Can Blockchain increase agility in the Public Sector?

A case study of UNICEF Innovation Fund's Portfolio Company, OS City

Cecilia Chapiro, Investment Adviser, UNICEF Innovation
adults and children stand the riverbank of the Río Bravo (known as the Rio Grande in the US) at an encampment in Matamoros in the northeastern state of Tamaulipas.
UNICEF/UNI285134/Vergara Toache
07 July 2021

According to the International Organization for Migration, the current urban population is expected to almost double in the next few decades to approximately 6.4 billion by 2050. As cities grow, governments face an increasing lack of institutional agility, preventing them from efficiently responding to citizens' growing demands. According to McKinsey, inefficiencies in public sector infrastructure result in $5T government revenues that go missing each year. Given governments' nature - large size, complex silos, frequent leadership changes, legacy systems, bureaucracy - the transition to more efficient systems is not an easy endeavor. Nonetheless, there is too much at stake to not experiment. Undoubtedly, improvements in government services can lead to better lives, but how to do so is the question. 

UNICEF Ventures, part of UNICEF’s Office of Innovation, is tasked with exploring emerging technologies with the potential to positively impact children and young people globally. Since 2015, the UNICEF Ventures team has been researching and experimenting with blockchain technology, understanding its value in providing efficiency, trust and security like no other technology has in the past. One way to pursue this is through our Innovation Fund, a pooled funding vehicle that allows UNICEF to quickly assess, fund, and grow open-source solutions to improve children’s lives. 

Such is the case of one of our portfolio companies, OS City, which in 2019 became part of the first UNICEF Innovation Blockchain Cohort. At that time, OS City was building notary services to help governments increase the accountability of government allocations of resources. During their one year investment period, OS City further developed their product and ultimately became a UNICEF Innovation Fund Graduate, with an open source digital certification solution using blockchain to increase transparency, preserve data integrity and accelerate the use of portable records in the public sector and informal economy. Today, OS City’s projects in Argentina, Chile, Costa Rica and Mexico include over 10,000 blockchain verifiable credentials (commercial permits, university diplomas, city inspectors badges, fair-trade artisan products, commercial licenses, construction permits, renewable energy purchasing, organic food, art value), providing transparency, security, traceability and accountability on public assets, impacting the lives of more than 960,000 citizens.

Sample verifiable credentials that can be allocated inside a SSI as a document holder: commercial permit, city inspector badge,  artisans fair trade, assuring quality and origin of local products, and certified college skills.
OS City
Sample verifiable credentials that can be allocated inside a SSI as a document holder: commercial permit, city inspector badge, artisans fair trade, assuring quality and origin of local products, and certified college skills.

In 2021 OS City received additional funding from UNICEF through UNICEF’s Cryptocurrency Fund (CryptoFund). OS City will use the investment to pilot a new citizen digital identity together with the Government of Argentina, towards improving the citizen-government relationship. 

The project aims to solve one of the obstacles in the transformation of the public sector: the lack of interoperability between the different areas of government.

“We see fragmented governments that do not share data or processes, and for this reason citizens end up repeating the same procedure multiple times or delivering the same information over and over again. Avoiding the aforementioned fragmentation lies in building governments as platforms for digital services, centered on the citizen, and whose common thread is a digital identity that allows for a new kind of citizen-government transactions that are fraud-proof, reliable and efficient.”

Jesus Cepeda, Founder, OS City

The pilot consists of building a digital portfolio, or increasingly known as a digital “wallet”, in which instead of transacting with cryptocurrencies, digital documents issued on blockchain are stored, shared, and openly verifiable by third parties. This can help the government to:

  • Reduce costs by interconnecting services with citizen digital identity
  • Make money online by offering frictionless, trustworthy digital services 
  • Increase trust and security issuing fraud-proof, notarised documents
identidad digital

"We see great potential in blockchains for improving public service delivery, which is a priority to our administration. Exploring these solutions make us pioneers in the use of this technology to authenticate citizens and share official documents within an unprecedented citizen-government relationship."

Luis Papagni, Innovation Undersecretary, Argentinian National Administration

The prototype to be conducted in the coming months will be testing the implementation of a new citizen digital identity.

Citizens in the Argentinian cities of Mar del Plata and Berisso will visit their governments’ portal, log in as proven-Argentinian citizens or residents, and then connect a blockchain wallet public address. The goal is to find out how citizens react to a blockchain identity service in demographically and economically different cities, offer a simple verifiable credencial (Cultural Passport) and gather insights toward scaling with the least friction. One of the main goals is to learn how to avoid any wider digital divide by using a digital wallet.

Sample login using existing wallets including Metamask and Coinbase
OS City
Sample login using existing wallets including Metamask and Coinbase

To kickstart this pilot, the cities of Mar del Plata and Berisso are connecting 1000 citizen digital identities and issuing a Cultural passport verifiable credential so that citizens can attend and visit any cultural event and infrastructure with a discount (e.g. museums) for free and by showing their verifiable credential QR that any third party can scan and verify. This exercise aims to familiarize citizens with blockchain wallets and verifiable credentials, but also to easily understand how these new digital assets and digital identities can be used, audited, verified (scanned) and transform the way we interact with our governments.

Sample of open verification based on a QR-Scan and a 4-step standard verification
OS City
Sample of open verification based on a QR-Scan and a 4-step standard verification

“OS City helps the public sector and the citizens it serves to benefit from new solutions powered by Ethereum and blockchain. We are excited to be supporting teams like OS City that both understand pressing local needs and can showcase the tangible value of blockchain in their solutions.”

Aya Miyaguchi, Executive Director, Ethereum Foundation

With a growing population and citizens’ demands, further collaborations between the government, startups and the public will be key to accelerate the transformation towards more agile and citizen-centered public services. The promise in using blockchain as a platform still needs more results to back it up but the promise is hard to ignore as we envision the future of government in a digital world.