Blockchain – what is it good for? At the moment not much, DTA says

Lack of standards holding back blockchain, government CDO says

The Digital Transformation Agency’s scrutiny of blockchain has confirmed it is “an interesting technology” that is “well worth being observed”. However, without standardisation and a lot more work, “for almost every use of blockchain you would consider today there is a better technology” — such as databases and APIs.

That’s the DTA’s verdict so far, according to the government’s chief digital officer, Peter Alexander, appearing this morning at a Senate Estimates hearing.

The government in this year's budget revealed that the DTA would conduct a $700,000 research program to examine the potential of blockchain and distributed ledger technology (DLT) to “investigate areas where blockchain technology could offer the most value for Government services”.

The DTA last month indicated it was in a “discovery phase” of the program and expected to produce a prototype blockchain-based system by the end of the financial year.

“Blockchain – interesting technology but early on in its development,” Alexander said, summarising the DTA’s current view. “It’s kind of at the top of its hype cycle,” he added.

The technology has shown potential for “low-trust engagement” but the CDO said that “generally speaking when government is engaging with someone we want to have a trusted relationship with them; we want to know who they are, we want to know what they’re entitled to, and we want to give them service that is personalised and meets their needs.”

“Blockchain is good for low trust engagement where you don’t know who you’re dealing with, you have low trust with that person or business, but you have a ledger or series of ledgers that can give you some validation or some support,” he said.

The DTA has been working with a number of agencies to examine potential use-cases for blockchain, Alexander said, including the Department of Human Services, the Department of Home Affairs (which has been “particularly engaged”), the Department of Defence, the Australian Taxation Office, Treasury, the Reserve Bank of Australia, IP Australia, and regulators ASIC and APRA.

“It does vary across entities but within each of those organisations they have capability centres of people who understand blockchain well... a lot of the engagement with them is comparing blockchain against existing technologies,” Alexander said.

Earlier this month the Commonwealth Bank of Australia and CSIRO’s Data61 division announced they had developed a blockchain-inspired system that could be used to impose ‘smart money’ limits on the spending of funds provided through the National Disability Insurance Scheme (NDIS).

Alexander said that DTA is “not saying blockchain doesn’t have potential” but there are challenges around a lack of standardisation and consequent fragmentation.

“When we get to a better standardisation the opportunities for blockchain will grow,” he said.

A lot of big technology vendors are pushing blockchain “very hard,” he added. They see sales opportunities in it.” “Internationally most of the hype around blockchain is coming from vendors and companies not from governments or users and deliverers of services,” he said.