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Blockchains for Government: Use Cases and

Challenges
JAMES CLAVIN, SISI DUAN, HAIBIN ZHANG, VANDANA P. JANEJA, KARUNA P. JOSHI, YELENA
YESHA, University of Maryland, Baltimore County
LUCY C. ERICKSON, American Association for the Advancement of Science
JUSTIN D. LI, Department of Homeland Security, Science and Technology Directorate

Digit. Gov.: Res. Pract., Vol. 1, No. 3, Article 22, Publication date: November 2020.

DOI: https://doi.org/10.1145/3427097 (https://doi.org/10.1145/3427097)

Blockchain is the technology used by developers of cryptocurrencies, like Bitcoin, to enable exchange of financial “coins” between participants
in the absence of a trusted third party to ensure the transaction, such as is typically done by governments. Blockchain has evolved to become a
generic approach to store and process data in a highly decentralized and secure way. In this article, we review blockchain concepts and use
cases, and discuss the challenges in using them from a governmental viewpoint. We begin with reviewing the categories of blockchains, the
underlying mechanisms, and why blockchains can achieve their security goals. We then review existing known governmental use cases by
regions. To show both technical and deployment details of blockchain adoption, we study a few representative use cases in the domains of
healthcare and energy infrastructures. Finally, the review of both technical details and use cases helps us summarize the adoption and technical
challenges of blockchains.

CCS Concepts: • Computer systems organization → Redundancy; • Computing methodologies → Distributed computing methodologies; • Security
and privacy → Distributed systems security;

Additional Key Words and Phrases: Blockchains, applications, security, e-health, e-government, critical infrastructure security

ACM Reference format:

James Clavin, Sisi Duan, Haibin Zhang, Vandana P. Janeja, Karuna P. Joshi, Yelena Yesha, Lucy C. Erickson, and Justin D. Li. 2020. Blockchains for Government: Use
Cases and Challenges. Digit. Gov.: Res. Pract. 1, 3, Article 22 (November 2020), 21 pages. https://doi.org/10.1145/3427097 (https://doi.org/10.1145/3427097)

1 INTRODUCTION
Blockchain is technology that builds a trustworthy service in an untrustworthy environment. It uses replication of
distributed systems to build a decentralized service that achieves the same goals with a trusted centralized one.
Since 2008, blockchain implementation has exploded, primarily driven by its native ability to support any type of
digital transaction. Blockchains have been adopted by Wall Street investment firms to enable transaction cost
reduction, Silicon Valley startups as an alternative means of raising funds through initial coin offerings, and by
one government, Venezuela, to encourage global investment into the country. The algorithms that power these
distributed transactions have given rise to an altogether new method for securely storing data in a digital world
that is oftentimes adversarial. Because blockchain guarantees high service availability as well as data integrity, any
industry in which transactions or processes rely on the use of a trusted third party, or where a strong guarantee of
security is required, can consider implementing blockchain solutions, as should governments worldwide.

What attributes of a blockchain may be of use in government? Blockchain provides a means to ensure that any
copy of the data will always be available, verifiable, and trustworthy. It functions like an old Xerox machine in
terms of data dispersion, in the sense that it can make copies of any item available to anyone who uses it. With
respect to trust, it acts more like a notary public, guaranteeing that any copy of data is authentic and that the
copies cannot be forgotten or counterfeited. Finally, in terms of transaction processing, it functions like a general
ledger in which transactions must be recorded in the same order.

To handle data sharing, transaction processing, and validation, there is a set of replicated servers, called nodes.
Each node runs a consensus algorithm, which provides a way to reach agreement with every other node about a
given transaction, without any human intervention. The algorithm must enable the system to proceed even when
some percentage of the nodes arbitrarily fail. There are various algorithms, discussed in detail later, but it is
noteworthy that democratic concepts such as quorum and majority voting are incorporated into them. The
overarching goal of such a system is to use replication to provide security (specifically availability and integrity),
and to enable the distributed servers to behave like a centralized decision maker.

How many failures blockchains can withstand—or the percentage of nodes that can fail without compromising
security—depends upon the particular use case and the types of failures. For example, a distributed file system
may need to withstand “crash” failures, or those failures that occur when faulty nodes simply stop processing
requests. Such systems (e.g., Google File System [54]) are commonly able to mask the failures of up to one-half of
the nodes. Failures like software bugs, hardware errors, and adversarial (cyber) attacks cause Byzantine faults.
Byzantine Fault Tolerance (BFT) systems withstand up to one-third of their nodes failing by providing stronger
guarantees between nodes through cryptographic techniques.

Blockchain history. The distributed systems technical concepts that underpin blockchain were proven in 1982 by
Leslie Lamport. Lamport introduced and solved the distributed consensus problem for BFT, in a proof he named
the Byzantine Generals Problem [76]. The solution states that to tolerate one arbitrary failure, the system requires
at least four replicated nodes so that they can reach a consensus on a specific decision. A more generalized
statement is that to tolerate f Byzantine failures, the system has to have n ≥ 3f + 1 nodes. In 1999, Miguel Castro
and Barbara Liskov became the first to apply Lamport's consensus in a functioning algorithm they called Practical
Byzantine Fault Tolerance (PBFT). [30] In 2008, a pseudonymous individual, or group, named “Nakomoto” used
consensus protocols, similar to BFT, to create Bitcoin. Bitcoin's innovation was to build a decentralized system as a
trusted broker for exchanging money, and acts in a similar way as government and banking systems do with cash.
Viewed historically, people used different types of exchange for trading things of value. In the case of Bitcoin, one
of the most famous first purchases was pizza. Purchasing that same pizza over the ages would have been done
differently, as is shown in Figure 1, each with different trust providers.

Fig. 1. The evolution of how people exchange products (from exchanging products directly to using
currency, credit, and cryptocurrency, up to the possible future, with Facebook proposing
“Libra.”).

