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Blockchains for Government: Use Cases and Challenges
Blockchain is the technology used by developers of cryptocurrencies, like Bitcoin, to enable exchange of financial “coins” between participants in the absence of a trusted third party to ensure the transaction, such as is typically done by governments.
Blockchain has evolved to become a generic approach to store and process data in a highly decentralized and secure way.
In this article, we review blockchain concepts and use cases, and discuss the challenges in using them from a governmental
viewpoint. We begin with reviewing the categories of blockchains, the underlying mechanisms, and why blockchains can
achieve their security goals. We then review existing known governmental use cases by regions. To show both technical and
deployment details of blockchain adoption, we study a few representative use cases in the domains of healthcare and energy
infrastructures. Finally, the review of both technical details and use cases helps us summarize the adoption and technical
challenges of blockchains.
CCS Concepts: • Computer systems organization → Redundancy; • Computing methodologies → Distributed computing methodologies; • Security and privacy → Distributed systems security;
Additional Key Words and Phrases: Blockchains, applications, security, e-health, e-government, critical infrastructure
security
1 INTRODUCTION
Blockchain is technology that builds a trustworthy service in an untrustworthy environment. It uses replication
of distributed systems to build a decentralized service that achieves the same goals with a trusted centralized one.
Since 2008, blockchain implementation has exploded, primarily driven by its native ability to support any type of
digital transaction. Blockchains have been adopted by Wall Street investment firms to enable transaction cost reduction, Silicon Valley startups as an alternative means of raising funds through initial coin offerings, and by one
government, Venezuela, to encourage global investment into the country. The algorithms that power these distributed transactions have given rise to an altogether new method for securely storing data in a digital world that
is oftentimes adversarial. Because blockchain guarantees high service availability as well as data integrity, any
industry in which transactions or processes rely on the use of a trusted third party, or where a strong guarantee
of security is required, can consider implementing blockchain solutions, as should governments worldwide.
What attributes of a blockchain may be of use in government? Blockchain provides a means to ensure that any
copy of the data will always be available, verifiable, and trustworthy. It functions like an old Xerox machine in
terms of data dispersion, in the sense that it can make copies of any item available to anyone who uses it. With
respect to trust, it acts more like a notary public, guaranteeing that any copy of data is authentic and that the
copies cannot be forgotten or counterfeited. Finally, in terms of transaction processing, it functions like a general
ledger in which transactions must be recorded in the same order.
To handle data sharing, transaction processing, and validation, there is a set of replicated servers, called nodes.
Each node runs a consensus algorithm, which provides a way to reach agreement with every other node about
a given transaction, without any human intervention. The algorithm must enable the system to proceed even
when some percentage of the nodes arbitrarily fail. There are various algorithms, discussed in detail later, but
it is noteworthy that democratic concepts such as quorum and majority voting are incorporated into them. The
overarching goal of such a system is to use replication to provide security (specifically availability and integrity),
and to enable the distributed servers to behave like a centralized decision maker.
How many failures blockchains can withstand—or the percentage of nodes that can fail without compromising
security—depends upon the particular use case and the types of failures. For example, a distributed file system
may need to withstand “crash” failures, or those failures that occur when faulty nodes simply stop processing
requests. Such systems (e.g., Google File System [54]) are commonly able to mask the failures of up to one-half
of the nodes. Failures like software bugs, hardware errors, and adversarial (cyber) attacks cause Byzantine faults.
Byzantine Fault Tolerance (BFT) systems withstand up to one-third of their nodes failing by providing stronger
guarantees between nodes through cryptographic techniques.
Blockchain history. The distributed systems technical concepts that underpin blockchain were proven in 1982
by Leslie Lamport. Lamport introduced and solved the distributed consensus problem for BFT, in a proof he
named the Byzantine Generals Problem [76]. The solution states that to tolerate one arbitrary failure, the system
requires at least four replicated nodes so that they can reach a consensus on a specific decision. A more generalized statement is that to tolerate f Byzantine failures, the system has to have n ≥ 3f + 1 nodes. In 1999, Miguel
Castro and Barbara Liskov became the first to apply Lamport’s consensus in a functioning algorithm they called
Practical Byzantine Fault Tolerance (PBFT). [30] In 2008, a pseudonymous individual, or group, named “Nakomoto” used consensus protocols, similar to BFT, to create Bitcoin. Bitcoin’s innovation was to build a decentralized system as a trusted broker for exchanging money, and acts in a similar way as government and banking
systems do with cash. Viewed historically, people used different types of exchange for trading things of value. In
the case of Bitcoin, one of the most famous first purchases was pizza. Purchasing that same pizza over the ages
would have been done differently, as is shown in Figure 1, each with different trust providers.
Bitcoin uses an approach called Proof-of-Work (PoW)-based consensus (described in greater detail later) to
allow users to exchange digital “coins” with each other with confidence. Different from the classic BFT protocols
that tolerate a fraction of node failures, PoW assumes a slightly different failure model called the computational threshold failure model. The system is considered valid as long as no adversary controls more than 51% of the total
computational power. Through PoW, the system supports an open and transparent pseudonymous environment
where any user can participate. However, PoW requires a lot of compute power, as the Bitcoin system retools
itself constantly to keep the algorithm tuned to enforce time restrictions on transaction validation.
