance by Blockchain Blockchain Public Space Users Provenance Service Merkle tree Merkle root Obtain subtree Search for Merkle root Embed at a certain point of time … … Rec 1 Rec 2 Rec 3 Rec 4 digest digest digest digest digest digest API digest - It is possible to make a Markle tree with several tens of thousands of records. Even in the case, the height of the tree is about 10 to 15. - In order to confirm the existence of rec 1, the Markle root can be calculated if only the subtree shown in blue is obtained. The service can be distributed using existing technologies (distributed KVS, DHT) Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.9/14 

Level 1 Solution Example (illustration on the next page) Daily record Digests of the produced documents are arranged to form a Merkle tree When it is time for the next issue of the government gazette to be published, the resulting Merkle root is printed in hexadecimal notation in that issue of the gazette Verification of disclosed information Administration provides a partial tree of the applicable Merkle tree in addition to the document itself at the time of disclosure Requester computes the digest of the disclosed document and recomputes the Merkle tree using the retrieved partial tree to obtain the Merkle root Requester confirms that the calculated Merkle root matches the value published in the earliest official gazette after the document was produced A similar system using the Financial Times has been in operation in Estonia for some time Search image on the web with “guardtime financial times” Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.10/14 

Illustrated Level 1 Solution Example doc 1 digest digest digest digest digest digest digest duplicate in case of odd number * Alice, to whom document 3 is disclosed, simultaneously receives the digests shown in blue, and whether they are located on the left or right side. * Now that Alice knows the series of digests to be concatenated from the digest of document 3, she can reproduce the calculations leading up to the Merkle root and confirm that the resulting Merkle root matches the value listed in the earliest official gazette after the document's creation date. Information disclosed to parties requiring proofs public information Merkle root Merkle tree (administration keeps and partially discloses the information) …… …… …… …… …… digest digest digest digest digest digest doc 2 doc 3 doc 4 doc n The next official gazette print Digests are completely different values if the original data differs by even one bit, and the original data cannot be inferred from the digests. Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.11/14 

About the Level 2 Solution Documents can be verified for authenticity with partial confidentiality by structuring and recording documents We will not go into detail here, as there are many possible methods and we do not endorse any particular method But if you are interested, please refer to this paper as an example Kenji Saito, Satoki Watanabe, “Lightweight selective disclosure for verifiable documents on blockchain”, ICT Express, Volume 7, Issue 3, September 2021, pp.290-294 We can always replace the blockchain with government’s official gazette or newspaper Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.12/14 

About Verifiable Credentials (VC) A mechanism being considered by W3C to enable verification of the authenticity of digitalized documents https://www.w3.org/TR/vc-data-model-2.0/ I believe it has already been mentioned during this training course As it only defines a framework, implementations can be varied and may or may not use blockchain As we have seen in this session, blockchain applications should be avoided for the public sector It would be possible to consider an implememntation of VC using, for example, a digitalized official gazette, rather than blockchain Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.13/14 

Conclusions Because the strength of blockchain depends on the high market price of its native cryptocurrency, public services should not depend on blockchain Because in a democracy, people need to monitor their government, censorship resistance and trustless provenance that blockchain provides are useful tools We can create a system that can be used to guarantee the authenticity of any official document, using the official gazette for example We do not have to rely on today’s blockchain Its application is wide-ranging and could be applied to any government-issued certificates, including driver’s licenses, passports, government-issued coupons, etc. It could also be realized as verifiable credentials recommended by W3C Session 10: Utilization of Blockchain in the Public Sector — APO Training Course on Blockchain Application — 2024-04-04 – p.14/14