Bitcoin uses an approach called Proof-of-Work (PoW)-based consensus (described in greater detail later) to allow
users to exchange digital “coins” with each other with confidence. Different from the classic BFT protocols that
tolerate a fraction of node failures, PoW assumes a slightly different failure model called the computational
threshold failure model. The system is considered valid as long as no adversary controls more than 51% of the total
computational power. Through PoW, the system supports an open and transparent pseudonymous environment
where any user can participate. However, PoW requires a lot of compute power, as the Bitcoin system retools itself
constantly to keep the algorithm tuned to enforce time restrictions on transaction validation.

In this article, we review what a blockchain is, how the underlying mechanism works, the technical and adoption
challenges, and the governmental use cases. There are several survey works in the literature, [36, 116], including
ones about the consensus mechanisms for both permissionless [89, 115] and permissioned blockchains [26], as
well as for BFT protocols [36, 99]; some works have reviewed blockchain applications with a focus on e-
government [11, 21]. Compared with existing survey works, we aim to review the governmental applications of
blockchains, with a focus on the technical perspective of the applications. Indeed, one of the major challenges for
blockchain adoption is the gap between the underlying technology and the understanding of the capabilities [26,
33]. Therefore, reviewing the use cases and applications of blockchains from the technical perspective can help
both technical developers better understand how the technology could be improved and also decision makers
better understand the pain points of the technology limitations and capabilities.

The rest of the article is organized as follows with an aim to answer the following questions:

• What is blockchain, its security goals, and its underlying mechanism? This is not considered as a new
contribution. Indeed, many online and research articles have introduced blockchain concepts. However, we
found that a lot of existing articles provide inaccurate information or describe the concepts in detail, which
makes it challenging for the general audience. Therefore, we answer the question by introducing different
layers of blockchains, their capabilities, and how each layer is composed technically. Specifically, in Section
2, we lay out in detail a three-layer view of the technology used in both permissionless and permissioned
blockchains and discuss their capabilities and limitations. With a slant toward government usage, the
section will provide a foundation to discuss applications built on top of the technology.

• What are the governmental use cases for blockchains? What is the best blockchain model for each use case?
What are the lessons learned? In Section 3, we present use cases from both researchers and white papers in
the field, as well as those applied by decision makers around the world. We aim to group the applications by
regions and countries to observe the trend in the adoption of blockchains. For each type of use case, we also
aim to discuss whether it is appropriate to use blockchain as a solution, the technical challenges, and how
the challenges could potentially be solved.

• How are blockchains deployed in practice? What features of blockchains are unique in each use case? To
show in detail how blockchains can be used in practice, in Section 4 we study governmental projects in two
major sectors: healthcare and critical infrastructures (with a focus on energy infrastructures). We review
different aspects in each sector how blockchains are used, present the benefits of using blockchains in each
use case, and discuss the adoption and technical challenges.

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• What are the adoption and technical challenges? Blockchains cannot solve all problems. In fact, blockchain
is not mature yet, as challenges exist for both adoption and technology development. It is desirable to
discuss the challenges from both adoption and technology development perspectives. Understanding the
adoption challenges can greatly help developers and researchers improve the technology. However,
understanding the technical challenges will benefit decision makers in learning the capability of the
technology and foster the adoption of the technology. In Section 5, we summarize and discuss both adoption
and technical challenges, and discuss the potential solutions to address these problems.

2 BLOCKCHAIN CONCEPTS
All blockchains work to make decentralized nodes achieve an agreement on the total order of transactions through
cryptography and an underlying consensus mechanism. Technically, blockchains generally fall into one of two
categories: permissionless or permissioned. Permissionless blockchains allow anyone to participate, are
considered “open,” and have trust provided by algorithms. In contrast, permissioned blockchains are usually
“private” or “consortium” and all participant identities are known but no participant needs to be trusted. In
practice, variants exist where there is no clear line between different types of blockchains. For instance, Ethereum,
a typically permissionless blockchain, can be set up as a private blockchain called the Ethereum private network
[48]. Efforts have also been made to achieve anonymity for permissioned blockchains [24, 61].

2.1 A Layered View of Blockchain

Blockchains can be abstracted into three different layers [7], as illustrated in Figure 2. At the core of blockchain is
layer 1: BFT consensus—also known as state machine replication—which is a generic approach to tolerate failures.
BFT consensus has different forms, ranging from conventional BFT protocols to PoW-based consensus. Despite
fundamental differences in how consensus is achieved, any form must solve the same problem: how to enable
nodes to reach consensus on the total order (i.e., consistency) of transactions submitted by clients in the form of
requests. After nodes reach a consensus about the order, the data/operations of the transactions are then
processed according to the order of the transactions. As a result, distributed nodes functionally behave as if there
were one centralized node. This ensures that there is only one sequence of client transactions, known as “the
longest chain.” Layer 2 of blockchain is the smart contract, which is essentially software code. A smart contract
provides an interface for blockchain developers to implement new functions. Smart contracts can then facilitate,
verify, or enforce the execution of business transactions. A smart contract can be viewed as a program that
connects the underlying consensus protocols with layer 3, applications and use cases.

Fig. 2. Overview of blockchains: categories, underlying techniques, and use cases.

2.2 Building the Hash Chain

The cryptographic concepts of “hashing” and “digital signatures” provide tamper proofing and validation. One way
hash functions generate a unique output of alphanumeric text given an input of a list of transactions. Change a
single thing about the list of transactions and the resulting hash is significantly different. Digital signatures like
Rivest–Shamir–Adleman or Elliptic Curve Digital Signature Algorithm are used to “sign” transactions. The hashes
are then linked together in a chain of blocks, with any block except the first one, called the genesis block, pointing
to prior hashes and signatures. Such a hash chain ensures that no one can manipulate the contents of any block or
reverse the chain order.

2.3 Permissioned Blockchains

Permissioned blockchains provide consensus and security using provably secure distributed consensus protocols.
The consensus protocols do not involve expensive procedures such as in PoW. Therefore, permissioned systems
have low latency (the time between the client sending a transaction until the client receives a reply), they are also
scalable (both in the number of clients and transactions as well as the number of servers) [112], and they consume
less energy than permissionless blockchains (described in detail later).