In this article, we review what a blockchain is, how the underlying mechanism works, the technical and
adoption challenges, and the governmental use cases. There are several survey works in the literature, [36,
116], including ones about the consensus mechanisms for both permissionless [89, 115] and permissioned
blockchains [26], as well as for BFT protocols [36, 99]; some works have reviewed blockchain applications with
a focus on e-government [11, 21]. Compared with existing survey works, we aim to review the governmental
applications of blockchains, with a focus on the technical perspective of the applications. Indeed, one of the
major challenges for blockchain adoption is the gap between the underlying technology and the understanding
of the capabilities [26, 33]. Therefore, reviewing the use cases and applications of blockchains from the technical
perspective can help both technical developers better understand how the technology could be improved and
also decision makers better understand the pain points of the technology limitations and capabilities.
The rest of the article is organized as follows with an aim to answer the following questions:
• What is blockchain, its security goals, and its underlying mechanism? This is not considered as a new
contribution. Indeed, many online and research articles have introduced blockchain concepts. However,
we found that a lot of existing articles provide inaccurate information or describe the concepts in detail,
which makes it challenging for the general audience. Therefore, we answer the question by introducing
different layers of blockchains, their capabilities, and how each layer is composed technically. Specifically,
in Section 2, we lay out in detail a three-layer view of the technology used in both permissionless and
permissioned blockchains and discuss their capabilities and limitations. With a slant toward government
usage, the section will provide a foundation to discuss applications built on top of the technology.
• What are the governmental use cases for blockchains? What is the best blockchain model for each use case?
What are the lessons learned? In Section 3, we present use cases from both researchers and white papers in
the field, as well as those applied by decision makers around the world. We aim to group the applications
by regions and countries to observe the trend in the adoption of blockchains. For each type of use case,
we also aim to discuss whether it is appropriate to use blockchain as a solution, the technical challenges,
and how the challenges could potentially be solved.
• How are blockchains deployed in practice? What features of blockchains are unique in each use case? To show
in detail how blockchains can be used in practice, in Section 4 we study governmental projects in two
major sectors: healthcare and critical infrastructures (with a focus on energy infrastructures). We review
different aspects in each sector how blockchains are used, present the benefits of using blockchains in
each use case, and discuss the adoption and technical challenges.
• What are the adoption and technical challenges? Blockchains cannot solve all problems. In fact, blockchain
is not mature yet, as challenges exist for both adoption and technology development. It is desirable to
discuss the challenges from both adoption and technology development perspectives. Understanding the
adoption challenges can greatly help developers and researchers improve the technology. However, understanding the technical challenges will benefit decision makers in learning the capability of the technology and foster the adoption of the technology. In Section 5, we summarize and discuss both adoption
and technical challenges, and discuss the potential solutions to address these problems.
2 BLOCKCHAIN CONCEPTS
All blockchains work to make decentralized nodes achieve an agreement on the total order of transactions
through cryptography and an underlying consensus mechanism. Technically, blockchains generally fall into
one of two categories: permissionless or permissioned. Permissionless blockchains allow anyone to participate,
are considered “open,” and have trust provided by algorithms. In contrast, permissioned blockchains are usually
“private” or “consortium” and all participant identities are known but no participant needs to be trusted.
In practice, variants exist where there is no clear line between different types of blockchains. For instance,
Ethereum, a typically permissionless blockchain, can be set up as a private blockchain called the Ethereum
private network [48]. Efforts have also been made to achieve anonymity for permissioned blockchains [24, 61].
2.1 A Layered View of Blockchain
Blockchains can be abstracted into three different layers [7], as illustrated in Figure 2. At the core of blockchain
is layer 1: BFT consensus—also known as state machine replication—which is a generic approach to tolerate
failures. BFT consensus has different forms, ranging from conventional BFT protocols to PoW-based consensus.
Despite fundamental differences in how consensus is achieved, any form must solve the same problem: how
to enable nodes to reach consensus on the total order (i.e., consistency) of transactions submitted by clients in
the form of requests. After nodes reach a consensus about the order, the data/operations of the transactions are
then processed according to the order of the transactions. As a result, distributed nodes functionally behave as
if there were one centralized node. This ensures that there is only one sequence of client transactions, known
as “the longest chain.” Layer 2 of blockchain is the smart contract, which is essentially software code. A smart
contract provides an interface for blockchain developers to implement new functions. Smart contracts can then
facilitate, verify, or enforce the execution of business transactions. A smart contract can be viewed as a program
that connects the underlying consensus protocols with layer 3, applications and use cases.
2.2 Building the Hash Chain
The cryptographic concepts of “hashing” and “digital signatures” provide tamper proofing and validation. One
way hash functions generate a unique output of alphanumeric text given an input of a list of transactions. Change a single thing about the list of transactions and the resulting hash is significantly different. Digital signatures
like Rivest–Shamir–Adleman or Elliptic Curve Digital Signature Algorithm are used to “sign” transactions. The
hashes are then linked together in a chain of blocks, with any block except the first one, called the genesis block,
pointing to prior hashes and signatures. Such a hash chain ensures that no one can manipulate the contents of
any block or reverse the chain order.
2.3 Permissioned Blockchains
Permissioned blockchains provide consensus and security using provably secure distributed consensus protocols.
The consensus protocols do not involve expensive procedures such as in PoW. Therefore, permissioned systems
have low latency (the time between the client sending a transaction until the client receives a reply), they are
also scalable (both in the number of clients and transactions as well as the number of servers) [112], and they
consume less energy than permissionless blockchains (described in detail later).
