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Blockchain, a Billion and Bureaucracy

Blockchain solutions – are a new class of information management solutions purposing a set of techniques to create and manage tamper-proof, self-authenticating objects. These techniques creatively deployed, produce disintermediating solutions.

To understand this class of solutions,
let us ask – why self-authenticating ‘x’ disintermediates ‘y’?

More prosaically – what are Digital Objects, what is self-authentication, what can be disintermediated, how can we intuitively understand this solution.  

Information System

An information system is a digital world that parallels real life – it is made of objects that represent entities in the real-world – mirroring their interactions and undergoing changes. Let us understand this through its elements.

Issuers and Identity – Real Life and Digital Objects

The government as an issuer of identity cards provides every citizen a document of identity – the Aadhaar Number. Access to any government service, subsidy, pension would necessarily be processed with an identity. Further, if for example, the government finds that anyone meets the criteria for a welfare pay-out, it can be transferred to his/her bank account – which is uniquely provided to him/her by the bank. 

The Personal identity (Aadhaar number) and Personal Account Bank (Account number) serve to uniquely identify a person to an account. Your Aadhaar card allows the bureaucracy to identify you and process transferring a payment to your account. Your assertion of identity and your account details is a claim that is verified by a bureaucrat (a street-level bureaucrat, by definition, where the bureaucracy meets the citizen).

A simple work flow

The welfare department can maintain additional information that identifies a person as BPL (Below poverty line), and once it verifies identity can check the persons availability in the BPL database to make a one-time transfer to the bank account. 

This verification and fulfilment process connects – identity verification – criteria verification for eligibility – extracting bank account information connected to identity – transfer of amount on meeting eligibility criteria – updating the transfer in the records.

Issuers and Credentials

Issuers like government (Aadhaar) or Banks (Bank Account Numbers) or the welfare department (BPL tags) initiate credentials. Digitization starts the process of creation of parallel digital Objects in an information system – like persons or accounts with credentials (ID No / Name / Date of Birth / Balance etc.,) that map to real life. 

Real life itself is a process of individuals acquiring credentials – an education – University (college, degree), Employment (Companies, roles, designations) Bank Account (Account Number, Balance) etc.,

Let us extend this to an inanimate object – car on an assembly line – as it is tracked by digital manufacturing systems. The car starts with a work-id and moves through the assembly line and acquires components and eventually rolls off the line as a car. All components can be tracked to the car – a digital object that began life on the assembly line as a work-ID.

Identity and Roles

Animate and inanimate objects can be identified using their unique identity (People, bank accounts, cars on assembly lines, Welfare payment receivers). All objects receive a unique Identity depending on the roles within domains – as an employee in an organization, student in a university, BPL card holder in a welfare system, Car on an assembly line, account holder in a bank. Aadhar is foundational, you receive the ID by being you.

Digital Objects and real-life transitions

The world in an information system consists of digital objects that map to real life, and what happens to digital objects parallel real-life transitions. All  identity information in real life is associated with its digital world equivalent, and application programs ensure that actions in real life affect the equivalent Digital Object – a withdrawal from your bank account changes the balance, similarly a person acquiring a degree, addition of components on an assembly line creating a car etc., Some transactions can occur entirely in the digital space, for instance, a transfer from one bank account to another.

Digital objects like their real-life counterparts have variant and invariant parts as characteristics. A person’s Aadhar Number and date of birth cannot change. However, designation or qualification or balance in his account can. These changes are legitimate and when they occur reflect the current status of the Digital Object like a Person, Bank Account or the state of a Car being manufactured.

Credentials, Claims and Criteria

Every object in a digital system – a person, car-in-assembly, a bank account, a person’s educational qualifications – has details that are its credentials. When credentials are being utilised for a transaction, they represent an assertion of claims by the owner – for instance processing a withdrawal from a bank account asserts your identity and your ownership of the bank account – the assertion of identity and ownership is verified even remotely by a triangulation of your identity by passwords/OTP sent to your mobile device or laptop.

When you walk to a window in a government office and present proof of your credentials (original documents or copies), you are effectively making a claim – about your identity or your educational qualifications and eligibility. These claims are verified and matched against criteria and your request for a service is delivered.

Enter Blockchain

In understanding the benefit of Blockchain let us separate the technical premise, as a given, from the promise of the blockchain solution, its consequence. 