Most permissioned blockchains, especially those widely employed or piloted by government, use provably secure
BFT protocols. Among these BFT solutions, the leader-based protocols are widely used, such as PBFT [30] and its
variants [106, 108]. In these types of protocols, there is a specific leader, which proposes the order of
transactions. The nodes then communicate with each other in several steps to reach agreement on the order. In
most leader-based protocols, each node sends messages to all other nodes in each step and collects matching
messages from a fraction of nodes before moving to the next step. If the leader is potentially faulty or malicious,
other nodes will run a leader change protocol until a new leader is elected.

On top of the consensus protocols, blockchains have different approaches to store the transactions. Figure 3
illustrates a typical system architecture used by permissioned blockchains. Specifically, after receiving requests
from the clients, a number of nodes run a BFT protocol to assign order to the transactions. The transactions and
their order are then forwarded to all other nodes in the system. Finally, the transactions are stored and processed
according to that order. In this architecture, the nodes that store the transactions act as learners that passively
learn the order from the consensus nodes.

Fig. 3. The normal operation for a permissioned blockchain running PBFT [30]. Control messages
refer to the messages for nodes to reach a consensus.

Numerous BFT protocols have been proposed in the literature [34, 37, 41, 43, 59, 106]. Chain-based approaches
organize nodes in a logical chain where a node only needs to communicate with its previous node and its
subsequent node, if any [42], avoiding the all-to-all communication described previously, resulting in
performance improvements. Another approach is a hybrid that combines BFT protocols, such as Aliph [59]. The
reason Aliph takes a hybrid approach is to combine the best features from more than one BFT protocol is because
there is no one-size-fits-all consensus protocol. In Aliph, the protocol can use one cheap protocol to achieve great
performance with fewer failures. When failures occur or become more frequent, the system switches to another
more expensive one to guarantee system security.

2.4 Permissionless Blockchains

Most permissionless blockchains adopt a “Proof-of-Something” strategy. In the case of Bitcoin, this is PoW, a
mathematical challenge offered to all nodes in the system to try to overcome (or work through) by an activity
called mining. Once mined, a node can propose a block of transactions and get rewarded in Bitcoin if the proposal
is accepted. The drawback to this approach is that throughput (the number of transactions processed per second)
is limited, and the energy consumption is high. Furthermore, collusion occurs—nodes form cartel-like entities
called mining pools—concentrating mining activity under the control of one group. With mining pools, the
blockchain becomes less decentralized and therefore less secure, and more susceptible to attack and manipulation.

Compared with BFT-based consensus, PoW-based consensus does not have a fixed leader and can be viewed as a
system where the leader changes after each block of transactions. To propose a new transaction, a node needs to
first solve PoW from the previous transaction. When a node proposes a transaction n, it also generates a
pseudorandom number that is called a cryptographic nonce. As illustrated in Figure 4, the nonce is broadcast to
all other nodes. Nodes compete to become the next leader by selecting random pending transactions and
generating a hash of the selected transactions. The node that first generates a hash smaller than the nonce value is
the winner and becomes the next leader. Compared with BFT consensus, PoW-based consensus involves fewer
messages for nodes to reach a consensus on the transactions. The blockchains based on it can easily scale to
thousands of nodes. The challenge is that more than one node might solve the puzzle at the same time, creating a
fork of the hash chain. Nodes in the PoW consensus will detect the fork, eventually agree on the longest hash
chain, and use it. It takes time for each transaction to be finalized after it has been proposed, usually after six
blocks, each taking about 10 minutes, in the case of Bitcoin—about an hour. This finalization time can be reduced
using different approaches.

Fig. 4. The message flow for PoW-based blockchains. Control messages are the messages for nodes
to compete for PoW.

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Multiple Proof-of-Something approaches have been proposed to enhance the performance of PoW-based
consensus, some of which are shown in Table 1. The workflow usually remains the same, but the protocols use
other strategies. For instance, Proof-of-Elapsed-Time replaces PoW with trusted hardware, using Intel Software
Guard Extension (SGX), a trusted execution environment. Specifically, computers running an Intel SGX processor
have a set of security-related instruction codes built into them that makes the piece of hardware protected. Instead
of generating a hash to solve PoW, every node utilizes SGX to wait for a random amount of time. The node that
finishes waiting earlier than all other nodes “wins” and can propose new transactions. Proof-of-Elapsed Time is in
use as a consensus option in the Hyperledger Sawtooth platform [95]. The major benefit is a greatly improved
system performance. The drawback is that each trusted execution environment has its own vulnerability, and one
has to trust a single vendor to use the blockchain. Other examples include Proof-of-Stake (PoS) and Proof-of-
Authority (PoA). PoS and PoA are each designed to improve the performance of Ethereum, and in both a small
group of nodes is selected as representatives. PoA selects the representatives based on their reputation, whereas
PoS selects representatives using one of several approaches. In Delegated PoS, nodes can vote for certain replicas
to select them as representatives. After the group of representatives is selected, the nodes have the authority to
propose new transactions and notify others of the results. The major challenge with representative-based systems
is that the selected representatives must behave correctly to ensure system correctness. For instance, in PoA, the
reputation system must be trusted, and one has to assume that malicious nodes do not have motivation to build up
their reputation and then corrupt the entire system.