Most permissioned blockchains, especially those widely employed or piloted by government, use provably
secure BFT protocols. Among these BFT solutions, the leader-based protocols are widely used, such as PBFT [30]
and its variants [106, 108]. In these types of protocols, there is a specific leader, which proposes the order of
transactions. The nodes then communicate with each other in several steps to reach agreement on the order.
In most leader-based protocols, each node sends messages to all other nodes in each step and collects matching
messages from a fraction of nodes before moving to the next step. If the leader is potentially faulty or malicious,
other nodes will run a leader change protocol until a new leader is elected.
On top of the consensus protocols, blockchains have different approaches to store the transactions. Figure 3
illustrates a typical system architecture used by permissioned blockchains. Specifically, after receiving requests
from the clients, a number of nodes run a BFT protocol to assign order to the transactions. The transactions and
their order are then forwarded to all other nodes in the system. Finally, the transactions are stored and processed
according to that order. In this architecture, the nodes that store the transactions act as learners that passively
learn the order from the consensus nodes.
Numerous BFT protocols have been proposed in the literature [34, 37, 41, 43, 59, 106]. Chain-based approaches
organize nodes in a logical chain where a node only needs to communicate with its previous node and its subsequent node, if any [42], avoiding the all-to-all communication described previously, resulting in performance
improvements. Another approach is a hybrid that combines BFT protocols, such as Aliph [59]. The reason Aliph
takes a hybrid approach is to combine the best features from more than one BFT protocol is because there is no
one-size-fits-all consensus protocol. In Aliph, the protocol can use one cheap protocol to achieve great performance with fewer failures. When failures occur or become more frequent, the system switches to another more
expensive one to guarantee system security.
2.4 Permissionless Blockchains
Most permissionless blockchains adopt a “Proof-of-Something” strategy. In the case of Bitcoin, this is PoW, a
mathematical challenge offered to all nodes in the system to try to overcome (or work through) by an activity called mining. Once mined, a node can propose a block of transactions and get rewarded in Bitcoin if the
proposal is accepted. The drawback to this approach is that throughput (the number of transactions processed
per second) is limited, and the energy consumption is high. Furthermore, collusion occurs—nodes form cartellike entities called mining pools—concentrating mining activity under the control of one group. With mining
pools, the blockchain becomes less decentralized and therefore less secure, and more susceptible to attack and
manipulation.
Compared with BFT-based consensus, PoW-based consensus does not have a fixed leader and can be viewed
as a system where the leader changes after each block of transactions. To propose a new transaction, a node
needs to first solve PoW from the previous transaction. When a node proposes a transaction n, it also generates
a pseudorandom number that is called a cryptographic nonce. As illustrated in Figure 4, the nonce is broadcast
to all other nodes. Nodes compete to become the next leader by selecting random pending transactions and
generating a hash of the selected transactions. The node that first generates a hash smaller than the nonce value
is the winner and becomes the next leader. Compared with BFT consensus, PoW-based consensus involves fewer
messages for nodes to reach a consensus on the transactions. The blockchains based on it can easily scale to
thousands of nodes. The challenge is that more than one node might solve the puzzle at the same time, creating
a fork of the hash chain. Nodes in the PoW consensus will detect the fork, eventually agree on the longest hash
chain, and use it. It takes time for each transaction to be finalized after it has been proposed, usually after six
blocks, each taking about 10 minutes, in the case of Bitcoin—about an hour. This finalization time can be reduced
using different approaches.
Multiple Proof-of-Something approaches have been proposed to enhance the performance of PoW-based consensus, some of which are shown in Table 1. The workflow usually remains the same, but the protocols use other
strategies. For instance, Proof-of-Elapsed-Time replaces PoW with trusted hardware, using Intel Software Guard
Extension (SGX), a trusted execution environment. Specifically, computers running an Intel SGX processor have
a set of security-related instruction codes built into them that makes the piece of hardware protected. Instead of
generating a hash to solve PoW, every node utilizes SGX to wait for a random amount of time. The node that
finishes waiting earlier than all other nodes “wins” and can propose new transactions. Proof-of-Elapsed Time is
in use as a consensus option in the Hyperledger Sawtooth platform [95]. The major benefit is a greatly improved
system performance. The drawback is that each trusted execution environment has its own vulnerability, and
one has to trust a single vendor to use the blockchain. Other examples include Proof-of-Stake (PoS) and Proofof-Authority (PoA). PoS and PoA are each designed to improve the performance of Ethereum, and in both a small
group of nodes is selected as representatives. PoA selects the representatives based on their reputation, whereas
PoS selects representatives using one of several approaches. In Delegated PoS, nodes can vote for certain replicas
to select them as representatives. After the group of representatives is selected, the nodes have the authority
to propose new transactions and notify others of the results. The major challenge with representative-based
systems is that the selected representatives must behave correctly to ensure system correctness. For instance, in
PoA, the reputation system must be trusted, and one has to assume that malicious nodes do not have motivation
to build up their reputation and then corrupt the entire system.
