Blockchain is an emerging technology with a lot of untapped potential for new implementations in the private or public sectors. It is a peer-to-peer (P2P) distributed ledger technology (DLT) database specifically designed to serve as a reliable digital ledger of records by being nearly immutable. (Frankenfield, 2023)

High level of immutability is achieved through three defining aspects of the design: (1) chained blocks of data linked by way of each one containing the cryptographic digital signature hash of the previous one; (2) full copies of the entire chain stored on all nodes of the P2P network with simultaneous updates; and (3) validation through a consensus mechanism like proof of work (PoW) or proof of stake (PoS). Any attempt to tamper with the data invalidates the cryptographic signature of the containing block which in turn, invalidates all subsequent blocks in the chain. Copies of the valid chain on other P2P nodes remain intact and the tampering modification is rejected unless a consensus is reached according to rules. The combination makes blockchain nearly tamper-proof. (Hayes, 2022)

Recognising the high potential of the technology, the European Union (EU) has recently created the European blockchain services infrastructure (EBSI) providing a number of use cases like notarisation services, university diplomas verification, digital IDs, or trusted sharing of value-added tax (VAT) numbers.

The basic layer of the EBSI consists of core hardware and software. Hardware includes more than 30 data centre ‘nodes’ for building a DLT database. Nodes are interconnected in a decentralized P2P network through the public Internet or private local area networks (LANs). Hardware and network connectivity are supported by software protocols for encryption and operational capabilities, as well as two platform frameworks for managing the blockchain databases – Ethereum for public permissionless access and HyperLedger Fabric for private or consortium permissioned access. The EBSI can be accessed by both public and private application developers – national governments or local businesses, while citizens can enjoy the services provided through their individual digital wallets. For example, to use the notarisation service a person uploads a notarised document generating an encrypted signature hash for it. The notary public sends another hash from their office identifying the same document. If the two hashes match, EBSI validates the document as authentic and the person can now freely use it. (Lindman et al., 2020)

Some legal issues may arise. Transactions on the blockchain are performed according to ‘smart contracts’ which are software-coded equivalents of standard legal contracts (Schrepel, 2021). It would be hard to enforce smart contracts in court. The immutability of the blockchain ledger makes corrections of any errors very difficult and the deletion of old inaccurate records nearly impossible. This may cause both legal and negative socioeconomic impact on some groups of users. The legal right of a convict to expunge their criminal record may be violated (Somers, 2019) and affected people could suffer unfair discrimination in employment or other social settings. Ethical issues arise when malicious actors intentionally create false records. Lastly, I foresee negative repercussions for professionals like cops under cover who by nature of their work use multiple fake identities. It is sufficient for one validated document with a photo of their real identity to find its way onto the blockchain to permanently expose their cover and jeopardize both their work and safety.

In conclusion, I remain sceptical about blockchain use in digitalization of public and private services and support instead the use of a highly centralized, compartmentalized and mutable non-blockchain DLT with multiple data back-ups and focus on high human ethics and morals.

References

1.  Frankenfield, J. (2023) Distributed Ledger Technology (DLT): Definition and How It Works, Available at: https://www.investopedia.com/terms/d/distributed-ledger-technology-dlt.asp#toc-distributed-ledgers-vs-blockchain  (Accessed: 01 April 2023). 

2.  Hayes, A. (2022) Blockchain Facts: What Is It, How It Works and How It Could Be Used, Available at: https://www.investopedia.com/terms/b/blockchain.asp  (Accessed: 01 April 2023).

3.  Lindman, J., Berryhill, J., Welby, J. and Piccinin-Barbieri, M. (2020) "The uncertain promise of blockchain for government", OECD Working Papers on Public Governance, No. 43, OECD Publishing, Paris. https://doi.org/10.1787/d031cd67-en  (Accessed: 01 April 2023).

4.  Schrepel, T. (2021) “Smart contracts and the digital single market through the lens of a “law + technology” approach”. Publications Office of the European Union. https://data.europa.eu/doi/10.2759/562748  (Accessed: 01 April 2023).

5.  Somers, M. (2019) The risks and unintended consequences of blockchain, Available at: https://mitsloan.mit.edu/ideas-made-to-matter/risks-and-unintended-consequences-blockchain  (Accessed: 01 April 2023). 

Official EBSI link

https://ec.europa.eu/digital-building-blocks/sites/display/EBSI