Blockchain Technology and Governance

Why Blockchain Matters for Governance

At its core, blockchain technology is a distributed, tamper-resistant digital ledger where records, once entered, are extremely difficult to alter.

For governance, this single feature is revolutionary because many public sector problems arise from:

• Manipulation of records
• Lack of transparency
• Excessive discretion
• Weak trust between State and citizens

Recognising this potential, the Government of India released the National Strategy on Blockchain through Ministry of Electronics and Information Technology (MeitY), signalling intent to integrate blockchain across → Healthcare, Agriculture, Finance, Voting systems, e-Governance

👉 In simple terms: Blockchain converts trust from an institutional promise into a technological guarantee.

Key Government Initiatives and Applications of Blockchain

(a) Central Bank Digital Currency (CBDC)

Entity: Reserve Bank of India

• RBI is developing the Digital Rupee (CBDC).
• Objective:
  • Modernise payment systems
  • Reduce dependence on physical cash
  • Minimise risks posed by private cryptocurrencies

Governance relevance:

• Faster, cheaper, traceable transactions
• Better monetary policy transmission
• Reduced shadow economy

📌 CBDC reflects state-controlled innovation, unlike unregulated crypto-assets.

(b) Land Registration and Digital Certificates

Land records are one of the largest sources of litigation and corruption in India.

• States like Telangana and Maharashtra have piloted blockchain-based land record systems.
• Objective:
  • Prevent tampering
  • Reduce property fraud
  • Increase transparency

Similarly:

• CBSE uses blockchain to issue tamper-proof digital academic certificates via DigiLocker.

Governance value:

• Certainty of ownership
• Reduction in disputes
• Faster service delivery

(c) Sectoral Adoption by Regulators

• Telecom Regulatory Authority of India (TRAI)
  → Exploring blockchain for telecom operations.
• Securities and Exchange Board of India (SEBI)
  → Studying blockchain for financial market transparency and settlement efficiency.

👉 This shows that blockchain is moving from pilot projects to regulatory interest.

Case Studies: Blockchain in Action at the Grassroots

(a) NFTs for Land Mutation – West Bengal

• NFT means Non-Fungible Token
  • Non-Fungible → means unique and not interchangeable. Unlike currency notes or cryptocurrencies (which are fungible), each NFT is distinct.
  • Token → a digital certificate stored on a blockchain that represents ownership or authenticity of an asset.
• New Town Kolkata Development Authority uses NFTs for land mutation.
• Municipal bodies in Durgapur and Bankura issue birth certificates using blockchain.

Governance impact:

• Elimination of manual paperwork
• Reduced discretion of officials
• Permanent, verifiable ownership records

(b) Tamil Nadu Blockchain Backbone

• Aims to provide citizens with a unique state digital ID.
• e-Pettagam App:
  • Acts as a secure digital wallet
  • Allows controlled sharing of documents

Governance impact:

• Citizen-centric service delivery
• Reduced document duplication
• Enhanced privacy with consent-based sharing

(c) Unified Land Management System – Karnataka

• Similar vision to Tamil Nadu.
• Objective: single source of truth for land records.

👉 Indicates horizontal diffusion of blockchain innovation across states.

(d) Firozabad Public Grievance Management System

• Uttar Pradesh Government partnered with Polygon.
• Citizens can file and track grievances on a blockchain-based portal.

Governance value:

• No manipulation of grievance records
• Increased accountability
• Transparent grievance lifecycle

Challenges of Blockchain in Governance

(a) Scalability and Energy Consumption

• Public blockchains require high computational power.
• Slower transaction speeds hinder large-scale adoption.

(b) Regulatory and Legal Uncertainty

• Absence of clear laws on:
  • Legal validity of blockchain records
  • Dispute resolution mechanisms

⚠ Without legal backing, technology alone cannot deliver justice.

(c) Data Privacy Concerns

• Public blockchains are transparent by design.
• Risk of exposing sensitive citizen data without strong privacy layers.

👉 Hence, governance needs privacy-by-design, not just transparency.

Way Forward for Blockchain in Governance

(a) Clear Regulatory Frameworks

• Enact laws recognising blockchain records as legally valid.
• Global example: Estonia → Integrated blockchain into national ID and health records with legal backing.

(b) Adopt Permissioned Blockchains

• Government systems should prefer private/permissioned blockchains.
• Example: NIC’s e-Office platform

Advantages → Better control, Improved scalability, Enhanced privacy

(c) Capacity Building and Pilots

• Train officials.
• Create sandbox environments.

Global example → Dubai Blockchain Strategy with pilots and public sector training.

Fourth Industrial Revolution and e-Governance (UPSC 2020 Context)

The Fourth Industrial Revolution (4IR), driven by AI, IoT, Big Data, and Blockchain, is fundamentally reshaping governance.

(a) Rise of Advanced Digital Technologies

• NASSCOM projects: Digital technologies → 40% of manufacturing spending by 2025.

(b) Data-Driven Governance

• Big data analytics enables:
  • Evidence-based policymaking
  • Better targeting

Example: Aadhaar-based DBT reducing leakages in welfare schemes.

(c) Expansion of Digital Economy

• Digital payments and e-commerce transforming governance and markets.
  Entity: Reserve Bank of India
• UPI transactions:
  • ₹23.49 lakh crore
  • 16.58 billion transactions (October 2024)

(d) AI-Led Public Services

• AI improving governance outcomes.

Example: Aarogya Setu for pandemic management.

Concluding Governance Insight

Blockchain is not a magic solution, but a governance-enabling infrastructure.

• It enhances trust, transparency, and accountability.
• Its success depends on:
  • Legal backing
  • Institutional capacity
  • Ethical and privacy safeguards

👉 In the era of the Fourth Industrial Revolution, good governance will increasingly depend on how wisely the State uses technology—not how fast it adopts it.

That is the essence of Blockchain Technology and Governance.