2.5 Smart Contracts
Smart contracts are programs that automatically fire when nodes come to consensus, without any human intervention. Smart contracts are not the normal contracts people use. Instead, the nodes in a blockchain are configured to check a series of conditions to see whether the triggering criteria has been met. If the requirements are
met, then the nodes execute an agreed upon contract, a program that executes business-defined functions. Smart contracts allow users to deploy new capabilities and functions while the blockchains are running; services do
not have to be stopped. Specifically, developers could write a new smart contract that includes a set of functions.
After the contract is deployed on the blockchain, authorized users could call the contract to use those functions.
Other running services on the blockchain do not have to be interrupted at all to support these new functions.
The most popular smart contract platforms include the Ethereum Virtual Machine (written in a language called
Solidity) and Hyperledger Fabric’s Chaincode (written using a combination of the languages Go, node.js, and
Java). Since all blockchain transactions are included in the hash chain, and therefore unchangeable, having a
bug in the contract, or a flaw that can be exploited, introduces risk into the system. It is also worth noting that
the use of smart contracts will likely degrade the performance of the system, as observed by several research
works [15, 60].
2.6 Blockchain vs. Databases
Modern databases are frequently designed to be replicated and distributed to achieve high reliability. The most
typical method is primary-backup replication, in which the data are replicated as copies across multiple servers
or virtual machines. When one copy is lost, additional copies are available to continue the service. This shares
certain similarities with blockchain systems, with three major differences. First, distributed databases focus
on the management of data. In contrast, blockchains aim to ensure data security. Second, blockchain systems
aim to tolerate Byzantine/arbitrary failures, whereas distributed databases usually handle only crash failures.
Third, blockchain systems aim to achieve the strongest guarantee of data consistency across multiple machines,
whereas distributed databases usually only achieve weaker guarantees of data consistency, such as causal consistency [25]. In causal consistency, data can be written concurrently by different nodes, introducing potential
conflicts to be resolved later. In comparison, blockchain systems guarantee linearizability, the strongest consistency guarantee in distributed systems [62]. Informally, linearizability ensures that the data are always consistent
across all nodes, so the distributed nodes behave like a centralized one.
3 GOVERNMENT ADOPTION OF BLOCKCHAIN
We have done a review of the known projects and use cases supported by governments across the world. Our
goal is to provide a comprehensive and representative, but not exhaustive, list. Our purpose is to discuss several
applications that are both representative and meaningful. Indeed, with the increasing interest in blockchains,
applications can be discovered in potentially all industries. A lot of them, however, are far away from being
practical or useful. Therefore, we select the representative use cases and group them by countries and regions.
In this way, we will be able to better see the trend in government use cases. Government adoption of blockchain
can be viewed from regulatory, consumer, and developer perspectives. As a governing body, a state may wish to
monitor how blockchains are used, as in the case of cryptocurrencies. As a user of applications, governments may
use blockchains to improve processes. And in some instances, a government may develop its own blockchainbased application to address an internal need.
In this section, we review the governmental efforts made by countries worldwide in piloting blockchain solutions, the setup, and lessons learned. Since blockchains are widely used by cryptocurrencies, most of the applications reviewed were financial. In Table 2, we include other domains such as medical, infrastructure, city
governance, asset and data management, and education.
3.1 U.S. Government
The U.S. Health and Human Services (HHS) department has developed an application called Accelerate for
management of contract billing that utilizes blockchain, AI, ML, and process automation. Accelerate is designed
to better manage the HHS portfolio of 100,000 contracts worth around $25B across about 50 systems. The
blockchain within Accelerate captures a pointer to unstructured data (e.g., documents) rather than storing the data itself. Accelerate was able to get contract information dispersed across the entire bureaucracy through replication of data and became the first federal blockchain-based application to be certified by a designated approving
authority, an internal senior management official, as having the authorization to operate [49], indicating that the
system had an acceptable level of risk and may be used in government applications. Accelerate was expanded to
acquisition management—getting contract information to researchers more readily so they could find suitable
materials for their research. HHS has projected savings at the point of purchase of up to $720M over time and may
expand Accelerate into clinical data—HHS leadership discussed using blockchain for tracking sepsis data [104].
Research is being done by the U.S. Centers for Disease Control and Prevention (CDC) to use blockchain to
help track public health outbreaks such as hepatitis A [96]. In 2017, the chief software architect for the CDC’s
Center for Surveillance Epidemiology and Laboratory Services began building proofs of concept for improving
surveillance across state lines. Since then, the CDC and IBM have come together to work on a blockchain-backed
solution for tracking the ongoing opioid disease crisis [83]. We assume that using blockchain to track COVID-19
is a consideration. Figure 5 shows that interest in blockchain for use in biomedical applications is growing rapidly
after many years of no published research. Most of these publications are for theoretical research, with few
discussing deployment of blockchain at the point of care. Several discuss blockchain’s tamper resistant property,
as well as its distributed nature—attributes relevant for health data interoperability. These blockchains tend to be
private permissioned ones; Ethereum is studied because of its smart contract capability, and Hyperledger Fabric
because it is open source and has some support from large companies such as IBM.
3.2 Asian Governments
In 2019, the Filipino government approved the adoption of an Ethereum-based solution for approximately 80
rural banks to get access to financial services. Motivating the effort is the fact that only 42% of Filipinos aged 15
or older have a bank account due to a combination of factors [38, 120].
The concept of blockchain city has been used and made live at Malaysia’s Melaka Straits city, a tourist city
funded by the Chinese government. The project aims to use blockchain to track tourist visas, passengers, luggage,
and booking services [102]. The city will also manage its own token, the DMI coin, for tourists to exchange their
money into digital currencies for payment in the city via their mobile phones.
