Introduction to the special issue: Blockchains and public administration

Abstract

Blockchains are peer-to-peer networks that record and track transactions in distributed ledgers. Cryptocurrencies were the first application of the technology. Since then, blockchains have been heralded as a novel institutional technology that can rival firms and governments in terms of certain coordination and production functions. Given initial applications in the public sector, the study of blockchains for public administration presents considerable opportunity to interested scholars for development and clarification. This special issue on “Blockchains in Public Administration” is a response to this gap. This thematic introduction to the special issue reviews the initial views of blockchains as an alternative to government. We then describe several areas where governments have begun to use blockchains. Our review of these applications emphasize opportunities for public administration scholars and practitioners to add to the ongoing conversation on the impact of blockchain on society.

Introduction

Blockchains are distributed, append-only ledgers. Bitcoin, the first truly peer-to-peer e-currency, was the first widespread application of this technology. Blockchains are also the architecture for smart contracts, which are digital contracts that are automatically executed when predetermined conditions are met. This can be understood as a natural evolution of the ability to create sufficiently reliable network-native units of account—contracts involving intertemporal commitment of these units of account between network actors are only possible given a sufficiently stable unitized basis for commitment. Decentralized Autonomous Organizations (DAOs) are collections of smart contracts enabled by blockchains which together constitute a digital version of the firm as a nexus of contracts. Yet DAO tooling is potentially applicable by any organization interested in improving its coordinative processes, thus making the specific way in which a given organization applies blockchain technologies differ considerably in practice.

Though blockchains were initially characterized by some proponents as an alternative to government, governments have launched programs deploying blockchains in public service provision and administration. In this essay, we describe the unique characteristics of blockchain technology, consider how thinking on blockchains has shifted from an alternative to government to a technology that depends in part on and can be used by government, and some of the emergent frontiers of blockchain applications in public administration.

The birth of blockchain is typically traced to a white paper published in 2008 by the pseudonymous Satoshi Nakamoto. Though the concept of peer-to-peer currencies goes back to the early 1990s at least, Nakamoto’s white paper assembled a set of cryptographic techniques to create a viable architecture for trustless coordination over a reliably scarce set of distributedly governed units of account (Nakamoto, 2008). Since then, much of the conversation about blockchains highlighted the revolutionary potential of these ledgers to record information about money, people, and property with relying primarily on governments or firms to do so (Berg et al., 2019). Part of this conversation emphasized how distributed ledgers could enable people to essentially do without government in many realms where they had traditionally relied on government (Atzori, 2015). Cryptocurrencies, for example, promised independence from government-controlled and managed money. As another example, blockchains were explored as a way to enable people to establish novel governance organizations. This perspective, sometimes called crypto-democracy, recognized that blockchains enable people to discern ways to self-govern, including devising systems of rules and procedures for making collective decisions (Allen, Berg, Lane, et al., 2018).

It is undeniable that blockchains have had a major impact on society, including as a source of innovation in business and governance (Allen et al., 2020). Blockchains have entered the popular lexicon, especially cryptocurrencies. Less emphasis has been placed on the extent to which public administrators are using blockchains, and more generally, about the complicated relationship between blockchains, governments, and law.

The view that blockchains can replace governments and firms, sometimes referred to as the crypto-anarchy perspective, emphasizes that distributed ledgers are a new technology of freedom. While blockchains certainly offer new opportunities to individuals as well as business, legal scholars cautioned the extent to which blockchains operate free from law (Alston et al., 2021). Blockchain technology, these scholars argued, depends for its effectiveness on a legal regime (Werbach, 2018). For example, negotiation disputes arising with smart contracts (contractual agreements built on top of blockchains) are similar to conventional contract disputes (Allen et al., 2019). Rather than see blockchains as an alternative to government, legal scholars devoted attention to understanding the emergent body of law to deal with specific challenges arising in blockchain communities and among users of blockchains. This body of law, dubbed lex cryptographia, constitutes an evolution of law rather than a retreat of it (De Filippi & Wright, 2018). In addition, while monetary policies of central banks can be criticized for lack of transparency as well as failings associated with any large, centralized bureaucratic organization (Boettke et al., 2021), central banks remain the path-dependent and therefore dominant game when it comes to monetary relations. Central banks have even begun issuing cryptocurrencies, or central bank digital currencies (CBDCs), although the world’s strongest currencies have not yet done so at large scale. In addition, governments in many countries and localities banned Bitcoin and other cryptocurrencies (Hendrickson & Luther, 2017). Though the extent government can effectively ban cryptocurrency is questionable, regulation and banning of cryptocurrency illustrates the entanglement of governments, law, and blockchain (Allen, Berg, & Novak, 2018).