Table 1. Permissionless Systems/Cryptocurrency and the Proof They Use to Come to a Consensus

Proof-of-
System/Cryptocurrency Something Strategy

Bitcoin [87], Ethereum [117] Proof-of-Work Computing a nonce

Ethereum-PoS, Hybrid Consensus [98], Elastico Proof-of-Stake PoW with weighted value
[80]

Hyperledger Sawtooth [95] Proof-of-Elapsed- PoW done by computer

Time processors

PoA Network [100] Proof-of-Authority PoS with weighted reputation

2.5 Smart Contracts

Smart contracts are programs that automatically fire when nodes come to consensus, without any human
intervention. Smart contracts are not the normal contracts people use. Instead, the nodes in a blockchain are
configured to check a series of conditions to see whether the triggering criteria has been met. If the requirements
are met, then the nodes execute an agreed upon contract, a program that executes business-defined functions.
Smart contracts allow users to deploy new capabilities and functions while the blockchains are running; services
do not have to be stopped. Specifically, developers could write a new smart contract that includes a set of
functions. After the contract is deployed on the blockchain, authorized users could call the contract to use those
functions. Other running services on the blockchain do not have to be interrupted at all to support these new
functions. The most popular smart contract platforms include the Ethereum Virtual Machine (written in a
language called Solidity) and Hyperledger Fabric's Chaincode (written using a combination of the languages Go,
node.js, and Java). Since all blockchain transactions are included in the hash chain, and therefore unchangeable,
having a bug in the contract, or a flaw that can be exploited, introduces risk into the system. It is also worth noting
that the use of smart contracts will likely degrade the performance of the system, as observed by several research
works [15, 60].

2.6 Blockchain vs. Databases

Modern databases are frequently designed to be replicated and distributed to achieve high reliability. The most
typical method is primary-backup replication, in which the data are replicated as copies across multiple servers or
virtual machines. When one copy is lost, additional copies are available to continue the service. This shares certain
similarities with blockchain systems, with three major differences. First, distributed databases focus on the
management of data. In contrast, blockchains aim to ensure data security. Second, blockchain systems aim to
tolerate Byzantine/arbitrary failures, whereas distributed databases usually handle only crash failures. Third,
blockchain systems aim to achieve the strongest guarantee of data consistency across multiple machines, whereas
distributed databases usually only achieve weaker guarantees of data consistency, such as causal consistency [25].
In causal consistency, data can be written concurrently by different nodes, introducing potential conflicts to be
resolved later. In comparison, blockchain systems guarantee linearizability, the strongest consistency guarantee in
distributed systems [62]. Informally, linearizability ensures that the data are always consistent across all nodes, so
the distributed nodes behave like a centralized one.

3 GOVERNMENT ADOPTION OF BLOCKCHAIN

We have done a review of the known projects and use cases supported by governments across the world. Our goal
is to provide a comprehensive and representative, but not exhaustive, list. Our purpose is to discuss several
applications that are both representative and meaningful. Indeed, with the increasing interest in blockchains,
applications can be discovered in potentially all industries. A lot of them, however, are far away from being
practical or useful. Therefore, we select the representative use cases and group them by countries and regions. In
this way, we will be able to better see the trend in government use cases. Government adoption of blockchain can
be viewed from regulatory, consumer, and developer perspectives. As a governing body, a state may wish to
monitor how blockchains are used, as in the case of cryptocurrencies. As a user of applications, governments may
use blockchains to improve processes. And in some instances, a government may develop its own blockchain-
based application to address an internal need.

In this section, we review the governmental efforts made by countries worldwide in piloting blockchain solutions,
the setup, and lessons learned. Since blockchains are widely used by cryptocurrencies, most of the applications
reviewed were financial. In Table 2, we include other domains such as medical, infrastructure, city governance,
asset and data management, and education.

Table 2. Blockchain Use Cases Adopted by Governments and the Focus of Blockchain Applications

Use Cases Representative Countries Focus

Medical and China, United States, Switzerland, Phillippines, Japan, Supply chain, Internet-of-Things,
healthcare Brazil, etc. etc.

Financial (Almost) All Cryptocurrencies, asset

applications management, etc.

Critical South Korea Asset management, optimization,

infrastructures etc.

Blockchain city Malaysia Cryptocurrency, data

management

Asset management Georgia, Sweden, Switzerland Land registry, property

transactions, etc.

Education Japan, Malta Certificate management

Data management Phillipines, Australia Cloud data management

3.1 U.S. Government

The U.S. Health and Human Services (HHS) department has developed an application called Accelerate for
management of contract billing that utilizes blockchain, AI, ML, and process automation. Accelerate is designed to
better manage the HHS portfolio of 100,000 contracts worth around $25B across about 50 systems. The
blockchain within Accelerate captures a pointer to unstructured data (e.g., documents) rather than storing the
data itself. Accelerate was able to get contract information dispersed across the entire bureaucracy through
replication of data and became the first federal blockchain-based application to be certified by a designated
approving authority, an internal senior management official, as having the authorization to operate [49],
indicating that the system had an acceptable level of risk and may be used in government applications. Accelerate
was expanded to acquisition management—getting contract information to researchers more readily so they could
find suitable materials for their research. HHS has projected savings at the point of purchase of up to $720M over
time and may expand Accelerate into clinical data—HHS leadership discussed using blockchain for tracking sepsis
data [104].

Research is being done by the U.S. Centers for Disease Control and Prevention (CDC) to use blockchain to help
track public health outbreaks such as hepatitis A [96]. In 2017, the chief software architect for the CDC's Center
for Surveillance Epidemiology and Laboratory Services began building proofs of concept for improving
surveillance across state lines. Since then, the CDC and IBM have come together to work on a blockchain-backed
solution for tracking the ongoing opioid disease crisis [83]. We assume that using blockchain to track COVID-19 is
a consideration. Figure 5 shows that interest in blockchain for use in biomedical applications is growing rapidly
after many years of no published research. Most of these publications are for theoretical research, with few
discussing deployment of blockchain at the point of care. Several discuss blockchain's tamper resistant property,
as well as its distributed nature—attributes relevant for health data interoperability. These blockchains tend to be
private permissioned ones; Ethereum is studied because of its smart contract capability, and Hyperledger Fabric
because it is open source and has some support from large companies such as IBM.

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Fig. 5. Pubmed.gov keyword “blockchain” search results January 2008 through December 2019,
as of August 2020.

3.2 Asian Governments

In 2019, the Filipino government approved the adoption of an Ethereum-based solution for approximately 80
rural banks to get access to financial services. Motivating the effort is the fact that only 42% of Filipinos aged 15 or
older have a bank account due to a combination of factors [38, 120].