South Korea’s government announced a 4B Korean won (about $3.5 million) award to set up a blockchainenabled virtual power plant in the city of Busan, the country’s second-most populous city [97]. The power plant
is to be cloud based and should integrate multiple energy resources to optimize power generation.
3.3 European Governments
The European Horizon program supports blockchain projects across the European Union [111]. Luxembourg
launched a digital Luxembourg initiative in 2017, with a focus of building a blockchain governance framework.
The purpose is to build a blockchain competence community and develop blockchain governance standards; the
project is ongoing.
The e-Estonia program [45] supports multiple features such as e-identity, e-healthcare, and e-governance.
Most are already operational, with 98% of Estonians filing tax declarations completed online, and 99% of their
health data is digitized and stored on blockchain. Although issues and concerns remain [93, 107], blockchains
have indeed revolutionized the way this government stores and processes data.
Countries such as Georgia and Sweden (and non-European Union countries like Switzerland) use blockchains
to manage assets [13]. Georgia (at the juncture of Asia and Europe) has implemented blockchain for land title
registry and related property transactions; the technology has helped make the process more efficient [105].
Sweden has also created a blockchain-based application for land registration and real estate transactions [78].
Blockchain in education has been applied as well [56, 57]. The Maltese government recently completed the
first national pilot of a blockchain to manage academic credentials such as diplomas, school certificates, and
transcripts. This has been shown to improve the safety of personal information, minimize bureaucracy, and
allow students to access their credentials more easily.
3.4 Others
Several major Australian government departments use cloud-based blockchain solutions, or Blockchain-asa-Service [88]. The Canadian government launched a pilot recently to use blockchain for digital credentials
management, allowing employees to maintain a permanent, self-owned, and secure record of their digital
credentials [77]. Anti-money laundering is another major initiative for several governments [69, 71, 75, 101].
For instance, the Financial Action Task Force, an intergovernmental entity, issued guidelines on virtual asset,
anti-money laundering and counter-terrorist financing regulations [69]. It has been shown that existing
approaches are effective in balancing between the threats and opportunities. Continuous monitoring and
investigation are desirable as the technology rapidly changes [27].
4 USE CASE STUDIES
During our review, we found that the majority of the announced government-supported blockchain projects
do not provide enough technical details about the setup or system architecture, among others. This is in part
because a lot of the projects are ongoing or in their initial phases. In this section, we review two use cases in two
sectors in detail: healthcare, and critical infrastructure. We review the use cases, present how blockchains are
used in each use case, and discuss potential challenges. Note that although we focus on healthcare and critical infrastructure sectors, the use cases involve domains beyond these two, such as finance and Internet-of-Things
(IoT). Therefore, we consider only these two representative sectors and discuss the applications in detail.
4.1 Healthcare
As measured by the number of articles published on PubMed, the National Institute of Health’s search engine of
medical references, interest in blockchain for use in biomedical applications has almost doubled year over year
from 2015 to 2019. Blockchain usage in Electronic Health Records (EHRs) holds promise, with five characteristics
of EHRs that must be addressed by any blockchain solution: governance, interoperability, privacy, scalability,
and security [29, 82]. The blockchain characteristics to meet those needs include immutability, cryptography,
distribution, decentralization, transparency, auditability, and nonrepudiation [82].
Technical solutions for guaranteeing privacy and security in biomedical blockchain applications using
blockchain have been proposed, including using the cryptocurrency Ethereum along with the Onion Router
for remote health monitoring [10], as well as a novel blockchain called Enigma, designed for exchanging EHR
data [121].
The use of blockchain as an overarching health information exchange for protected health information to be
exchanged nationally in the United States was proposed, with a theoretical blockchain-based technology to be
used as a record locator service pointing to demographic copies of medical records stored in a shared set of
servers called Patient Identity Brokers [51]. Such a design lends itself well to recent regulatory changes in the
United States. The 21st Cures Act not only gave patients a right to their health data but also said that healthcare
systems cannot information block that data. The legislation was made in 2016, and it was not until March 2020
that a final rule was issued by the Office of the National Coordinator detailing how the information exchange
from the provider to the patient was to work. That office created a technical framework and compliance structure
for enabling protected health information to flow securely as the patient directs it. The technical framework is
essentially a distributed system that lends itself to the possibility of blockchain usage, with interoperability between IT systems more possible than ever through the creation of a standardized core dataset that all participants
must use.
Most of the projects in the healthcare sector focus on utilizing blockchain as a reliable platform for data sharing. Indeed, the critical nature of healthcare data makes blockchains unique in facilitating secure data sharing.
However, implementing a large-scale EHR data exchange system is not easy, with or without using blockchains.
Effort from multiple disciplines and across stakeholders are necessary to make it possible, and realizing that
vision in a final system, while also maintaining security, will be challenging. Perhaps, though, now more than
ever such a system is possible, as the global pandemic has made it a necessity that health data flow more freely
than ever before. New technology is needed to address both public health needs and the need for the individual’s
medical chart to be readily accessible to the patient or provider.