The perspectives above suggest that blockchains, despite their novelty, have not wholesale replaced government or law. Perhaps most significant for scholars and practitioners of public administration, governments have experimented with adopting blockchains to provide public services. These include deployments for such diverse services as registration of real property, transfer of government funds to people during crises or during economic dislocations (such as unemployment payments), and for public procurement. Blockchains have also been used in the foreign aid realm and by nonprofits. The applications to the nonprofit sector, including accepting cryptocurrencies during fundraising campaigns (or cryptogiving) are part of the emergent research in the nonprofit sector organized around the idea of cryptoaltruism, or the ways in which nonprofits are leveraging blockchains to provide services (Novak, 2023).

Despite these emergent uses in the public sector, consideration of blockchain in public administration has only barely scratched the surface (Chen & Murtazashvili, 2023). This special issue is a response to this gap. In this article, we suggest avenues of research on blockchains in public administration. We first consider what makes blockchains unique and interesting from a technological perspective. We then consider several applications of blockchains in the public sector, with emphasis on research puzzles for scholars of public administration interested in the link between emergent technologies and public service provision.

The uniqueness of blockchains

Blockchain networks’ coordinative potential is seen as disruptive because of its unique affordances, including openness, immutability, transparency, persistency, and resilience (De Filippi & Wright, 2018), though as we discuss, this list of benefits is often enumerated without considering the costs of this system of recordation, or its suitability for a given coordinative purpose. Such considerations of the “transaction costs” of adopting blockchains are an important consideration in understanding its uses, including in public sector applications. This means their coordinative potential is neither costless nor unlimited, and only suited to governance contexts where these coordinative benefits exceed the underlying costs.

Unlike other decentralized technologies, such as the Internet or commons-based peer production, such as Free/Libre Open-Source Software (FLOSS) or Wikipedia, which have some of these features, blockchains combine these affordances, which can make them a transformational technology for impersonal coordination surrounding a single agreed upon rule set. Rozas et al. (2021) identified the following affordances of blockchains:

1. Tokenization: The process of transforming rights to perform actions on an asset into transferable data elements, or tokens, on blockchains.

2. Self-enforcement and formalization of rules: Through smart contracts, blockchains enable communities of users to encode rules in ways that are unambiguously understood by machines and self-executing.

3. Autonomous automatization: DAOs, once humans input information, can essentially communicate with themselves.

4. Increasing transparency: Opening operational processes and associated data through the persistence and immutability properties of blockchain technologies.

5. Decentralization of power over infrastructure: Blockchains enable decentralized development of rules to govern a network.

6. Codification of trust: The process by which third parties do not have to verify agreements.

One should keep in mind that the description above does not mean absence of humans: people set up blockchains, input information, and deal with governance challenges. What remains unique is that once they are established, they have a combination of affordances that make them unlike any previous ledgers. Furthermore, these affordances are neither costless nor universally well-suited to all potential applications.

There are also several types of network architecture underlying major blockchain networks. Though blockchains can be open (or permissionless) so that anyone can contribute to the good or service provided, blockchains can also involve permissions in terms of accessing, validating, or viewing network processes. In the case of permissioned blockchains, governance rules determine different roles and access to information in each blockchain network. Many of the most likely applications of public sector blockchains are hybrid, combining features of public and private blockchains. The reason for permissions is because of sensitivity about who has access to data. In practice, blockchain networks display a continuum of permissions for use, validation, and governance, such that the label can be understood as tending to describe either relatively centralized (permissioned) or decentralized (permissionless) networks respectively.