The concept of blockchain city has been used and made live at Malaysia's Melaka Straits city, a tourist city funded
by the Chinese government. The project aims to use blockchain to track tourist visas, passengers, luggage, and
booking services [102]. The city will also manage its own token, the DMI coin, for tourists to exchange their
money into digital currencies for payment in the city via their mobile phones.

South Korea's government announced a 4B Korean won (about $3.5 million) award to set up a blockchain-enabled
virtual power plant in the city of Busan, the country's second-most populous city [97]. The power plant is to be
cloud based and should integrate multiple energy resources to optimize power generation.

3.3 European Governments

The European Horizon program supports blockchain projects across the European Union [111]. Luxembourg
launched a digital Luxembourg initiative in 2017, with a focus of building a blockchain governance framework.
The purpose is to build a blockchain competence community and develop blockchain governance standards; the
project is ongoing.

The e-Estonia program [45] supports multiple features such as e-identity, e-healthcare, and e-governance. Most
are already operational, with 98% of Estonians filing tax declarations completed online, and 99% of their health
data is digitized and stored on blockchain. Although issues and concerns remain [93, 107], blockchains have
indeed revolutionized the way this government stores and processes data.

Countries such as Georgia and Sweden (and non-European Union countries like Switzerland) use blockchains to
manage assets [13]. Georgia (at the juncture of Asia and Europe) has implemented blockchain for land title
registry and related property transactions; the technology has helped make the process more efficient [105].
Sweden has also created a blockchain-based application for land registration and real estate transactions [78].

Blockchain in education has been applied as well [56, 57]. The Maltese government recently completed the first
national pilot of a blockchain to manage academic credentials such as diplomas, school certificates, and
transcripts. This has been shown to improve the safety of personal information, minimize bureaucracy, and allow
students to access their credentials more easily.

3.4 Others

Several major Australian government departments use cloud-based blockchain solutions, or Blockchain-as-a-
Service [88]. The Canadian government launched a pilot recently to use blockchain for digital credentials
management, allowing employees to maintain a permanent, self-owned, and secure record of their digital
credentials [77]. Anti-money laundering is another major initiative for several governments [69, 71, 75, 101]. For
instance, the Financial Action Task Force, an intergovernmental entity, issued guidelines on virtual asset, anti-
money laundering and counter-terrorist financing regulations [69]. It has been shown that existing approaches
are effective in balancing between the threats and opportunities. Continuous monitoring and investigation are
desirable as the technology rapidly changes [27].

4 USE CASE STUDIES

During our review, we found that the majority of the announced government-supported blockchain projects do not
provide enough technical details about the setup or system architecture, among others. This is in part because a lot
of the projects are ongoing or in their initial phases. In this section, we review two use cases in two sectors in
detail: healthcare, and critical infrastructure. We review the use cases, present how blockchains are used in each
use case, and discuss potential challenges. Note that although we focus on healthcare and critical infrastructure
sectors, the use cases involve domains beyond these two, such as finance and Internet-of-Things (IoT). Therefore,
we consider only these two representative sectors and discuss the applications in detail.

4.1 Healthcare

As measured by the number of articles published on PubMed, the National Institute of Health's search engine of
medical references, interest in blockchain for use in biomedical applications has almost doubled year over year
from 2015 to 2019. Blockchain usage in Electronic Health Records (EHRs) holds promise, with five characteristics
of EHRs that must be addressed by any blockchain solution: governance, interoperability, privacy, scalability, and
security [29, 82]. The blockchain characteristics to meet those needs include immutability, cryptography,
distribution, decentralization, transparency, auditability, and nonrepudiation [82].

Technical solutions for guaranteeing privacy and security in biomedical blockchain applications using blockchain
have been proposed, including using the cryptocurrency Ethereum along with the Onion Router for remote health
monitoring [10], as well as a novel blockchain called Enigma, designed for exchanging EHR data [121].

The use of blockchain as an overarching health information exchange for protected health information to be
exchanged nationally in the United States was proposed, with a theoretical blockchain-based technology to be
used as a record locator service pointing to demographic copies of medical records stored in a shared set of servers
called Patient Identity Brokers [51]. Such a design lends itself well to recent regulatory changes in the United
States. The 21st Cures Act not only gave patients a right to their health data but also said that healthcare systems
cannot information block that data. The legislation was made in 2016, and it was not until March 2020 that a final
rule was issued by the Office of the National Coordinator detailing how the information exchange from the
provider to the patient was to work. That office created a technical framework and compliance structure for
enabling protected health information to flow securely as the patient directs it. The technical framework is
essentially a distributed system that lends itself to the possibility of blockchain usage, with interoperability
between IT systems more possible than ever through the creation of a standardized core dataset that all
participants must use.

Most of the projects in the healthcare sector focus on utilizing blockchain as a reliable platform for data sharing.
Indeed, the critical nature of healthcare data makes blockchains unique in facilitating secure data sharing.
However, implementing a large-scale EHR data exchange system is not easy, with or without using blockchains.
Effort from multiple disciplines and across stakeholders are necessary to make it possible, and realizing that vision
in a final system, while also maintaining security, will be challenging. Perhaps, though, now more than ever such a
system is possible, as the global pandemic has made it a necessity that health data flow more freely than ever
before. New technology is needed to address both public health needs and the need for the individual's medical
chart to be readily accessible to the patient or provider.

4.2 Critical Infrastructures (Energy Sector)

The U.S. Department of Homeland Security defines 16 critical infrastructures including energy, food and
agriculture, and transportation, among others. It is stated that “the security and resilience advances a national
policy to strengthen and maintain secure, functioning, and resilient critical infrastructure” [91]. Due to the nature
of critical infrastructures, blockchain application in critical infrastructures has been widely explored. Besides the
financial and healthcare sectors (also considered critical infrastructures), other domains such as the energy sector
are under investigation by governments around the world. As an example, the U.S. Department of Energy awarded
several projects to both industry and academia to create the “Energy Internet” [66]. The purpose is to build an
advanced management framework for distributed energy resources to support fast, scalable, and secure peer-to-
peer communications.