4.2 Critical Infrastructures (Energy Sector)
The U.S. Department of Homeland Security defines 16 critical infrastructures including energy, food and agriculture, and transportation, among others. It is stated that “the security and resilience advances a national policy
to strengthen and maintain secure, functioning, and resilient critical infrastructure” [91]. Due to the nature of
critical infrastructures, blockchain application in critical infrastructures has been widely explored. Besides the
financial and healthcare sectors (also considered critical infrastructures), other domains such as the energy sector are under investigation by governments around the world. As an example, the U.S. Department of Energy
awarded several projects to both industry and academia to create the “Energy Internet” [66]. The purpose is to
build an advanced management framework for distributed energy resources to support fast, scalable, and secure
peer-to-peer communications.
Blockchain in the energy sector can involve multiple aspects, ranging from energy trading to management
of IoT devices and energy resources management [14, 85]. In Table 3, we present the representative areas of
blockchain adoption in the energy sector.
Energy trading, especially renewable energy trading and management, is one of the main areas found in
current blockchain projects in several countries [35, 67, 70]. For instance, a project supported by the Japanese
Ministry of the Environment aims at building a system for measuring and managing self-consumed renewable
energy [35]. The project utilizes the cryptocurrency side of the blockchain technology to build the trading system.
Specifically, the self-consumed renewable energy is first converted into tradable values and sent to the blockchain
network. The real-time trading prices are then calculated according to the exchange cost and demand. When the
transactions are finalized, energy can be exchanged locally without having to be transmitted to a central location.
Similar methods have been used in projects from other countries such as the United States and Australia [67, 70]
that have been shown to greatly reduce the management and trading cost. Besides other components such as
energy resource management, such a use case shares a lot of similarity with blockchains in the financial domain.
In other words, the adoption of blockchain could potentially reduce the cost for any financial transaction in the
energy sector and remove the need for a trusted single party.
Smart energy involves the management of IoT devices and energy assets. Research projects, industrial projects,
and governmental pilots have been found [46, 68, 92]. Such projects usually involve efforts from both industry
and academia to be successful. For instance, in the past few years, the Department of Energy announced funding
for both university-led and industry-led research projects to integrate IoT technologies with the energy infrastructure, several of which focus on blockchain and IoT integration [47, 66]. The purpose is to provide robust and
scalable infrastructure in the energy sector. This use case is similar with managing IoT assets using blockchain
as used in other application domains, such as supply chain and healthcare. There are still many challenges, because the integration of energy-related infrastructure and blockchain software is not easy. Energy-related devices
suffer from numerous physical threats since the deployment environments are heterogeneous. Despite the challenges, such an integration can greatly benefit energy infrastructure by enhancing the security and efficiency of
resource management, potentially disrupting different aspects in the energy sector such as energy sharing [114]
and electric vehicle charging [72].
Another noteworthy aspect in the energy sector is the protection of mission critical systems, although the
available approaches do not directly utilize the “blockchain” technology. For instance, several works focus on
building intrusion-tolerant Supervisory Control and Data Acquisition (SCADA) systems [18, 19, 90], where
SCADA is the core control system for the power grid. Such approaches use BFT to build an intrusion-tolerant
SCADA system. Since BFT is the core mechanism for permissioned blockchains and some hybrid blockchains,
BFT-based SCADA can provide the same security guarantee with blockchains (i.e., high availability and integrity). The benefits of using only BFT instead of blockchains include better performance and more flexible
system design.
5 CHALLENGES AND CONSIDERATIONS
In a 2018 report on cryptocurrencies and blockchain in Europe and Central Asia, the World Bank states that
“policy makers should strike a balance between curbing the hype surrounding these new technologies and unleashing potentially transformational new opportunities. While encouraging and facilitating these innovations, they should prepare to craft new regulations to create a level playing field for new and old industries, by adjusting financial oversight, consumer protection, and tax administration” [58]. The following year, the European
Commission summarized to the World Trade Organization’s Global Trade and Blockchain Forum what the technical and legal challenges for government use of blockchain are: integration with existing systems, scalability,
blockchain-to-blockchain interoperability, lack of a policy framework for cryptocurrencies, and the enforceability of smart contracts [2]. That lack of a framework was also mentioned at the 2019 Organisation for Economic
Co-operation and Development Global Blockchain Policy Forum [3]. Without such a framework, the economic
implications of central government usage of so-called stablecoins (e.g., Facebook’s Libra) would be unpredictable
and wide ranging [3]. The lessons learned from government adoption of blockchain range from addressing the
security implications of ledger transparency through cryptography to planning for the increased costs of implementing blockchain relative to more mature technology [5, 63]. In this section, we review adoption challenges
and how governments have faced them to encourage innovation, provide information about the technical challenges and close with a brief discussion.
5.1 Adoption Challenges
Industry and government adoption. Grasping the different implementations of blockchain and their capabilities
pose challenges for decision makers when it comes to data governance, privacy and security regulations, and
standards [110, 113]. To address such issues, policy makers should take time to assess the technology, look for
standards to be developed, and gather experience with the technology [40, 113]. Academic and industrial efforts
have been made to discuss and create standards for blockchains to be used in different domains [12, 40, 65].
The International Standards Organization Technical Committee 307 has published three standards, including a
vocabulary, a privacy and personally identifiable protection consideration, and a smart contract overview [86].
