A summary of the UK Government Office for Science report on distributed ledger technology: its eight recommendations and why it still reads well.
The eight recommendations in four stages
A ledger is older than the blockchain
The foreword opens with history: people have kept ledgers on clay tablets, papyrus, vellum and paper, and for most of that time the only real innovation was computerisation, which simply moved paper records into bytes. What is new, the Chief Scientific Adviser argued, is that algorithms now let many parties build and maintain one shared ledger together.
A distributed ledger is described as an asset database shared across multiple sites, organisations or countries. Each participant can hold an identical copy, and a change shows up in every copy within minutes or even seconds. The assets might be financial, legal, physical or electronic. Cryptographic keys and signatures control who may do what, and the participants agree the rules for changing entries.
The report is careful to say it is not about Bitcoin. Bitcoin is one application of the underlying technology, an online equivalent of cash. The same building blocks, adjusted with rules, signatures and smart contracts, can record almost anything of value.
Permissioned or permissionless
Anyone can propose changes on Bitcoin’s open, permissionless model, provided they do the work to add a block. Governments are likelier to prefer permissioned ledgers, where the owner of the data decides who can take part. The report also notes that distributed ledgers move much of the complexity of security into the background, which can make systems cheaper and easier to use.
Why governments might care
The potential uses named include collecting taxes, delivering benefits, issuing passports, keeping land registries, assuring supply chains and protecting the integrity of public records. For citizens, the promise is more control over personal records and a clear trail of who has accessed them. For public bodies, it is lower fraud, error and paperwork.
Estonia is the worked example: it used a ledger-based integrity system known as Keyless Signature Infrastructure so citizens could verify that records about them had not been altered, including by privileged insiders. The report links that assurance to the growth of services such as the e-business register and e-tax. In the private sector, Everledger’s tracking of diamonds from mine to insurer is used as an illustration of provenance.
Five government case studies were scoped: protecting critical infrastructure from cyberattack, tracking welfare eligibility while improving financial inclusion, showing how aid money is spent, supporting small businesses and growth, and reducing tax fraud. Each is assessed for how mature the technology is for that job.
The eight recommendations
1. Leadership. Ministers should provide vision, with one team leading government use of ledgers and another enabling their use in the wider economy, backed by a capability road map.
2. Research. Fund work to make ledgers scalable, secure, energy-efficient and provably correct, coordinated through the Alan Turing Institute.
3. City demonstrators. Create a city-level testbed where the elements come together.
4. Regulation. Build a regulatory framework that evolves alongside the technology and consider achieving regulatory goals through technical code as well as legal code.
5. Standards. Work with academia and industry on integrity, security and privacy standards, with a bespoke risk assessment for each use and penetration testing during trials.
6. Identity. Implement usable authentication for individuals and organisations, tied to international standards.
7. Trials. Run real trials, coordinated like clinical trials so results are comparable and rigorous.
8. Skills. Build a cross-government community of interest and use government as a smart customer.
Two ideas worth keeping
Legal code and technical code. The report points out that digital systems are governed by two rule books: the law, and the software. Both need rigour, and technical code can sometimes be used to check compliance with legal code automatically, lowering the cost of following the rules. That is an early statement of what is now called regulatory technology.
Authentication is not identification. To trust a transaction, one side must prove it is who it says it is (authentication) and that it has permission (authorisation). Proving that does not always require revealing a full identity. The report points to public key infrastructure and smartphone security features as foundations, which connects directly to our digital identity coverage.
Where the report is cautious
It does not oversell. A distributed ledger is harder to attack than one central database because an attacker would have to alter every copy, but anyone who finds a way to make a legitimate change can change all copies, so security remains a design problem. Wallets holding Bitcoin have been stolen even though the ledger itself held up. Hardware, software ageing and human error all matter, and ledgers designed for long life must be updatable. Privacy is flagged as an unsolved research area because a ledger holding personal records is only safer than a database if designed to be.
Sources
- Distributed Ledger Technology: Beyond Block Chain. UK Government Office for Science (Chief Scientific Adviser's report), Foreword December 2015, published January 2016.
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