Blockchain in the energy sector can involve multiple aspects, ranging from energy trading to management of IoT
devices and energy resources management [14, 85]. In Table 3, we present the representative areas of blockchain
adoption in the energy sector.

Table 3. Blockchain Use Cases in the Energy Sector

Areas Blockchain Usage Benefits

Energy trading Transaction management Real-time and peer-to-peer exchange

Smart energy IoT management, resource management Secure asset management

System protection (SCADA) Data and service protection Intrusion tolerance

Energy trading, especially renewable energy trading and management, is one of the main areas found in current
blockchain projects in several countries [35, 67, 70]. For instance, a project supported by the Japanese Ministry
of the Environment aims at building a system for measuring and managing self-consumed renewable energy [35].
The project utilizes the cryptocurrency side of the blockchain technology to build the trading system. Specifically,
the self-consumed renewable energy is first converted into tradable values and sent to the blockchain network.
The real-time trading prices are then calculated according to the exchange cost and demand. When the
transactions are finalized, energy can be exchanged locally without having to be transmitted to a central location.
Similar methods have been used in projects from other countries such as the United States and Australia [67, 70]
that have been shown to greatly reduce the management and trading cost. Besides other components such as
energy resource management, such a use case shares a lot of similarity with blockchains in the financial domain.
In other words, the adoption of blockchain could potentially reduce the cost for any financial transaction in the
energy sector and remove the need for a trusted single party.

Smart energy involves the management of IoT devices and energy assets. Research projects, industrial projects,
and governmental pilots have been found [46, 68, 92]. Such projects usually involve efforts from both industry
and academia to be successful. For instance, in the past few years, the Department of Energy announced funding

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for both university-led and industry-led research projects to integrate IoT technologies with the energy
infrastructure, several of which focus on blockchain and IoT integration [47, 66]. The purpose is to provide robust
and scalable infrastructure in the energy sector. This use case is similar with managing IoT assets using blockchain
as used in other application domains, such as supply chain and healthcare. There are still many challenges,
because the integration of energy-related infrastructure and blockchain software is not easy. Energy-related
devices suffer from numerous physical threats since the deployment environments are heterogeneous. Despite the
challenges, such an integration can greatly benefit energy infrastructure by enhancing the security and efficiency
of resource management, potentially disrupting different aspects in the energy sector such as energy sharing [114]
and electric vehicle charging [72].

Another noteworthy aspect in the energy sector is the protection of mission critical systems, although the available
approaches do not directly utilize the “blockchain” technology. For instance, several works focus on building
intrusion-tolerant Supervisory Control and Data Acquisition (SCADA) systems [18, 19, 90], where SCADA is the
core control system for the power grid. Such approaches use BFT to build an intrusion-tolerant SCADA system.
Since BFT is the core mechanism for permissioned blockchains and some hybrid blockchains, BFT-based SCADA
can provide the same security guarantee with blockchains (i.e., high availability and integrity). The benefits of
using only BFT instead of blockchains include better performance and more flexible system design.

5 CHALLENGES AND CONSIDERATIONS

In a 2018 report on cryptocurrencies and blockchain in Europe and Central Asia, the World Bank states that
“policy makers should strike a balance between curbing the hype surrounding these new technologies and
unleashing potentially transformational new opportunities. While encouraging and facilitating these innovations,
they should prepare to craft new regulations to create a level playing field for new and old industries, by adjusting
financial oversight, consumer protection, and tax administration” [58]. The following year, the European
Commission summarized to the World Trade Organization's Global Trade and Blockchain Forum what the
technical and legal challenges for government use of blockchain are: integration with existing systems, scalability,
blockchain-to-blockchain interoperability, lack of a policy framework for cryptocurrencies, and the enforceability
of smart contracts [2]. That lack of a framework was also mentioned at the 2019 Organisation for Economic Co-
operation and Development Global Blockchain Policy Forum [3]. Without such a framework, the economic
implications of central government usage of so-called stablecoins (e.g., Facebook's Libra) would be unpredictable
and wide ranging [3]. The lessons learned from government adoption of blockchain range from addressing the
security implications of ledger transparency through cryptography to planning for the increased costs of
implementing blockchain relative to more mature technology [5, 63]. In this section, we review adoption
challenges and how governments have faced them to encourage innovation, provide information about the
technical challenges and close with a brief discussion.

5.1 Adoption Challenges

Industry and government adoption. Grasping the different implementations of blockchain and their capabilities
pose challenges for decision makers when it comes to data governance, privacy and security regulations, and
standards [110, 113]. To address such issues, policy makers should take time to assess the technology, look for
standards to be developed, and gather experience with the technology [40, 113]. Academic and industrial efforts
have been made to discuss and create standards for blockchains to be used in different domains [12, 40, 65]. The
International Standards Organization Technical Committee 307 has published three standards, including a
vocabulary, a privacy and personally identifiable protection consideration, and a smart contract overview [86].
Another concern is interoperability of blockchains, which includes both exchanging data among blockchains and
transferring assets between different blockchain systems. Both research and industry efforts have been made to
create such a service [22, 79]. Yet due to the rapidity with which blockchains types are being developed and
adapted, it remains to be seen whether interoperability will create new development opportunities for developers,
and—if so—whether governmental decision makers will wish to fund the work.

Governmental role in adoption. Governments worldwide have started to develop policies or government
strategies for the adoption of solutions [1, 109]. The experience that they have gained with cryptocurrencies has
given them insight into how they could use blockchain to reduce transaction costs [52]. They may determine that
it is more efficient to execute cross-border trade transactions via blockchain through cryptocurrency. The
realization of such transactions, however, requires complex integration work and a conducive regulatory
environment. Governments that utilize blockchain technology should partner with private firms to both encourage
innovation and develop a flexible regulatory framework [3]. An example is the United Arab Emirates’ support of
blockchain, in which they created a regulatory sandbox for technology companies to test blockchain solutions for
FinTech and for streamlining data interoperability across government services [4]. In the United States, the
Boldline Accelerator program is similar in its support of public-private collaboration and has discussed how to use
blockchain for identity management, tracking human trafficking, Visas, and shipping fraud [39]. Public-private
collaborations should focus on developing blockchain interoperability and standardization, as applied to a
carefully selected set of inefficient bureaucratic use cases [16, 94].

