Worldwide, more and more governments are considering the what, where, and how to apply blockchain as a database architecture. As of the end of 2016, approximately 24 governments and 80 of the world’s central banks were investing in the technology.
Blockchain is a distributed database architecture for which a record and verification of a transaction relies on multiple parties agreeing on the validity of that transaction, rather than relying on a single centralized authority. The technology represents a mathematical and computational mechanism to verify that an event (i.e., a transaction, an authentication, a vote, an activity, etc.) took place, effectively disintermediating traditional intermediaries.
While efforts to understand the blockchain, sometimes referred to as distributed ledger technology, are well underway in the United Kingdom, Germany, Russia, China, Australia, the United States, Canada, and, perhaps most notably, Estonia, a few government-defined efforts stand out for rapid movement from understanding the concept to piloting and experimentation.
Dubai’s Blockchain Strategy Pillars and Goals
One such effort has emerged not from a nation-state, but from a city. A new blockchain strategy recently emerged from Dubai as a result of collaboration between the Dubai Future Foundation, the Smart Dubai Office, and His Highness Sheikh Hamdan. To guide experimentation, the strategy is divided into three pillars:
- Government Efficiency: Enabling a paperless digital layer for all city transactions, and supporting all private and public sector Smart Dubai initiatives
- Industry Creation: Enabling the creation of new businesses across numerous industries, including banking, healthcare, transportation, energy, real estate, and beyond
- International Leadership: Opening up the country’s blockchain platform to foreign entities to enhance security, safety, and convenience
The city has declared lofty goals: expressing its interest to become a “hub for blockchain” and, in the spring of 2016, assembling a Global Blockchain Council. The council has more than 45 private and public sector entities (banks, enterprises, startups, and regulators). Perhaps most aggressively, Dubai aims to execute all government-related transactions on a blockchain within just 3 years (by 2020).
Significant Blockchain Initiatives Already Underway
But while anyone can publish a stated strategy (as a press release), what stands out about Dubai’s efforts are its myriad, but significant initiatives already underway. What follows is an overview of a few of such examples, which Dubai has said represents just a fraction of its goal of “35 proofs-of-concepts a year.”
- Government-Issued Documentation: Placing residential and business-related government-issued documentation or registration on blockchain is another area under experimentation. This pilot involves streamlining the identity verification process and teases significant cost savings for all, as Dubai residents generate roughly 100 million documents each year, including vehicle registrations, business registrations, wills, electricity, residency, and health documents, and beyond.
- Global Trade: In the initiative focused on trade processing, Dubai and IBM are working with a range of supply chain constituencies to develop a shared blockchain to transmit shipment, transportation, and logistics data, provide real-time status of goods, loads, freight, and transactions, and process trade finance more rapidly. Specifically, the pilot follows fruit as it is exported from India to Dubai by boat, made into juice in Dubai, and then exported to Spain by air.
- Trade Finance: To explore financial use cases, such as letters of credit issuance, companies like Emirates NBD Bank and Banco Santander are part of the collaborative effort to pilot the integrated transfer of goods, documentation, and funds using a distributed ledger.
- Health Records: United Arab Emirates (UAE) telecom du is also working with IBM and others to develop blockchain efforts associated with electronic health records, particularly exploring the areas of record sharing across institutions, identity access and authentication, and security.
- Physical Asset Management: The Dubai Multi Commodities Center (DMCC) is driving experimentation across across numerous areas involving physical asset management, such as title transfer, the diamond trade, and the digitization and authentication of Kimberly Process certificates, and IBM and du are also looking at the tracking of devices (related to trade, transportation, healthcare, smart cities, or otherwise).
- Loyalty Programs: Dubai is also working to boost its already high tourism by piloting loyalty programs using blockchain. The Dubai Points project aims to gamify loyalty point collection to incentivize tourists to engage with local businesses and attractions, while simultaneously building their own bank of points redeemable anywhere they want to go.
Most notable about these efforts is their diversity. Dubai’s Customs, Trade, and Dutech IT divisions’ primary partner for powering blockchain development has been with IBM and Hyperledger. Facilitating and coordinating these efforts across private and public sector organizations requires collaboration across dozens and dozens of global startups, not to mention local banks, international banks, ports, shipping companies, couriers, logistics companies, suppliers, telecoms, hospitals, retailers, and many others.
Another consequence of experimentation across so many use cases is the inevitable intersection such applications of blockchain will have with other emerging technologies. The trade, finance, and asset management pilots, for example, will use part of IBM’s Watson Internet of Things (IoT) platform to report and record device data to execute smart contracts. While many government bodies and organizations are working on finance and trade-related use cases, few are considering or applying blockchain to such a wide range of industry use cases.
Anticipated Benefits of Vast Experimentation Efforts
Dubai’s expectation is that cost savings and innovation benefits will more than justify the cost of experimentation. By digitizing paperwork alone, Dubai estimates that savings will result in approximately 5.5 billion dirhams (~$1.5 billion) per year, approximately 114 million tons in CO2 emissions, and a redistribution of 25.1 million hours of economic productivity.
Beyond financial justification, many (mostly Western) startups involved in the project point to Dubai’s general push to be an early mover, to innovate, to attract talent and entrepreneurship, and to augment industry credibility. The time is certainly ripe for experimentation in and leadership of a technology that inherently requires so many entities to work together to establish secure adoption at scale.