Blockchain technology, initially associated with crypto assets, has already proven its potential to transform various areas of the economy. Those who think that only the world of payments has been revolutionized by the opening of the crypto universe are mistaken.

In the public sector, for example, its use has been increasingly studied and tested to promote transparency, security, efficiency, and decentralization in essential services. From public records to digital identity, including government purchases and social programs, blockchain is beginning to be incorporated by governments around the world — including in Brazil.

In this article, we will tell you more about how there are already links between blockchain technology and the public sector - and what we can expect for the future of this interconnection.

Transparency and trust as central pillars

Possibly the two biggest challenges in public administration are the lack of transparency and the high degree of bureaucracy, which opens space for inefficiency and corruption. Blockchain, being a technology based on immutable and auditable records, can change this logic.

Imagine administrative processes like bidding, property records, or resource transfers being automatically recorded on a public blockchain. This would create an environment of complete traceability, where any citizen or oversight body could verify the steps, the responsible parties, and the amounts involved — all without the need for intermediaries or trust in a central entity.

Studies like a recent one conducted by FGV EAESP researchers indicate that the use of blockchain in the public sector reduces operational costs, automates processes with smart contracts, and significantly decreases the space for human manipulations in the systems.

The study, in case you want to know more about it, is this one:

Initiatives in Brazil: from planning to execution

Brazil has already taken some concrete steps in this direction. In 2020, the federal government announced the creation of a national blockchain network, focusing on integrating public systems into a common, secure, and auditable infrastructure. The expectation was to implement solutions aimed at digital identity, issuance of certificates, notarial records, and data integration among ministries.

At the same time, initiatives like the b-Connect project, developed within the federal government, are studying the use of blockchain for tracking official documents and automating internal processes. The Conecte SUS platform, which gained notoriety during the pandemic, also considered integration with blockchain records for vaccination data — ensuring authenticity and inviolability of health information.

The Brazilian Judiciary is also showing increasing interest in the technology. Courts are already discussing the use of blockchain for process records, integrity of decisions, and traceability of digital evidence.

The digitization accompanied by the use of blockchain technology already makes Brazil a country with a reasonably digitized government today, which reduces inefficiencies and considerably improves the delivery of public services at the final point.

Data privacy and the challenges of the LGPD

One of the central dilemmas in the adoption of blockchain in the Brazilian public sector is the compatibility of the technology with the General Data Protection Law (LGPD). Blockchain, by definition, works with immutable and public data. The LGPD, on the other hand, requires that personal data can be corrected, anonymized, or even deleted.

How to resolve this conflict? One of the most explored solutions is the use of permissioned or hybrid blockchains, in which only authorized entities can access certain sensitive information. Another strategy involves the use of hashing techniques and off-chain storage — that is, sensitive data remains outside the chain, and the blockchain only stores the encrypted identifier or hash, which can be deleted without violating the main record.

The National Data Protection Authority (ANPD) has already positioned itself, stating that the use of blockchain in the public sector needs to respect the principles of the General Data Protection Law (LGPD) from the planning phase, adopting the concept of privacy by design. However, it is worth noting that this adaptation will need to consider the existence of the LGPD at some future time.

And this happens, of course, because just as in the strategies for protecting your crypto assets, it is crucial to think about the proper safeguarding of your data. They are worth much more than you imagine.

International examples that serve as inspiration

Outside Brazil, there are several concrete projects that demonstrate the potential for public use of blockchain. The city of Zug in Switzerland is a reference with its decentralized digital identity, used to access municipal services, vote in public consultations, and validate documents.

In the United Arab Emirates, Dubai is betting on an ambitious strategy to become a 'blockchain city', with dozens of public services already operating in a distributed manner. This includes property records, identity documents, health, and administrative processes.

Another example is the use of blockchain by the UN World Food Program, which distributes blockchain-based digital vouchers to refugees, with biometric control, fraud protection, and total traceability of resource use.

Most promising use cases

Among the most promising sectors for blockchain adoption in the public sector are:

  • Public health: vaccination history registration, control of medicine distribution, and integration of medical records with decentralized authentication;

  • Education: validation of diplomas and academic certificates, combating fraud in school records, and greater mobility of students between institutions;

  • Energy: real-time monitoring of consumption and generation, with incentives for sustainability practices and 'tokenization' programs for carbon credits;

  • Taxes and auditing: automation of declarations, secure cross-referencing of tax data, and audits with inviolable digital trails;

  • Public procurement: traceability of bids and contracts, with automatic validation of stages via smart contracts.

The way forward: interoperability and governance

For blockchain to truly transform the public sector, it will be necessary to ensure interoperability between different systems and levels of government, from municipalities to the Union. In addition, it will be essential to define technical standards, governance policies, and reliable digital identity systems, integrated securely.

Another critical point will be the balance between transparency and privacy. This will require technical and legal development, as well as training of public servants and managers capable of conducting projects involving blockchain responsibly.

Blockchain as a tool for state innovation is already a reality

The use of blockchain in the public sector is not just a trend — it is a real opportunity to reinvent the way the State relates to citizens, making services more efficient, less bureaucratic, and more trustworthy.

The difference that occurs when the government decides to put its processes on blockchain is that we do not have the option to choose the platform - as we can choose an exchange, for example - so it is very important that this process is well done and well executed.

With pilot projects already underway and other examples already in operation, Brazil is in a position to become an international reference in this movement, as long as it proactively addresses the regulatory, technical, and cultural challenges that accompany this transition.

And you, have you noticed any improvements in recent years resulting from this type of optimization?

#PublicServices #blockchain #GovernmentTransparency

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Photo by WangXiNa, available on Freepik