Cost of blockchain. The potential for blockchain to reduce transaction costs is appealing to government, as noted
earlier [52]. For digital platforms, blockchain can reduce the cost to start up new marketplaces, as well as audit the
validity of transactions [31]. However, their decentralized nature can introduce new inefficiencies and data
governance issues [31]. Blockchains’ strength in guaranteeing data integrity through immutability may come at a
premium, relative to having the same guarantee in a centralized application [64]. Transaction costs have been
found to be higher for permissionless blockchains when compared to centralized solutions [13], and blockchain
applications can cost significantly more to operate than a cloud-based centralized equivalent, even after
controlling for cloud service utilization fees [103].

Data quality. Blockchain does not protect against data from untrustworthy sources, such as authorized but
potentially tainted parties. It cannot prevent well-formatted but incorrect or inaccurate data from being sent and
stored in the system [119]. As a result, blockchain may be used as an illegal content distribution channel. The
system may also consist of data with low quality or high inaccuracy. Such data quality issues might be harmful in
applications where transparency of the data is desirable, especially in government applications [5]. Although
blockchain can be used as an auditing system for validating these data, the data are already distributed and cannot
be retrieved from all parties with certainty. A decentralized system that allows any two parties to anonymously
exchange assets may provide a haven for those wishing to perform illicit activities without fear of reprisal. As a
result, existing solutions usually involve additional layers to detect or ensure data quality [28, 119]. It is not clear
whether such a layer will provide the desirable analysis and become generic enough to ensure data quality.

Correctness and security of the system. Several blockchain systems intentionally make their consensus protocols
proprietary, making it difficult to trust in the correctness and security of the platforms [26]. Consensus protocols
are complicated and the implementation in a complex real system requires extensive development, which may
introduce unintended consequences, as has been observed [32]. Before adopting a blockchain solution, the
underlying mechanism and the system implementation should be carefully reviewed. Even though most peer-
reviewed works have been carefully reviewed by experts, errors in some solutions are still found later [6].
Therefore, it is important to evaluate whether the implementation matches the theory and design of the
blockchain. Some efforts have been made for e-government applications [53]. It is yet to be seen whether the
solutions are generic and useful enough to fully evaluate the systems.

5.2 Technical Challenges

The performance trade-offs and blockchain standards. There is no one-size-fits-all blockchain system [20, 37,
59, 112]. Different approaches have been proposed to meet different needs, such as improved latency, throughput,
scalability, and bandwidth [34, 37, 42, 59]. Indeed, each protocol has made trade-offs—for example, to reduce
the number of messages nodes needed to exchange in the protocol, the consensus usually involves more steps to
complete. In other words, such a protocol has longer latency to achieve higher throughput. Before widespread
development and adoption, some innovative first movers must implement solutions that consider the trade-offs
among security, efficiency, and robustness.

Although significant effort has been put into developing new blockchain platforms, it is not easy to develop both
correct and efficient systems. In fact, developing consensus protocols is like engineering cryptographic systems,
which require expertise in cryptography, security, and the theory of distributed systems [26]. Therefore, expert
review, validation of both the theory and implementation of new blockchain platforms, and standards
recommendation [65] (e.g., cryptocurrency exchanges, running blockchains in applications like clinical trials, etc.)
are desirable if the full potential of blockchain is to be realized.

Scalability. Scalability can be interpreted as the number of nodes and the number of clients. The number of nodes
is a concern during blockchain deployment—how many nodes should one use to start the service? The number of
clients is a concern for the workload—how many requests should one expect and what are the sizes of the
requests? Both permissionless and permissioned blockchains have scalability limits [112]. The open nature of the
consensus mechanisms of permissionless blockchains allows anyone to join and therefore usually involves
thousands of nodes. The problem for such blockchains is that they usually suffer from long transaction latency
(where it takes longer for the transaction to be available) and have not scaled to many client transactions in real-
world applications. However, permissioned blockchains can scale to a large number of clients with less latency,
but they rely upon a small number of blockchain servers. Hybrid blockchains address the scalability problem [8,
50, 73, 74, 80, 98, 118], but each has its own challenges and most have a sufficiently large number of
representatives to guarantee correctness of the system (safety and liveness)—for example, greater than 600 [80].
A BFT protocol of such a size, however, can be impractical. Other BFT algorithms, such as the cryptocurrency
Algorand [55], remove the need to run PoW by applying proven cryptographic techniques along with verifiable
random functions and committees, but, again, have a limitation. Algorand relies upon the number of coins, which
might limit its practicality in real-world deployment. The optimal blockchain that balances scalability for both
clients and servers has yet to be found.

Privacy and compliance. Privacy and compliance are always major concerns in governmental applications.
Although conventional blockchains provide availability and integrity, the data are essentially transparent—all
participants may freely review transactions. This means that an architect should be careful in selecting the type of
blockchain and perform a use case analysis that includes privacy and security guarantees relative to performance
needs. With the current regulatory climate of governments focused on protecting user data, blockchains become
especially problematic given their open and immutable nature. At the same time, laws designed to safeguard the
privacy and security of individuals’ information do provide a roadmap for designers. Generalized examples include
the California Consumer Privacy Act of 2018 and the European Union's General Data Protection Regulation of
2016. In the healthcare space, the Health Insurance Portability and Accountability Act and the Health Information
Technology for Economic and Clinical Health Act are the basis for interoperability rule changes proposed by the
Office of the National Coordinator, as well as the Centers for Medicare and Medicaid Services. With the preceding

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two acts in mind, researchers at MIT built a PoW consensus protocol called Medrec for mining patient
information. This type of clinical data is becoming standardized through the implementation of EHR systems that
leverage messaging protocols, such as Health Level 7 [17].

