Blockchain Governance & IMPLEMENTATION MODELs

1. Blockchain Governance & IMPLEMENTATION MODELs J. WALUBENGO

2. Summary • Blockchain Basics • Distributed, Public, Private, Permissioned, Permission-less • Consensus • Smart Contracts • Blockchain Benefits • General Use Cases • Network Operator Use Cases • Evaluation Blockchain Offers • Blockchain Governance Frameworks • Implementation Approaches. • Challenges • Q&A

3. Blockchain -BASICS

4. Types of DLT/Blockchain

5. Consensus MECHANISMS • Consensus Mechanisms • A consensus mechanism is the process in which a majority (or in some cases all) of network validators come to agreement on the state of a ledger. It is a set of rules and procedures that allows maintaining coherent set of facts between multiple participating nodes. • Proof of Work • Proof of Stake • Majority Voting (Variants of Practical/Federated Byzantine Fault Tolerance)

6. Smart Contracts • A smart contract is a collection of code and data (sometimes referred to as functions and state) that is deployed to a blockchain (e.g., Ethereum). Future transactions sent to the blockchain can then send data to public methods offered by the smart contract.

7. Benefits of Blockchain Tech Distributed Database • Each party on a blockchain has access to the entire database and its complete history. No single party controls the data or the information. Every party can verify the records of its transaction partners directly, without an intermediary. Peer-to-Peer Transmission • Communication occurs directly between peers instead of through a central node. Each node stores and forwards information to all other nodes.

8. Benefits of Blockchain Tech • Transparency with Pseudonymity • Every transaction and its associated value are visible to anyone with access to the system. Each node, or user, on a blockchain has a unique 30-plus-character alphanumeric address that identifies it. Users can choose to remain anonymous or provide proof of their identity to others. Transactions occur between blockchain addresses. • Irreversibility of Records • Once a transaction is entered in the database and the accounts are updated, the records cannot be altered, because they’re linked to every transaction record that came before them (hence the term “chain”). Various computational algorithms and approaches are deployed to ensure that the recording on the database is permanent, chronologically ordered, and available to all others on the network.

9. Generational Progress/Use Cases • 1st Generation. • Bitcoin - Currency • 2nd Generation.   • Generalized Distributed Ledger Technology (DLT)- Put assets/info into the blockchain (Land, Property, Medical Records etc) • 3rd Generation.   • Smart Contracts - If Land and Money is in the ledger, make logic swap them. • 4th Generation.  •  If Smart Contracts can happen, then we need to match sellers & buyers.  We need markets. Examples with markets that have a sense of fairness(1st come, 1st serve)  Stock Markets, Auctions, Games, Patents (first to file)

10. More Use Cases New services and products will pop up in areas such as creating and trading assets, tracking provenance, managing supply chain, managing identity, and in providing ancillary services to the software itself. Examples Agriculture—IoT sensors reading the environment and automatically initiating activities such as irrigation or deployment of insecticide, based on programmed trigger values Real estate—Automatically locking a house (through an Internet-enabled lock) upon a tenant’s nonpayment of rent and then unlocking it when payment is submitted General business and personal management—Replacing intermediaries that handle processing and payments for a fee (e.g., eBay and Airbnb) with peer-to-peer transactions, automating compliance with records’ “destroy by” dates, and managing users’ multiple digital identities and preferred release of personal data Health care—Securing access to personal health records, enabling doctors to provide insurers proof of completed surgeries, supervising drugs and other supplies, and enabling secure and timely sharing of patient information for clinical trials and research • (Source: ISACA Tech Brief-Understanding Smart Contracts, 2018)

