Blockchain To Run Welfare Show, Finland May Set Example

Finland has recently started an unprecedented social experiment that will be watched around the world amid gathering interest in the idea of a universal basic income.

It has become the first country in Europe to start paying an unconditional monthly sum to its unemployed citizens. During the next two years, 2,000 unemployed Finns, aged 25 to 58, will receive a guaranteed sum of 560 euros. The money will replace the social benefits they have been receiving so far and will be paid even if they find work.

Kela, Finland’s social security authority, says that the project is aimed at reducing poverty and unemployment. At the same time, it is a perfect opportunity to explore ways to reduce bureaucracy and streamline the complicated social security systems and processes.

Technology is significant in Finland. There are numerous examples where the country stayed ahead of the game and wowed the global community with innovative solutions. Perhaps we will see Finland become a pioneer in the application of Blockchain to deal with state bureaucracy.

Cointelegraph spoke with prominent industry experts to receive their opinion on the chances of Blockchain to run the welfare system one day.

Blockchain means transparency

Blockchain’s transparency is often seen as one of its core values. In the digital world, transparency issues have come to the fore. At the moment, changes are mostly taking place in small companies and businesses. Seeking to gain more competitive advantages, they are opening up their systems for customers and partners using Blockchain as an efficient tool. Government institutions should aspire to be as transparent and trusted as possible.

So why not to play around with Blockchain to upgrade cumbersome systems, starting with a social security system, and more precisely with a universal basic income scheme?

Ukko Kumpulainen from UKKO employment service sees Blockchain as a huge opportunity for this kind of government institution. He says:

“It will give the necessary transparency to transfers but still hide the true identity of a person receiving a basic income. Combined with Ethereum, I see potential to automate most of the governmental tasks and decision making that comes with unemployment and other benefits.”

Keir Finlow-Bates, CEO at Chainfrog, is certain that there is no technical reason why the Blockchain system could not be used to distribute a universal basic income. In his opinion, there are two ways in which it could be applied. It could either be used as an accountancy ledger to record the issuance of the fiat currency, meaning that Blockchain is not used to store value, to provide transparency to all citizens, or it could be used to manage a cryptocurrency for the issuance of the universal basic income.

Cutting off middlemen

There is an opinion that Blockchain technology has the potential to make systems of benefits distribution more efficient, cheaper and secured against fraud. Finlow-Bates explains:

“As you could cut out the use of banks to store and transfer the currency generated, and possibly through the use of smart contracts automate the movement of the universal basic income sums, there is the potential of reducing costs, as it is always the case when you reduce middlemen and administrators.”

In his opinion, the fact that a public distributed ledger is inherently transparent adds to its value as an efficient tool used for managing a scheme. It would give citizens the opportunity to monitor the system for fraud and abuse.

However, it is still an open question as to who they would report fraud, if, for example, someone was registered twice.

Social security changes

Blockchain is evolving far beyond the payments industry and soon we will probably see it occupying the niche in social security systems. Mika Lammi, the head of IoT Business Development at Kouvola Innovation Oy, believes that there may be additional contexts to the mere distribution of the income which may necessitate Blockchain:

“There are examples of Blockchain enabled solutions in banking, one of the most brilliant being the Finnish solution to the payment cards used by the immigration services. This, however, was a different problem altogether – how to preserve anonymity and security from the various conflicting legal points of view.”

Lammi also refers to Estonia’s E-health record initiative as a very promising example of the right kind of problems Blockchain is good at resolving.

In his opinion, anything related to identity management and related information might be a good context for Blockchain. He believes that in the short and mid-term, it would enable various government functions to utilize a secure and trustless connection-based information architecture without making enormous overhauls in their core systems.

Therefore, the technology could offer a new method in, for example, managing massive pension data and distributing funds. He explains:

“This is a very long road to walk – on an idea level it seems to make immediate sense, but there is a vast and complex legacy system and architecture jungle which has to be mapped and navigated first, and that is the truly difficult task.”

Indeed, we have only just begun to reveal the potential of the technology, and challenges faced on this exciting journey are truly multidimensional - there is a lot of political and technological issues which slows the speed of change.

Perhaps it is fair to say that state authorities tend to be lacking competency, flexibility and creativity in finding innovative solutions for the safe and efficient delivery of services and benefits. Ukko Kumpulainen says:

“I see this as a huge technological and manual process which has evolved over a long time period. We see this also here at UKKO.fi where we do most of the stuff as automated as possible while most of the governmental processes still rely on manual, human-based decision making. Ethereum could be a much more efficient approach to handling huge data masses. Still, governments could rebuild these processes if there is enough will to do this and overcome political issues that might arise. I see that the system works now (at least somehow), so is it reasonable to rebuild this instead of trying to evolve it step by step? Should you fix your old car or replace it with a new one?”

The whole world is eager to see what happens next in the Finnish universal basic income trial. The findings along the way could shape social welfare policies around the globe, and who knows, maybe tech will find a way to run the welfare show soon?


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