Timing assumptions. Most permissionless blockchains assume a synchronous network (i.e., all replicas know the
message transmission time), which is not a practical assumption. For the system to be correct (safety and
liveness), there must be a large number of nodes that actively participate. Therefore, the correctness of such a
system in a small-scale or private setting can be questionable. However, most permissioned blockchain protocols
assume something called partial synchrony [44], in which the network delay and processing delay by the nodes
are bounded by an upper limit unknown to all nodes. It is assumed that each node in the network will eventually
respond, and if a given node does not respond, other nodes will handle it according to the protocol, providing an
answer and ensuring that the network will not get stuck waiting indefinitely. The shortcoming of this approach is
that it introduces performance and security issues—what if an adversary can somehow manipulate this network
delay in such a way that causes nodes to misbehave or to give up information? In this type of network, the system
may simply stop processing any requests just like a crashed service, even if all nodes in the system are correct. A
potential solution to this may be the use of what is known as a purely asynchronous BFT consensus protocol, in
which nodes have no upper bound in response time so the protocols are resilient to all kinds of attacks. Research
into this area is ongoing and includes several possible solutions [9, 43, 81, 84].

5.3 Discussion

Permissioned vs. permissionless. Most of the government blockchain implementations are permissioned.
Although some use permissionless blockchain, in these cases the blockchain is still deployed in a closed, private
setting. Many of the countries we studied for blockchain adoption have either banned or regulated
cryptocurrencies, which are fully permissionless. We conclude that the development of cryptocurrencies by
governments is unlikely unless the adoption is a specialized use case such as critical infrastructure. Even in such a
case, the blockchain would likely be tethered to the currency of the given nation-state.

The quest for high performance. We have not found any published results that have measured performance, or
assessed the performance needs, in government blockchain implementations. Many applications are new, and the
long-term feasibility will depend upon a cost-benefit analysis. Many use cases involve large volumes of data,
however, so we expect scalability and throughput needs for these systems to drive changes to their blockchain
implementation.

The quest for technology improvement. We have found little information regarding the feedback or lessons
learned based upon government blockchain implementations. We believe this to be in part because most projects
are still in their early stages. We advocate for research and industry to continue to collaborate and improve
systems based upon our observations of past successes [26, 32].

Cryptocurrencies regulation. Many countries have developed regulations for cryptocurrencies, and yet no country
has fully determined how to implement the regulations. Part of the challenge is how to classify cryptocurrencies
using existing financial constructs. Taxing or regulating a cryptocurrency as a currency, a security, or an asset is
difficult, as a cryptocurrency can be any one or all three.

6 FUTURE OF BLOCKCHAIN AND CONCLUSION

Blockchains have evolved beyond cryptocurrencies to general purpose and can be used across an array of
applications, particularly those that need high service availability and data integrity. If their adoption increases,
then blockchain-based solutions may reintroduce a trusted broker: the data center, whether in the cloud or on
premise. A cloud-based blockchain system makes the cloud provider into a new type of trusted broker. If instead
nodes are on premise but are used by the public, then whatever entity is hosting them becomes the trusted broker,
and the system becomes vulnerable to any failures that may render the entire system unreliable. Therefore,
replacing a fallible human or bureaucracy with a blockchain may shift risk rather than eliminate it [23].

The technical challenges for blockchains, such as being fully privacy preserving, ensuring compliance when
necessary, and being scalable, have yet to be fully solved, and more work is needed to address them. Yet despite
these challenges, blockchains can make applications better and will begin to be the solution for use case–specific
distributed systems problems. Most blockchain applications were financial at first, just as many good and proven
technologies have been. Blockchains are now being used in other spaces, such as government. They may be the
best technology to deploy when a need to distribute data through a system that needs to guarantee data integrity
and service availability exists, but the ability to make it happen is limited.

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Footnote
This research was supported by an NSF Workshop supplement to NSF award 1747724, Phase I IUCRC UMBC:
Center for Accelerated Real-Time Analytics (CARTA). For J. Li, this activity was supported by a U.S. Department
of Homeland Security (DHS) American Association for the Advancement of Science (AAAS) Fellowship, sponsored
by DHS and administered by the Oak Ridge Institute for Science and Education (ORISE) for the DOE under
contract number DE-SC0014664. All opinions expressed in this article are those of the authors and do not
necessarily reflect the policies and views of DHS, ORAU, or ORISE.

Authors’ addresses: J. Clavin, S. Duan, H. Zhang, V. P. Janeja, K. P. Joshi, and Y. Yesha, University of Maryland,
Baltimore County, 1000 Hilltop Circle, Baltimore, MD 21250; emails: jclavin@umbc.edu
(mailto:jclavin@umbc.edu), sduan@umbc.edu (mailto:sduan@umbc.edu), hbzhang@umbc.edu
(mailto:hbzhang@umbc.edu), vjaneja@umbc.edu (mailto:vjaneja@umbc.edu),
karuna.joshi@umbc.edu (mailto:karuna.joshi@umbc.edu), yeyesha@umbc.edu
(mailto:yeyesha@umbc.edu); L. C. Erickson, American Association for the Advancement of Science, 1200
New York Ave, NW Washington, DC 20005; email: lcerickson@gmail.com
(mailto:lcerickson@gmail.com); J. D. Li, Department of Homeland Security, Science and Technology
Directorate, 245 Murray Lane, SW Washington, DC 20528; email: jdli@alumni.stanford.edu
(mailto:jdli@alumni.stanford.edu).

This work is licensed under a Creative Commons Attribution International 4.0 License
(https://creativecommons.org/licenses/by/4.0/).

©2020 Copyright held by the owner/author(s).

2639-0175/2020/11-ART22

DOI: https://doi.org/10.1145/3427097 (https://doi.org/10.1145/3427097)

Publication History: Received March 2020; revised September 2020; accepted September 2020

https://dl.acm.org/doi/fullHtml/10.1145/3427097 10/10