The distributed nature of blockchains does not make them free of governance considerations. Blockchain networks are polycentric is that any given networks consists of internal rules, including coding and protocols (Cowen, 2019), as well as are nested in higher-level legal and regulatory institutions (Alston et al., 2022; Reijers et al., 2018). Internal governance has been referred to as the “invisible politics” of blockchains since much of this occurs behind the scenes, though there have been some highly public disputes over blockchain governance (De Filippi & Loveluck, 2016). In addition, blockchains rely on a shared pool of know-how about blockchains, as well as require institutions and rules to manage access to knowledge within a given network (Murtazashvili et al., 2022).

A research agenda on blockchains and public administration

Blockchains and public service provision

What has been the experience of public organizations adopting blockchains to improve record-keeping, including identification of citizens, recording of property, and vital records? Governments have increasingly deployed blockchain pilot programs for traditional record-keeping functions, though their efficacy and scalability is far from clear. A central question is whether blockchains are indeed a superior technological solution for public record-keeping, and if so, in what areas. As more public sector actors consider using the technology, a clearer track record of the successes and failures of its application in public sector contexts is warranted.

One core function of government is record-keeping. There are also challenges that arise, including whether government records can be trusted. To date, there has been some effort by governments to use blockchains to preserve trustworthy records on evidence of rights, entitlements, and actions—in this sense, creating more open and transparent public records (Lemieux, 2019). These applications promise greater transparency in public record-keeping, though an ongoing challenge is whether government has the technical infrastructure to set up blockchain-based information repositories. More fundamentally, the question of whether a blockchain network is well-suited to a particular public recordation must itself be answered, both through the experimentation these pilot projects provide, as well as careful consideration of the nature of the public sector process the ledger is recording information about.

Another potential benefit of blockchain is streamlining core functions of government, including use in real estate markets. Blockchains for property registration address the issue that property transactions involve many intermediaries broker, government property databases, title companies, escrow companies, attorneys, and many more. Once digitalized, property transactions can be initiated by users, with peer to peer trading of fractional rights, all based on smart contracts executing transactions, with an immutable record of all transactions (Graglia & Mellon, 2018). That being said, the processes of land recordation and surveying on the precision of which a viable blockchain registry depends on are not as tractable to fine-grained demarcation and final resolution as many blockchain advocates make them out to be (Arruñada, 2018). Blockchains have generally not lived up to their potential in real estate transactions, where conventional registries remain the most significant source of governance of real property (Arruñada, 2018). This application also confronts the marginal way in which property institutions tend to develop alongside economic activity (Demsetz, 1967), which makes the optimal level of definition of property institutions a continuum as a opposed to a binary certainty—this diminishes the tractability of certain property institution to definitive recordation in code. Though some countries have experimented with blockchain for land registration and real estate transactions, including Sweden and Georgia, it is not clear how much of an impact these have had. Finally, the question of capacity is especially significant in considering applications of blockchains to real property transactions, for the viability of any blockchain application depends on the fidelity of the data from which the ledger is built. An ongoing area for research is determining what the benefits are of these systems, as well as to clarify the costs of moving from digital records to blockchain-based real estate and property governance.

Another area where blockchains have shown some promise is in public procurement. One of the problems in procurement is inefficiency and corruption. The reasons for inefficiency and corruption reflect the incentives of government and service providers: service providers can engage in lobbying, but they sometimes engage in bribery, and public officials sometimes have incentives to accept those bribes. Similarly, third party service provision carries a host of verifiability challenges when the payment is coming from a different party than the one to which the service is being provided, which can exacerbate the problems inherent to public service delivery by private parties. One solution is greater transparency, which is hoped to reduce ability of politicians to engage in corrupt behavior in procurement, through reductions in side payments and diverted funds.

Blockchains have been explored to enhance transparency and combat corruption in public procurement, such as the World Economic Forum (WEF) project on Unlocking Government Transparency with Blockchain, which compared traditional e-procurement with blockchains. Though the promise appears enticing, the project only lists a few applications in the US, South Korea, and Spain, and analysis of e-procurement in Ukraine (prior to Russia’s full-scale war against Ukraine) found that OpenMarket, a blockchain-based e-sale system, performed less effectively than ProZorro, a traditional e-procurement system. The reasons had to do with lack of transparency in the blockchain-based system as well as challenges posed by too much decentralization (Bustamante et al., 2022). This emphasizes how blockchain technology is neither a necessary nor sufficient condition for improvement in all public sector recordation contexts; indeed, in some cases different technological solutions (or a subset of blockchain’s cryptographic components) are likely to be better suited to a given public sector context.

