Five must-read takeaways from the UK government’s blockchain report

“Human progress is marked by the rise of new technologies and the unleashing of human ingenuity.”

That’s the foreword to a report into blockchain and distributed ledger technology published this week by the UK government’s chief scientific adviser.

The document sees positive prospects for the emerging technology and recommends that the government widely develop and demonstrate blockchain and distributed ledger technology, which has attracted global media attention and encouraged a large number of "blockchain" enthusiasts.

Perhaps the most important advice to take away is to encourage the UK government to conduct research into the application of this technology.

Author Mark Walport writes:

“Distributed ledgers have the potential to help governments collect taxes, deliver benefits, issue passports, record land registries, secure the supply chain of goods and ensure the integrity of government records and services.”

However, Walport went on to make a series of additional recommendations, predicting how the UK government would move forward with his proposals.

For those who missed the presentation, we’ve summarized the five most compelling takeaways below:

1. Use blockchain technology

Walport wrote that the first priority for governments supporting the development of distributed ledgers is to develop prospects for how the technology can improve the way governments do business and provide services to citizens.

He then suggested that governments should act as “expert customers” and start using the technology themselves.

In this way, he believes the government can “support and influence” the development of economic activity in the sector.

suggestion:

Provide ministerial leadership to ensure the government can provide vision, leadership and a platform for distributed ledger technology within government.

Specifically, the Government Data Unit should guide government as a user of distributed ledgers, while the Digital Economy Centre (DCMS) should guide government as a driver of distributed ledgers.

2. Invest in research

“To ensure the technology is robust and scalable, we need to understand the ethical and societal implications of different potential uses, financial costs and benefits,” Walport said.

He encouraged research and the creation of UK capabilities to conduct trials and experiment with different distributed ledger solutions.

On research and development, he believes the UK is in a “good position” but also warns that there is interest and competition in distributed ledger technology development around the world.

suggestion:

The UK research community should invest in the research needed to ensure distributed ledgers are scalable and secure, while providing proof of the correctness of their contents. They need to provide high-performance, low-latency operation, and they need to be energy efficient.

The newly created Alan Turing Institute could play an important role in coordinating and "self-organizing" public and private research and developing sectors interested in it and related technologies.

The private sector should consider investing in the Alan Turing Institute to support pre-competitive research that will ultimately lead to new commercial applications that are both sound and secure. This includes obvious work in areas such as cryptography and cybersecurity, but will also extend to the development of new types of algorithms.

3. Create a regulatory framework

After research and development, the successful implementation of distributed ledgers will require good governance in order to protect participants and stakeholders.

Appropriate controls must also be in place to ensure the system can recover from "systemic risks or criminal activity".

“The challenge is to balance the interests of the actors in the system and the interests of society, while avoiding that innovation is stifled by overly rigid structures,” he said.

suggestion:

Governments need to consider how to put in place a regulatory framework for distributed ledger technology. Regulation needs to proceed in parallel with the development of new achievements and applications of the technology.

As part of regulatory considerations, governments should also consider how to use technical codes as well as legal codes to achieve regulatory goals. The Center for the Digital Economy could adopt this suggestion.

4. Set standards to ensure security and privacy

While acknowledging that encryption systems are "difficult to break," Walport spelled out the risk of human error affecting security and confidentiality, as well as problems such as improper coding or hardware.

He therefore noted that governments should develop appropriate standards to ensure the robustness of distributed ledger systems, while calling for in-depth research into these potential issues.

suggestion:

Governments need to work with academia and industry to ensure the integrity, security, and privacy of distributed ledgers and their content.

These standards need to be reflected in both regulation and software code.

5. Build trust and interoperability

In digital systems, trust is based on two key requirements: authentication and authorization. Walport recommends using and building “stronger and more robust” identity management tools to provide authentication while protecting the privacy of users, whether they are groups, individuals or governments.

Furthermore, in order to “maximize the capabilities of distributed ledgers,” they will need to be able to work with other ledgers.

In addition to identity verification, this will require data interoperability, policy interoperability, and protocols enforced by international standards.

suggestion:

In addition to top-down leadership and coordination, there is also a need to develop capabilities and skills across government. We recommend the establishment of a cross-government community of interest that brings together the analytical and policy communities to generate and develop potential “use cases” and create a wealth of knowledge and expertise within the civil service.

This is a significant opportunity for governments to incentivize the commercial sector by acting as a customer in the procurement of distributed ledger applications.