11. Opportunity for NET Operators

12. Opportunity for NET Operators

13. Evaluating Blockchain Offers Evaluate Blockchain solutions/offers based on: Technical Framework • Different Security (Mining Puzzles vs Proof of Stake) • Platform Features (Scope of instruction/script set, limited vs full VM) • Monetary Policy (Inflation/deflation, Inter-block times) • Community served (Target audience) Business Framework • What is being decentralised?: Property ownership and trading • What is the Level of decentralisation: Through disintermediation or thro Introduction multiple intermediaries (i.e intro competition) • Which Blockchain is being deployed: Bitcoin/Ethereum/etc platforms • How will product exchange be secured?: Thro Atomicity. (ref: or reputation) Governance Framework • 1) Who are the Software Developers • 2) Who are the Miners/Block producers • 3) Who is Community of Users/Target Audience

14. DLT/Blockchain Governance

15. Blockchain Gov Framework

16. DLT/Blockchain Governance • Governance of the Blockchain • The governance of Blockchain describes the entity that is responsible for deciding who will be the participating nodes or agencies, the rules of participation and the role each agency will play. • Quite often, this would be the lead agency or department mandated to provide a particular service e.g. for land registration, this would be the lands ministry while for passport registrations, this would be the immigration department.

17. DLT/Blockchain Governance • Governance by the Blockchain. • Once the lead agency has settled on the type of Blockchain(DLT), type and number of participating nodes, their validation rules and consensus mechanism, it would then implement and execute the government process using DLTs. • It is critical to note that once the DLT is activated and is running, the lead agency takes a lesser active role as most of the day-to-day function of service delivery would now be automated and executing autonomously – as per the governance rules defined earlier above.

18. Implementation Approaches. • There are three levels of digitization that governments agencies may adopt. We shall call them eGovernment 1.0, 2.0 and 3.0 respectively.

19. Implementation Approaches. • eGovt 1.0 (Client-Server Implementations) • This is the traditional computerization stage where Client-Server systems are often deployed. In this traditional situation, one government department or entity is usually responsible for particular transaction and user data. It owns, operates and maintains the digital systems for updating and managing this data.

20. E-Gov 1.0

21. E-gov 2.0 • eGovt 2.0 (DLT Implemented) • In this situation, there are several nodes operated by different agencies to deliver the decentralized nature of the distributed ledger. The information infrastructure resembles a network structure and the organization responsible for service provisioning sets the governance rules for the DLT.

22. E-gov 2.0

23. E-gov 3.0 • In the final model, the government is transformed and the governance by a single entity has changed into a networked governance structure in which multiple agencies are responsible for governing and transacting. The DLT is expected to facilitate direct interaction between citizens, providing administration without necessarily having a single or specific government administrator (Keyser, 2017)

24. E-gov 3.0

25. TYPICAL Implementation Approach EGov 1.0 M.D.A EGov 2.0 M.D.A Middle Ware Private Sector 1.0, 2.0 or 3.0 Inst. EGov 3.0 M.D.A - Organization/Governance M.D.A – Min./Dept./Agency - Systems/DLTs

26. TYPICAL Implementation Approach • Different Ministry, Departments and Agencies (MDAs) would be at different levels of implementing DLTs. However, there will be a middleware layer that would facilitate interoperability between the MDA. That way each entity is left to decide on its DLT governance and System structures. • One key government agency underpinning the rest will be the one handling Identity Management. Whatever level of implementation it would be at (eGov 1.0, 2.0 or 3.0) it should be able to provide reliable identity services to the rest of the ecosystem.

27. IMPLEMENTATION Challenges

28. References • Ølnes, S., Ubacht, J., & Janssen, M. (2017). • Blockchainin government: Benefits and implications of distributed ledger technology for information sharing. Government Information Quarterly, 34(3), 355–364. https://doi.org/10.1016/j.giq.2017.09.007 • Keyser, R. (2017). Blockchain: A Primer for Governments. February 6th 2017. Retrieved from http://www.viewpointcloud.com/blog/ government-technology/blockchain- governmentsprimer/. • Beck, Roman & Müller-Bloch, Christoph & Leslie King, John. (2018). Governance in the Blockchain Economy: A Framework and Research Agenda. Journal of the Association for Information Systems.

29. Ends • Q&A? • Comments?