Governments have also proposed blockchains to improve service delivery. During coronavirus, a group of members of the US Congress (which like any group in Congress may reflect the interests of business, in this case blockchain-supporting businesses) proposed using blockchain technology to track relief programs and to reduce fraud in dispersal of unemployment benefits during the pandemic (Brett, 2020). Despite proposals, nothing materialized and the existing system to allocate benefits prevailed, despite since being revealed as subject to substantial fraud.

Several questions follow, each with significance for scholars of public administration. What is preventing more widespread use of blockchains for public administration? Socio-technical perspectives on public administration recognize that public adoption of technology depends on trust. Hence, a lack of trust may be an issue. There are also the questions of efficiency that we have briefly touched upon here. The new public management sees opportunities for government to use technology to become more efficient. These policies often face political obstacles. Incentives of government employees to learn new technologies, as well as the extent to which these provide enough benefits over simpler technologies, remains an important consideration. Returning to the issue of transaction costs raised above, there is a substantial opportunity to better understand the benefit-cost calculations behind blockchains. A starting point for analysis may be that that if a government is able to digitalize records, how much value does a blockchain system provide? And when blockchain solutions are implemented, what are their consequences? Existing applications of blockchains in the public sector are therefore useful opportunities to study their consequences.

Blockchains and the nonprofit sector

To an extent, any organization must be self-governing. The problem is that self-governance does not always work, as there are many challenges to maintaining an organization. Blockchains can improve capacity for self-governance by private and nonprofit organizations and enable greater autonomy for commons-based peer production communities (Rozas et al., 2021). Considerations of use of blockchains by public and nonprofit governments is thus an emergent area of inquiry.

The nonprofit or third sector has been deploying blockchains. These “blockchain for good” applications are interested in how blockchains can improve the ability of nonprofits to do what it is they set out to accomplish. One example is how peer-to-peer communities interested in improving management of commons—natural resources and the global environment—are able to use blockchains to bring people together for a common purpose (Rozas et al., 2021).

Chen and Murtazashvili’s (2024) contribution to this special issue analyze blockchains and their impact on the nonprofit sector, with emphasis on their use by Ukrainian civil society organizations after Russia’s unprovoked invasion in February 2022. One reason to accept crypto is that people may trust crypto networks more than conventional banks, or not have access to conventional banking. Depending on the network from which donations are accepted, cryptocurrencies could also facilitate smaller donations or crowdfunding herd effects. With Russia’s invasion of Ukraine, the role of blockchains in crisis became clear. Some are considered “good” opportunities: Ukrainian NGOs could accept crypto payments from people who may not have access to conventional banks, and they could also us blockchains to show where money is spent, increasing trust and hence incentives to donate.

The available evidence suggests that blockchains played some positive role in the Ukrainian defense against Russia’s invasion. Almost immediately after the invasion began, The Giving Block set up a Ukraine Emergency Relief Fund which enables support for multiple organizations supporting humanitarian aid in Ukraine using cryptocurrency. ¹ The charity helps nonprofits accept crypto donations and allows donors to quickly identify and donate to crypto-ready charities. ² Save the Children’s initial $19 million emergency Ukraine appeal included crypto, made on their crypto donation page, which accepts more than 60 types of cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC), Cardano (ADA), and even Dogecoin (DOGE). The interface allows donors to dynamically create crypto wallets, state how much they wish to send, and include “for Ukraine” in the notes. ³ A challenge is that donations in crypto appeared to then stagnate. ⁴

From these examples, we envision several interesting research questions. How can blockchain technologies enable governments and nonprofits to better respond to crises and emergencies? The recent invasion of Ukraine by Russia, which has been accompanied by substantial use of blockchains by nonprofits, including to transmit large levels of donations, is suggestive of the promise of blockchains for philanthropic purposes. The coronavirus pandemic also raised the potential role for blockchains for managing public health crises in terms of contact tracing and recordation of sensitive health data. Thus, analysis of how blockchains address classic dilemmas of governments and nonprofits in responding to crises, including coordination of crisis response, are especially timely.