The blockchain premise is that every digital object initiated within its system, belongs to its rightful owner and cannot be tampered even by its owner and as a consequence only legitimate actions  (a change of address of an Aadhar ID, a change to the balance in an account) can change the status of credentials of an object. As a subsidiary principle – the history of all changes to any/all objects are maintained and are trackable and traceable.

Auto-authentication, Identity, Trust and Disintermediation

If a digital object cannot be tampered, then by extension any claim made by a digital object, it’s credentials, can be trusted  – that is, the claim by a digital object mirrors a real-life claim made by its owner and is auto-authenticated by virtue of being tamper proof.  

Trust in a digital environment is trust in the validity of the claims being made by various objects in the digital system – that mirror real life. A blockchain environment by being tamper-proof makes claims of all digital objects self-validating. 

Verified as the Default mode of Claims

In a blockchain based application, procedure requiring  a bureaucrat to verify identity is made redundant, say for processing a pension – since only you can assert your identity digitally and the claims you make are self-validating – verified is the default mode of every claim.

That is a big deal – because, if sending your credentials electronically to a bank allows you to process your bank account, then a digital presentation of your credentials (your identity/ your land records /your bank account) should allow the processing  of a pension / subsidy/ one-time distress payment etc.,  automatically, as the claims are self-validating and need only to meet the criteria.   

Trust in Digital Objects, Disintermediation and flexible responses 

Trust in the veracity of information provided by a digital object, in this case representing a person or his/her credentials, allows three broad kinds of disintermediation, when our technology infrastructure is enabled to process claims electronically. 

– One, in a rule-based system of processing of documents, the entire procedure can be technology mediated, wherever verification and processing is expected to be algorithmic – defined by a Go/No Go application of a set of rules.

– Two, it disintermediates the office as a physical location that mediates the interface with government. Citizens connect to government and request for services, using applications that automatically trace the location of the request and process service delivery to its completion

-Three, it disintermediates the act of physical presence as a necessary condition to initiate identity-based requests. In situations requiring in-situ responses or emergencies, presence may also be infeasible.

Individuals requesting a service are simultaneously verified and processed depending on the type of processing rules – a request to the Police for assistance, a subsidy, a request for medical support on-site – the location and identity both are revealed and verified seamlessly with the request for the service. The ability to configure a response to an individual or large groups can begin with the availability of identity, relevant credentials, locations etc., as the case may require. Information provided is on a need-to-know basis.

The foundations for block-chain in Governance

At its core, the blockchain uses cryptography to uniquely map Digital objects. Decentered but actively redundant chained ledgers maintain fidelity, support self-authentication and enable the track and trace capability. 

The fundamental building block that allows the self-assertion of digital identity and other credentials like educational qualifications etc., is the existence of governance mechanisms called ISSUERS.  

ISSUERS are recognized institutional mechanisms that provide digital credentials to all citizens – Aadhar / Universities / Banks / RTO / Income-Tax etc. 

The DigiLocker, a locker of the Government of India that stores every individual’s documents in a private 1 GB space for every citizen, currently contains 945 Issuer organizations, 56.79 million users and about 4.26 Billion authenticated documents. (as on 24-02-2021)

Truly frictionless government interaction will be facilitated by the expansion of digital coverage that empowers every individual with low-cost access to electronic devices, and governance structures that issue documents are mandated to use the DigiLocker.

The mundane aspects of the bureaucracy – verification and a response by criteria/rules – is ripe for disintermediation that will make bureaucratic mechanisms truly neutral, impersonal and scalable. Expansion of bureaucracy should focus on increasing value-adding capabilities and not in increasing manpower dedicated to its gate-keeper functions. 

The Government took a step towards self-authentication when it removed requirements of attestation by a gazetted officer for document submissions. 

Providing every Indian a digitally managed identity and empowering us by offering digital access to the services of the state – and tracking it to completion – can be enabled by effectively using blockchain solutions.   

A blockchain solution architecture has at its core a philosophical goal of eliminating non-value adding intermediation, and the solution lends itself to an open evaluation of its code to address implicit biases in automated systems.

The Government should initiate the creation of a public blockchain infrastructure /playground, allowing fresh talent and energy to influence this promising mix of policy and technology. Only a creative extension of this rapid phase of digitization, with checks and balances, can expand the capability of our public services to deliver with the integrity and transparency we deserve.


KP Vinod, Advisor at Dhiway, has a background in leadership roles in Marketing and Alliances with SAP, CA and is an MPA from the Lee Kuan Yew School of Public Policy, NUS.