Another concern is interoperability of blockchains, which includes both exchanging data among blockchains
and transferring assets between different blockchain systems. Both research and industry efforts have been made
to create such a service [22, 79]. Yet due to the rapidity with which blockchains types are being developed and
adapted, it remains to be seen whether interoperability will create new development opportunities for developers,
and—if so—whether governmental decision makers will wish to fund the work.
Governmental role in adoption. Governments worldwide have started to develop policies or government strategies for the adoption of solutions [1, 109]. The experience that they have gained with cryptocurrencies has given
them insight into how they could use blockchain to reduce transaction costs [52]. They may determine that it is
more efficient to execute cross-border trade transactions via blockchain through cryptocurrency. The realization
of such transactions, however, requires complex integration work and a conducive regulatory environment. Governments that utilize blockchain technology should partner with private firms to both encourage innovation and
develop a flexible regulatory framework [3]. An example is the United Arab Emirates’ support of blockchain, in
which they created a regulatory sandbox for technology companies to test blockchain solutions for FinTech and
for streamlining data interoperability across government services [4]. In the United States, the Boldline Accelerator program is similar in its support of public-private collaboration and has discussed how to use blockchain for
identity management, tracking human trafficking, Visas, and shipping fraud [39]. Public-private collaborations
should focus on developing blockchain interoperability and standardization, as applied to a carefully selected set
of inefficient bureaucratic use cases [16, 94].
Cost of blockchain. The potential for blockchain to reduce transaction costs is appealing to government, as
noted earlier [52]. For digital platforms, blockchain can reduce the cost to start up new marketplaces, as well
as audit the validity of transactions [31]. However, their decentralized nature can introduce new inefficiencies
and data governance issues [31]. Blockchains’ strength in guaranteeing data integrity through immutability may
come at a premium, relative to having the same guarantee in a centralized application [64]. Transaction costs
have been found to be higher for permissionless blockchains when compared to centralized solutions [13], and blockchain applications can cost significantly more to operate than a cloud-based centralized equivalent, even
after controlling for cloud service utilization fees [103].
Data quality. Blockchain does not protect against data from untrustworthy sources, such as authorized but
potentially tainted parties. It cannot prevent well-formatted but incorrect or inaccurate data from being sent and
stored in the system [119]. As a result, blockchain may be used as an illegal content distribution channel. The
system may also consist of data with low quality or high inaccuracy. Such data quality issues might be harmful
in applications where transparency of the data is desirable, especially in government applications [5]. Although
blockchain can be used as an auditing system for validating these data, the data are already distributed and cannot
be retrieved from all parties with certainty. A decentralized system that allows any two parties to anonymously
exchange assets may provide a haven for those wishing to perform illicit activities without fear of reprisal. As a
result, existing solutions usually involve additional layers to detect or ensure data quality [28, 119]. It is not clear
whether such a layer will provide the desirable analysis and become generic enough to ensure data quality.
Correctness and security of the system. Several blockchain systems intentionally make their consensus protocols proprietary, making it difficult to trust in the correctness and security of the platforms [26]. Consensus
protocols are complicated and the implementation in a complex real system requires extensive development,
which may introduce unintended consequences, as has been observed [32]. Before adopting a blockchain solution, the underlying mechanism and the system implementation should be carefully reviewed. Even though
most peer-reviewed works have been carefully reviewed by experts, errors in some solutions are still found
later [6]. Therefore, it is important to evaluate whether the implementation matches the theory and design of
the blockchain. Some efforts have been made for e-government applications [53]. It is yet to be seen whether the
solutions are generic and useful enough to fully evaluate the systems.
5.2 Technical Challenges
The performance trade-offs and blockchain standards. There is no one-size-fits-all blockchain system [20, 37, 59,
112]. Different approaches have been proposed to meet different needs, such as improved latency, throughput,
scalability, and bandwidth [34, 37, 42, 59]. Indeed, each protocol has made trade-offs—for example, to reduce the
number of messages nodes needed to exchange in the protocol, the consensus usually involves more steps to
complete. In other words, such a protocol has longer latency to achieve higher throughput. Before widespread
development and adoption, some innovative first movers must implement solutions that consider the trade-offs
among security, efficiency, and robustness.
Although significant effort has been put into developing new blockchain platforms, it is not easy to develop
both correct and efficient systems. In fact, developing consensus protocols is like engineering cryptographic
systems, which require expertise in cryptography, security, and the theory of distributed systems [26]. Therefore,
expert review, validation of both the theory and implementation of new blockchain platforms, and standards
recommendation [65] (e.g., cryptocurrency exchanges, running blockchains in applications like clinical trials,
etc.) are desirable if the full potential of blockchain is to be realized.
Scalability. Scalability can be interpreted as the number of nodes and the number of clients. The number of
nodes is a concern during blockchain deployment—how many nodes should one use to start the service? The
number of clients is a concern for the workload—how many requests should one expect and what are the sizes of
the requests? Both permissionless and permissioned blockchains have scalability limits [112]. The open nature
of the consensus mechanisms of permissionless blockchains allows anyone to join and therefore usually involves
thousands of nodes. The problem for such blockchains is that they usually suffer from long transaction latency
(where it takes longer for the transaction to be available) and have not scaled to many client transactions in
real-world applications. However, permissioned blockchains can scale to a large number of clients with less
latency, but they rely upon a small number of blockchain servers. Hybrid blockchains address the scalability problem [8, 50, 73, 74, 80, 98, 118], but each has its own challenges and most have a sufficiently large number of
representatives to guarantee correctness of the system (safety and liveness)—for example, greater than 600 [80].
