The Digital Transformation Agency appears less than impressed with blockchain’s current capabilities after it was given $700,000 in budget funding to investigate the technology.
After its initial research, the federal government’s digital office has found that blockchain is at the “top of a hype cycle” and is currently less effective than other existing technologies in delivering government services.
The DTA received $700,000 in reallocated funding in this year’s federal budget to research the benefits of using blockchain to help deliver government services, the maturity of the technology, the problems it may solve and the government’s readiness to adopt it.
It has been working with a number of government agencies to develop prototypes for the use of blockchain to deliver services, including with the Department of Human Services for welfare payments and the Department of Home Affairs for cargo settlement.
But DTA chief digital officer Peter Alexander told a Senate estimates hearing on Tuesday morning that the technology is yet to prove its worth.
“Our position today, and this is an early write-up, is that blockchain is an interesting technology that would be well worth being observed, but without standardisation and a lot more work, for every use of blockchain that you would consider today there is a better technology,” Mr Alexander told the hearing.
“It’s an interesting technology but it’s early on in the development. It’s at the top of a hype cycle. A lot of the engagement [with the agencies] is comparing blockchain against existing technologies,” he said.
“We’re not saying that blockchain doesn’t have potential but today, without standardisation, there is the challenge of blockchain becoming a little fragmented. When we get to the standardised blockchain then the opportunities for it will grow.”
The DTA has focused its project on the potential application of blockchain in delivering Centrelink payments and securely recording transactions, with an aim to have a working prototype by the end of the financial year.
But difficulties have emerged with the anonymous nature of blockchain, Mr Alexander said.
“Generally speaking when the government is engaging with someone, we want to have a trusted relationship with them. We want to know who they are and give them a personalised service,” he said.
“Blockchain is good for low trust engagement – you don’t know who you’re dealing with but have a series of ledgers that can give some validation and support.”
And it’s mostly large tech companies that are driving the hype for blockchain, rather than governments or users, Mr Alexander said.
“It would be fair to say that a lot of the big vendors are pushing blockchain very hard and internationally most of the hype around blockchain is coming from vendors and companies, not from governments and users and deliverers of services,” he said.
“The Australian government is at a pretty similar state to most progressive governments looking at blockchain and trying to understand it.”
Government agencies have been very responsive and eager to investigate the potential of blockchain, he said, but knowledge and skills have varied greatly.
“Every agency has been very engage – we’ve had engagement with lots of agencies. The level of maturity is growing and it is where you would expect it to be with a technology like blockchain,” Mr Alexander said.
“They’ve got some people in agencies who are very mature with blockchain and others who when you talk about blockchain they think about cryptocurrency. It does vary across entities, and each of those organisations have capability centres of people who understand blockchain well,” he said.
The funding for the blockchain project was delivered at the personal request of Mr Turnbull, it was revealed during a senate estimates hearing earlier this year.
“The Prime Minister in fact wrote to our minister and asked us to have a look at blockchain, which evolved into this piece of work. This came about from a number of conversations with ministers and officers that a number of agencies had commenced looking at blockchain,” Mr Alexander said in May.
The DTA has said that the $700,000 in funding has gone entirely towards the staff members working on the project.
“We actually costed that with the application of the team staff, and we’re absorbing that funding. We were doing some work on it, we have a team that will do that and we costed the staff effort,” Mr Alexander said.