How have nonprofits responded to new opportunities presented by cryptogiving? Nonprofits are increasingly willing to accept cryptocurrencies. At the same time, such acceptance has varied, as have the benefits from adoption. Key questions include understanding why some nonprofits pivoted to crypto, perceptions of nonprofit leaders on cryptocurrency, and the consequences of cryptocurrency for nonprofit performance.

Crisis management and response

Crises are increasing in scale. This has created ever-increasing demand for nonprofits to address crises, as has increasing globalization and interactions of people from multiple jurisdictions, each contributing to greater coordination challenges confronting governments as well as nonprofits. The literature on crisis management and response sees several challenges to more effective emergency and crisis response. These include coordination failures arising in networked systems of governance; issues with trust in public, nonprofit, and private organizations that respond to crises; challenges with supply chains; and identification of victims of disasters, especially large natural disasters.

Here, we briefly mention more about two of these challenges to illustrate how blockchains have been used in crisis and disaster response. Networked governance involves multiple, autonomous organizations working toward a common or shared objective (Provan & Kenis, 2008). Challenges in networked governance increase as the size of these networks increase (Provan & Milward, 2001). For example, Hurricane Katrina in 2005 caused the deaths of over 1300 people and cost over $100 billion in property damage. From a governance perspective, confusion abounded among the US Army Corps of Engineers, elected officials, FEMA, and the Orleans Levee District (Derthick, 2007), leading some to characterize the response as one of the biggest breakdowns of governance networks in modern history (Koliba et al., 2011).

Another challenge is trust. In the 2010 Haiti earthquake, over 200,000 people died, along with massive property damage. The Red Cross collected over $500 million in funds for the recovery but much of that money went missing (Willems et al., 2016). This loss of trust is significant as participation in coproduced goods, which include crisis and disaster response, depend in large measure on trust in government (McLennan, 2020). In addition, both crises referenced included tremendous challenges identifying victims who perished as well as supply chain issues that frustrated people in need of assistance being able to get supplies intended for their relief.

Blockchains, both in theory and in some limited-scale pilots, can address these challenges. One example of a crisis response blockchain architecture is the proof of concept architecture created by IBM along with collaborators, which after Hurricane Harvey in Texas offered an infrastructure to coordinate relief among disaster relief agencies, reducing paperwork and increasing trust in government and relief. ⁵ It was a specific response to problems with coordinating organizations involved in disaster relief.

The way blockchains operate is by increasing verifiability, thus reducing ability of public and private organizations to engage in opportunistic behavior (De Filippi, 2021). The potential margins to improve nonprofit responses to crises include increased transparency in spending, in fundraising (as contributions can be fully transparent, as well as how they are spent), and more inclusive decision-making, as blockchains can be used to devise rules for participation in collective decisions, as well as to experiment with novel ways to enable participation.

For supply chains, blockchains offer the promise of a shared, distributed ledger to which all relevant partners and shareholders have instant access to data—though as we discuss, it is not clear by any means that blockchains are necessary to address any of these challenges. For example, Miracle Relief Collaboration League (MRCL) partnered with blockchain provider Chainyard to improve service delivery. ⁶ MRCL was concerned about lack of trust, transparency, and auditability of relief efforts, as well as challenges registering volunteers and coordinating across organizations. The system Chainyard set up enabled immutability (all stakeholders can verify demand, supply, supply chain, and coordinated communication), as well as a faster development cycle (open-source project development enables mobilization of knowledge commons, including programing languages, community resources for support, etc.), although the extent to which development cycle effects are directly tethered to blockchain technology is unclear. The promise of such a system is anywhere, anytime access with a smartphone to request help, to register stakeholders, and to record donations, as well as to record distribution of goods relief and storage. It is hoped that such an architecture will increase transparency, privacy, and tracking capabilities, as well as, ultimately, trust.

The examples above suggest a research agenda. Returning to a point just mentioned, the major question is whether blockchains are necessary for any of these services. Are blockchain solutions a better investment than efforts to improve conventional crisis response? Do people have access to the technology that enables blockchains for crisis response, including smartphones? Do businesses accept payments in crypto? All of these questions are open ones for research for public administration scholars interested in the links between technology and crisis response.

Blockchain and public administration in the global south

The impact of technology in the Global South often involves different opportunities and challenges than in the Global North. To date, there has been consideration of technological divides confronting the Global South. The extent to which blockchains are deployed in such contexts is another topic for public administration. We highlight two key areas: foreign aid and post-conflict reconstruction.