A BFT protocol of such a size, however, can be impractical. Other BFT algorithms, such as the cryptocurrency
Algorand [55], remove the need to run PoW by applying proven cryptographic techniques along with verifiable
random functions and committees, but, again, have a limitation. Algorand relies upon the number of coins, which
might limit its practicality in real-world deployment. The optimal blockchain that balances scalability for both
clients and servers has yet to be found.
Privacy and compliance. Privacy and compliance are always major concerns in governmental applications.
Although conventional blockchains provide availability and integrity, the data are essentially transparent—all
participants may freely review transactions. This means that an architect should be careful in selecting the type
of blockchain and perform a use case analysis that includes privacy and security guarantees relative to performance needs. With the current regulatory climate of governments focused on protecting user data, blockchains
become especially problematic given their open and immutable nature. At the same time, laws designed to safeguard the privacy and security of individuals’ information do provide a roadmap for designers. Generalized
examples include the California Consumer Privacy Act of 2018 and the European Union’s General Data Protection Regulation of 2016. In the healthcare space, the Health Insurance Portability and Accountability Act and
the Health Information Technology for Economic and Clinical Health Act are the basis for interoperability rule
changes proposed by the Office of the National Coordinator, as well as the Centers for Medicare and Medicaid
Services. With the preceding two acts in mind, researchers at MIT built a PoW consensus protocol called Medrec
for mining patient information. This type of clinical data is becoming standardized through the implementation
of EHR systems that leverage messaging protocols, such as Health Level 7 [17].
Timing assumptions. Most permissionless blockchains assume a synchronous network (i.e., all replicas know
the message transmission time), which is not a practical assumption. For the system to be correct (safety and
liveness), there must be a large number of nodes that actively participate. Therefore, the correctness of such a
system in a small-scale or private setting can be questionable. However, most permissioned blockchain protocols
assume something called partial synchrony [44], in which the network delay and processing delay by the nodes
are bounded by an upper limit unknown to all nodes. It is assumed that each node in the network will eventually
respond, and if a given node does not respond, other nodes will handle it according to the protocol, providing an
answer and ensuring that the network will not get stuck waiting indefinitely. The shortcoming of this approach is
that it introduces performance and security issues—what if an adversary can somehow manipulate this network
delay in such a way that causes nodes to misbehave or to give up information? In this type of network, the system
may simply stop processing any requests just like a crashed service, even if all nodes in the system are correct. A
potential solution to this may be the use of what is known as a purely asynchronous BFT consensus protocol, in
which nodes have no upper bound in response time so the protocols are resilient to all kinds of attacks. Research
into this area is ongoing and includes several possible solutions [9, 43, 81, 84].
5.3 Discussion
Permissioned vs. permissionless. Most of the government blockchain implementations are permissioned. Although some use permissionless blockchain, in these cases the blockchain is still deployed in a closed, private
setting. Many of the countries we studied for blockchain adoption have either banned or regulated cryptocurrencies, which are fully permissionless. We conclude that the development of cryptocurrencies by governments
is unlikely unless the adoption is a specialized use case such as critical infrastructure. Even in such a case, the
blockchain would likely be tethered to the currency of the given nation-state.
The quest for high performance. We have not found any published results that have measured performance, or
assessed the performance needs, in government blockchain implementations. Many applications are new, and the long-term feasibility will depend upon a cost-benefit analysis. Many use cases involve large volumes of data,
however, so we expect scalability and throughput needs for these systems to drive changes to their blockchain
implementation.
The quest for technology improvement. We have found little information regarding the feedback or lessons
learned based upon government blockchain implementations. We believe this to be in part because most projects
are still in their early stages. We advocate for research and industry to continue to collaborate and improve
systems based upon our observations of past successes [26, 32].
Cryptocurrencies regulation. Many countries have developed regulations for cryptocurrencies, and yet no country has fully determined how to implement the regulations. Part of the challenge is how to classify cryptocurrencies using existing financial constructs. Taxing or regulating a cryptocurrency as a currency, a security, or an
asset is difficult, as a cryptocurrency can be any one or all three.
6 FUTURE OF BLOCKCHAIN AND CONCLUSION
Blockchains have evolved beyond cryptocurrencies to general purpose and can be used across an array of applications, particularly those that need high service availability and data integrity. If their adoption increases,
then blockchain-based solutions may reintroduce a trusted broker: the data center, whether in the cloud or on
premise. A cloud-based blockchain system makes the cloud provider into a new type of trusted broker. If instead
nodes are on premise but are used by the public, then whatever entity is hosting them becomes the trusted broker, and the system becomes vulnerable to any failures that may render the entire system unreliable. Therefore,
replacing a fallible human or bureaucracy with a blockchain may shift risk rather than eliminate it [23].
The technical challenges for blockchains, such as being fully privacy preserving, ensuring compliance when
necessary, and being scalable, have yet to be fully solved, and more work is needed to address them. Yet despite
these challenges, blockchains can make applications better and will begin to be the solution for use case–specific
distributed systems problems. Most blockchain applications were financial at first, just as many good and proven
technologies have been. Blockchains are now being used in other spaces, such as government. They may be the
best technology to deploy when a need to distribute data through a system that needs to guarantee data integrity
and service availability exists, but the ability to make it happen is limited.