feature from Markets Daniel Palmer 5 Must-Read Excerpts from the UK Government’s Blockchain Report “The progress of mankind is marked by the rise of new technologies and the human ingenuity they unlock.” That’s the glowing foreword to a new report on blockchain and distributed ledger tech issued by the UK government’s Chief Scientific Adviser this week. Taking a positive outlook on the emerging technology, the document recommends a broad government initiative to develop and demonstrate blockchain and distributed ledger technology, one that has caught the attention of the global media while emboldening the growing chorus of “blockchain” enthusiasts. Perhaps the most important takeaway from proposal is that the UK government was encouraged to pursue applications of the technology. Author Mark Walport wrote: “Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.” However, Walport goes on to make a series of additional recommendations that foretell how the UK government could move forward on his suggestions. For those who missed the report, we’ve compiled five of its most compelling takeaways below: 1. Use blockchain tech Government’s first role in supporting the development of distributed ledgers is to develop a vision of how the technology can improve the way government does business and delivers services to citizens, Walport wrote. He then recommended that government should act as an “expert customer” and itself start using the technology. In doing so, he argues government can “support and influence” the development of economic activity in this sector. Recommendation: Provide ministerial leadership to ensure that government provides the vision, leadership and the platform for distributed ledger technology within government. Specifically, the Government Data Service should lead work in government as a user of distributed ledgers and the DCMS Digital Economy Unit should lead work on government as an enabler of distributed ledgers (working with the Department of Business, Innovation and Skills and with Innovate UK).

2. Invest in research

“As well as ensuring that the technology is robust and scalable, we need to understand the ethical and social implications of different potential uses and the financial costs and benefits of adoption,” says Walport.

He encourages research and the creation of a UK capability to trial and experiment with different distributed ledger solutions.

With regard to research and development, the UK is in a “good position”, he suggests, while warning that there is interest and competition in development of distributed ledger technology around the world

Recommendation:

The UK research community should invest in the research required to ensure that distributed ledgers are scalable, secure and provide proof of correctness of their contents. They need to provide high-performance, low-latency operations, appropriate to the domain within which the technology is being deployed. They need to be energy efficient.

The newly-created Alan Turing Institute, working with groupings such as the Whitechapel Think Tank, could play an important role in co-ordinating and ‘self-organising’ the public and private research and development sector interested in this and related technologies.

The private sector should consider investing in the Alan Turing Institute to support the pre-competitive research that will ultimately facilitate new commercial applications that are robust and secure. This includes work on obvious areas such as cryptography and cybersecurity but also extends to the development of new types of algorithm.

3. Create a regulatory framework

Following research and development, successfully implementing distributed ledgers will require good governance to protect the participants and stakeholders, the author contends.

To ensure the system is resilient to “systemic risk or criminal activity”, adequate regulation must also be in place.

“The challenge is to strike the balance between safeguarding the interests of participants in the system and the broader interests of society whilst avoiding the stifling of innovation by excessively rigid structures,” he says.

Recommendation:

Government needs to consider how to put in place a regulatory framework for distributed ledger technology. Regulation will need to evolve in parallel with the development of new implementations and applications of the technology.

As part of the consideration of regulation, government should also consider how regulatory goals could be achieved using technical code as well as legal code. The DCMS Digital Economy Unit could take ownership of this recommendation.

4. Set standards to ensure security and privacy

While acknowledging that cryptographic systems are “extremely hard to break”, Walport spells out the risks of human error due to problems such as inadequate coding or hardware that risks security and confidentiality.

He therefore points to the government’s role in setting adequate standards to ensure the robustness of distributed ledger systems, while calling for research into these potential issues.

Recommendation:

Government needs to work with academia and industry to ensure that standards are set for the integrity, security and privacy of distributed ledgers and their contents.

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

5. Build trust and interoperability

In digital systems, trust is based on two key requirements: authentication and authorisation. Walport recommends the use and creation of “much more powerful and robust” identity management tools to provide authentication whilst protecting users’ privacy, whether they are individuals, other organisations or government.

Furthermore, he suggests that, in order to “maximise the power of distributed ledgers”, they will need to be able to work with other ledgers.

Beyond authentication, he says, this will require agreement on data interoperability, policy interoperability and the implementation of international standards.

Recommendation:

As well as top-down leadership and coordination, there is also a need to build capability and skills within government. We recommend the establishment of a cross-government community of interest, bringing together the analytical and policy communities, to generate and develop potential ‘use cases’ and create a body of knowledge and expertise within the civil service.

GDS and the Data Science Partnership between GDS, Office for National Statistics, Cabinet Office and the Government Office for Science could act as the convenors of this community of interest. There are important opportunities for government to stimulate the business sector by acting as a smart customer in procuring distributed ledger applications.

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