Foreign aid has a tremendous role in the Global South. Despite this role, there is agreement that aid delivery is subject to many challenges. One of the early deployments of blockchains were by international organizations in hopes of improving the process of foreign aid provision (Reinsberg, 2019). International aid agencies can use blockchains to record and manage identities. This could include biometric scans, that could reduce reliance on physical identification. Still, these deployments have confronted challenges, such as people resisting use of crypto payment systems, and issues with trust and individual privacy with the biometric scans.

Another question is how blockchains might be used in reconstruction efforts in fragile states. Here, the promise about reconstruction is arguably tempered, as the existing applications of blockchains by government are in conventional high-capacity states in terms of public administration. By high capacity, we follow Fukuyama (2013) in conceptualizing of quality of governance as capacity and autonomy to implement policies. Use of blockchains for land registries, distribution of government services, and recording of identities each presumes a basic administration structure upon which a layer of additional technology can be added. Recent work in this area suggests that given the challenges with even standard digitalization in fragile states, blockchain applications are not likely to offer many solutions for post-conflict government deployments (Qadam Shah et al., 2023). Still, blockchains are not without significance for those residing in fragile states. Cryptocurrencies provided some means for people to insure against risk with conflict. In Afghanistan, crypto use increased with the Taliban returning to power. Thus, while it may not be used by governments in fragile states, cryptocurrency networks offer people in such contexts opportunities to insure against the damage caused by large-scale political conflict and violence.

Since post-conflict reconstruction is not limited to the Global South, there are also opportunities to explore how capacity influences blockchain use in such efforts. In Ukraine, crypto has been used by agencies and the government as a payment to support reconstruction (Chen & Murtazashvili, 2024). It is not a solution, but the extent to which it works is an area for research, in particular comparisons of the role of blockchains in reconstruction efforts in Afghanistan and Ukraine. Given differences in preexisting infrastructure of the state—there is much more capacity in Ukraine—it is likely that there will be more opportunities to deploy blockchains in Ukraine. As reconstruction is already underway in Ukraine, there will likely be opportunities for such deployments soon, and as we discussed above, Ukrainian nonprofits are already experimenting with blockchains to provide services.

Beyond the questions above, a significant question is how blockchain technologies can be deployed by communities for which there is trust with higher-level governments. Indigenous communities in the Global South are often left outside of the political mainstream. In the Global North, indigenous communities are often some of the most impoverished areas. This is certainly the case in the US, where American Indians were forced to reservations by the end of the 19th century and then given harsh rules that made economic development challenging. As a result of a legacy of predatory policies, many tribal citizens living on reservations in the US and tribal governments may not trust the federal government. Even if there is trust, the nature of Indian-federal relations remains highly bureaucratic, with Indians living on reservations required to deal with tremendous paperwork to access government services, to buy and sell property, and to start businesses, among other things. A significant gap in analysis of blockchains and public administration is understanding the extent to which blockchains can unlock the potential for indigenous people to self-govern, including through adoption of indigenous cryptocurrencies, use of blockchains to administer transfers from national to indigenous governments, and the use of blockchains for public administration by indigenous governments to facilitate transparency and restrain corruption.

An open-ended research agenda

One of the goals of this introduction to the special issue on blockchains in public administration is to raise interest and awareness in the field of public administration regarding blockchains and their use in the public sector. Conversations on blockchain have mostly moved beyond the view that blockchains are a wholesale alternative to government. Legal scholars emphasize the constructive role of law in realizing the potential for blockchain. The study of how blockchains can improve public service delivery remains in its infancy, as is analysis of the way blockchains are transforming the nonprofit sector. There is also the question of why blockchains have not been implemented perhaps as much as one might expect given the hype surrounding blockchains, especially perceptions of their immutability and hence potential to increase confidence in information management systems. This may be due to alternative technical means to obtain similar or better performance than a blockchain network, lacking state capacity, or other issues that future research and the pilot programs discussed will hopefully reveal. Such analysis presents opportunities to leverage insights from previous work on barriers to adoption of new technologies in the public sector. Deployments of blockchains in the public each provide opportunities to examine the efficiency or effectiveness of public services compared to more traditional e-government services.