Exploring the Potential of Blockchain to Revolutionise Collaboration and Outcomes-Based Policy Approaches

Blockchain's unique features, including immutability, decentralisation, and programmability, have the capacity to enhance collaboration and improve outcomes-based policy approaches. In this blog, Jeffrey Matsu – Chief Economist at CIPFA and GO Lab Fellow of Practice – explores the opportunities presented by blockchain technology in overcoming collaboration challenges and how it can revolutionise the way we approach policymaking.

Enhancing Collaboration

Building and maintaining relationships is crucial for successful collaborative activities. In a survey which informs our new report 'Exploring blockchain technologies for collaboration and partnerships', most respondents identified ‘building and maintaining relationships’ as a major challenge in collaboration.

Blockchain can contribute to relationship-building by providing enhanced data security, reducing investigation expenses, and promoting trust through tamper-resistant and transparent data management. Additionally, decentralisation enables democratic sharing of information, empowering stakeholders without compromising data ownership. Smart contracts automate data exchange and verification, streamlining collaboration and reducing the need for intermediaries.

The coordination of data systems and reporting is also vital for effective collaboration. Blockchain's decentralised records offer a new way to achieve information consistency, especially in areas with multiple reporting mechanisms. Financial reporting and sustainability reporting are two examples where blockchain can reconcile data inconsistencies and eliminate the need for manual reconciliation. This streamlining of coordination efforts can save time, reduce costs, and enhance overall efficiency.

Finally, transparency and accountability are critical for collaborative initiatives. Blockchain's immutability and transparency improve the auditability of data, enabling accurate tracking of outcomes. This enhanced transparency can revolutionise public spending evaluation by establishing links between achieved outcomes and funding sources. Blockchain-based solutions are emerging in public procurement and grants management, combatting corruption and providing greater transparency throughout complex processes.

Insights from Healthcare and Climate Change

Blockchain has the potential to revolutionise various sectors by enhancing transparency, security, and collaboration. Two case studies explore the applications of the technology in healthcare and climate action.

Blockchain in healthcare

The COVID-19 pandemic highlighted the need for efficient data management in healthcare. However, the digitalisation of healthcare records has faced challenges, with fragmented data and limited trust in digital systems. Blockchain has emerged as a promising solution for healthcare records management and research collaboration.

While privacy concerns restrict the direct use of blockchain for personal data, a combination of on- and off-chain methods can desensitise and anonymise data while ensuring verifiability. The technology enables research collaboration among competitors in the pharmaceutical industry, for instance, facilitating the sharing of clinical data for peer learning and advancements in rare disease treatments.

Furthermore, blockchain can support outcome-based approaches in healthcare, where payments are tied to clinical outcomes achieved. This approach incentivises innovation, maximises patient health, and reduces delays in accessing breakthrough treatments. However, data silos and complex monitoring processes currently hinder the adoption of outcome-based contracts. To address these challenges, a technical data infrastructure and the involvement of private investors are crucial for accurate pricing and risk allocation.

Blockchain in climate action

To combat climate change effectively, global coordination and collaboration are essential. Blockchain technology offers transparent data sharing and collaborative efficiency, as demonstrated by pilot initiatives in electricity and supply chain management. However, the lack of industry collaboration remains a challenge for broader implementation.

Blockchain's potential in climate action extends to voluntary carbon markets, where it can enhance transparency, traceability, and accountability. Initiatives such as the Brooklyn Microgrid enable peer-to-peer energy trading, while the Climate Action Data (CAD) Trust harmonises carbon registry data globally, mitigating double-counting and building confidence in voluntary carbon markets.

By recording information on an immutable ledger, blockchain ensures credibility and accountability in carbon markets. The CAD Trust leverages the technology's strengths while integrating with other platforms for data storage. User accessibility is prioritised, allowing registries to upload data through APIs, spreadsheets, or manual entries.

Although blockchain can improve outcomes-based policy approaches across a range of sectors, it is important to acknowledge the limitations and challenges associated with the technology’s implementation, such as the need for technical expertise, data source accuracy, and ethical concerns. Nonetheless, the insights gained from these case studies emphasise the transformative potential of blockchain in driving positive outcomes and policy approaches.

Risks and Challenges

While blockchain offers numerous benefits, it also presents challenges and trade-offs. Current blockchain systems are slower and less efficient than conventional databases, requiring additional time and resources. Implementing blockchain technology requires organisations to address challenges such as a lack of skills and capacity, interoperability issues with existing infrastructure, and organisational commitment.

The immutable nature of blockchain can limit flexibility in managing collaboration as well. Fraud and errors in data entry can undermine the benefits of immutability, while smart contracts may sacrifice the interpretative richness and discretion offered by traditional contracts. Careful consideration is needed to strike a balance between the benefits of immutability and flexibility.

Meanwhile, decentralisation, often touted as a key advantage of blockchain, can inadvertently create power imbalances. Those with IT expertise may gain disproportionate control, leading to the emergence of new power structures. Proper governance is essential to ensure fairness and accountability within blockchain networks.

Embracing innovation

By addressing challenges related to building and maintaining relationships, coordination, transparency, and accountability, blockchain can facilitate trust, streamline processes, and enhance overall efficiency. However, its implementation will require public sector bodies to carefully consider the trade-offs and challenges involved, and communicate these clearly to the wider public.

While blockchain is not a panacea for all collaboration challenges, its unique features offer valuable opportunities to drive progress and innovation in the delivery of public services. As we move forward, it is essential to explore and harness the potential of the technology in creating a more collaborative and outcomes-driven approach to policymaking.