ON Tuesday, The Manila Times hosted our Editorial Roundtable on Blockchain Technology at the Asian Institute of Management (AIM) in Makati City. The event brought together experts in the blockchain space and some of our senior editorial personalities in a new format for our frequent forums, and the discussion generated some insightful and frankly eye-opening ideas. The most remarkable, from our point of view, was the strong consensus that despite the enthusiastic advocacy for applying new technology, any sophisticated technology tool like blockchain is only effective if its use is grounded in basic human ethics.
To be clear, blockchain is not actually “new” technology, having been introduced to the world as far back as 2008 as the underlying technology of cryptocurrency. Our various experts noted that association with something that is, more often than not, regarded as a novel form of gambling has perhaps handicapped the wider adoption of blockchain, but emphasized that cryptocurrency was merely one application for it that could be considered in its own niche. The underlying blockchain technology has a wide range of other potential applications. What makes it “new” in the Philippine context is the government’s decision to integrate the entire national budget into a blockchain system in January of this year in response to public anger over the massive flood-control corruption scandal, becoming the first country in the world to do so.
A blockchain is a form of database called a “distributed ledger,” which is readable by anyone, but in which the data cannot be altered. This is accomplished by “tokenizing” a particular data point — for example, a budget allocation line item — which assigns that piece of information a permanent code identifier (called a “hash” in computer-speak). Then every subsequent transaction involving that piece of data can be traced back to its origin through the “blocks” in the “chain,” hence, blockchain. So, for example, a budget amount would correspond to a project tender, then a bid award, disbursement to a contractor, and finally a completed project, with all of those records being transparently viewable, but impossible to alter along the chain. And because the ledger is “distributed,” it exists in a network rather than in a single location, which means the entire database cannot be manipulated from a single point.
In order for a blockchain system to work effectively, however, it must be used by everyone concerned, and that is the greatest challenge in the view of our expert panel. The fundamental value of the blockchain system, no matter its application, is in its transparency and the security of its included data. Our experts were of the shared view that public experience with using the blockchain in various applications — monitoring government spending, filing and tracking tax payments, managing permits and registrations, and the like — would convince ordinary citizens of its reliability, and help to build public trust. However, unless the country’s leadership embraces it, it may not work, becoming what was described as “a superficial solution.”
One problem is the slow uptake of blockchain tools among local government units (LGUs). It emerged during the discussions at the roundtable that of the tens of thousands of LGUs at various levels in the country, only about 200 have implemented or at least seriously explored using blockchain for some functions. That is something that needs to accelerate rapidly, in our view.
The bigger problem is one of mindset. Everyone participating in the discussion was in agreement that unless officials adopt a mindset embracing transparency and verifiability of transactions — basic ethics, in other words — the potential for blockchain tools to improve efficiency and accountability would be greatly diminished. And if there is resistance from government leaders to adopting it for purposes where it clearly would help to build public trust, then trust in both the leadership and the technology would be damaged quickly. The implied message was that improperly using a solution to improve accountability might be worse than not attempting to use it all.
Blockchain is not a “silver bullet,” and it was encouraging that the experts we gathered acknowledged that, and recommended an incremental approach in applying it to assess its efficacy, and to carefully address some of the concerns about the technology raised by our editorial panel. These included management of sensitive private data, which is a significant obstacle as the immutability of data in a blockchain prevents deletion, a right Filipinos have under the law; concerns over the technical readiness of the country to employ blockchain efficiently; and concerns over its cost. However, we came away from the discussion encouraged that those driving the blockchain revolution have a good sense of balancing opportunity with risk, and that to whatever degree blockchain is integrated here, it will be to the country’s benefit.