Exploring the potential of blockchains to improve Governance in State of Karnataka

Around last week I read the blue paper and whitepaper of Steem. After spending a day reading and thinking about it I felt that Steem is working product and it is a POC for many community initiatives that can be run on blockchains. So I pinged Sridhar Pabbishetty CEO, Namma Bengaluru Foundation on facebook. After a casual chat about the role blockchains can play in improving the governance he suggested me to create the first draft that can be peer reviewed. So I spent a day streamlining my thoughts and doing some more reading.

When I started preparing the draft I started feeling that Steem already has most of it covered and if used properly we can do trial runs without spending lot of Government money on technology. I was amazed and what can be achieved with Steem after reading the blue paper. So I created a Steem blue paper awareness initiative.

Below is the draft I created for the proposal. Please do read and let me know your thoughts on the same in the comments section.

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Abstract

This paper outlines the potential of blockchains to improve the governance and tokenization of the investments in governments projects as a means to to address the issue of lack of funds. The combined effect of adoption of blockchains in governance and tokenization of funding also leads to long term interest for all the parties involved which can address the myopic decisions taken be elected representatives due to the pressure of elections every five years and uncertainty of next term prospects.

Blockchains and Governance

The following phrases are generally used when describing an ideal government.

1. Transparent Processes
2. Open Data
3. Distributed
4. Autonomous
5. Organization
6. Consensus Driven
7. Long Term focussed

The same phrases are used to describe blockchain or blockchains can be used to create systems which can be characterised by these phrases. Governments across the world are exploring the potential of blockchain in governance. 1

Public and private blockchains

All government data should be open by default and all citizen data should be private by default. Based on the requirements governments can have a web of public and private blockchains which are interoperable. All currently public records can be on public blockchain and private/sensitive data can be on private blockchains.

Example use-cases for public blockchain.

1. All birth and death certificates.
2. Property sale deeds.
3. Company/Business registrations.
4. Visa applications
5. Bill payments

Example use-cases for private blockchain

1. Healthcare data.
2. Wealth Records and Income tax filings.
3. Voting systems.
4. Aadhaar Integration?

Interoperability

Interoperability of public and private blockchains dictates the successful delivery of governments services as each of the services generally include interaction between at-least one public blockchain and one private blockchain. Hence making sure that these blockchains can act in tandem is of at-most importance.

Investing in the government projects

Many youngsters would be interested in investing in government projects if only the process of investing was more transparent and easier. Today’s investors would like to keep a close tab on their investments and change their investment strategy accordingly. If they are able to invest in the projects that they think have maximum impact to their demography they will be willing to increase their investments. By addressing this category along with investors who are in it for the profits only, the funding challenges can be eased to a certain extent.

Investing in single project

Tokenization of investments in individual government projects can lead to greater responsibility and the ease of investing can lead to influx of funds easing the budgetary pressures. In the pilot stage it can be implemented for projects with high visibility like Metro and smart cities projects. Governments and the primary investors can have major stake to begin with. As this project matures the amount of tokens that are available to public can be increased. Over a couple of years we can also look at project majorly being funded by public and the vendors/governments holding a necessary minority share along with voting rights.

To address the issues of volatility and to create a long term interest in the projects three different tokens can be created for every major project.

1. [Project] - Token which represents a share in the project.
2. [Project Power] - Token with a vesting period. These tokens can be convert [Project] tokens by by powering down where 1/12th or 1/24th of [Project Power] tokens can be liquidated every month or quarter.
3. [Project Blockchain Rupee] - Token that addresses the volatility by pegging itself to INR. Holding these tokens would fetch interest. The rate of interest can be adjusted based on the debt to ownership ratios.

For each of these projects there can be an organization which would hold the major shares and is majorly responsible for safeguarding the interests of the project. This could be the elected representatives/government who are responsible for the project.

To borrow from the Steem whitepaper, the above three tokens are created based on the following principles.

“There are some key principles that have been used to guide the design of Steem. The most important principle is that everyone who contributes to a venture should receive pro-rata ownership, payment or debt from the venture. This principle is the same principle that is applied to all startups as they allocate shares at founding and during subsequent funding rounds.”

Investing in group of projects, sectors or government initiatives as a whole

To make it easier for people to invest in group of projects, sectors or government initiatives as a whole index funds can be created.

Role of Political Parties

Political parties play a crucial role in Governance. One of the major hindrances for the political parties to start implement and manage projects with a long term perspective is that they are not sure if they would be elected in the next elections. So there is no way for them to safeguard their interests as the fruits of their policies can only yield after 5 years during which they may no longer be the ruling party. By enabling the political parties to invest their own funds to buy stakes in projects they can safeguard their investments of money, time and resources for the long term irrespective of whether they are in power or not.

Political parties can also delegate their [Project Power] tokens which hold influence over the decisions about the project to their party representatives. This can also lead to internal party democracy as the same amount of [Project Power] tokens can be allocated to different representatives in the party who would like to content for an elected post. The candidate who would have grown the tokens to a bigger pool organically can be given a chance to contest. Once the testing period is over the the delegated tokens can be relieved from the individuals and allocated to the next set of people. This approach can also ease the transition of normal people into politics or management of government projects.

Types of contributions

To borrow from Steem white paper again

“There are two ways people can get involved with a cryptocurrency community: they can buy in, or they can work in. In both cases users are adding value to the currency, however, the vast majority of people have more free time than they do spare cash. Imagine the goal of bootstrapping a currency in a poor community with no actual cash but plenty of time. If people can earn money by working for one another then they will bootstrap value through mutual exchange facilitated by a fair accounting/currency system.”

To highlight people can either buy in or work in. People flush with funds can buy in and people with free time can work in. This addresses the lack of funds issue and at the same time it can also address the unemployment problems. People without jobs can spend their time to work in and earn the tokens. Once they earn the tokens if they feel strongly about the project then they can exchange them for Power tokens which would give them control over the project that is proportional to their ownership of power tokens.

Role of citizen Groups

It would also allow citizen groups to come together pool their power tokens by delegating it to the organization they are part of. Once the organization has enough power tokens they will have a say in how the project is run. If the individuals feel that the organization is not representing their interests they can always cancel the delegation and hence get the power tokens back. They can either use the influence of their power tokens on their own or they can delegate it to the new organization that they feel represents their interest better.

Summary

“Government as DAO” funded by a “Cryptocurrency Index fund” with all transactional data on public or private interoperable blockchains based on the sensitivity of the data and distributed governance controlled by the individuals or groups who have contributed the maximum value to the initiative.

References

1. KPMG introductory video on how Blockchain can improve governance :https://www.youtube.com/watch?v=MwuH01FYzLY
2. Dubai https://www.ibm.com/blogs/blockchain/2017/04/blockchain-in-dubai-smart-cities-from-concept-to-reality/
3. How blockchain can help create better public services - https://betterworkingworld.ey.com/digital/how-blockchain-can-help-create-better-public-services
4. Will blockchain transform the public sector? https://www2.deloitte.com/insights/us/en/industry/public-sector/understanding-basics-of-blockchain-in-government.html

Technical references

1. A basic implementation of DAO on ethereum blockchain : https://ethereum.org/dao
2. Steem blue paper (High level functional details) : https://steem.io/steem-bluepaper.pdf
3. Steem white paper (Detailed technical explanations) : https://steem.io/SteemWhitePaper.pdf