The tiny Pacific Island nation of Tuvalu is planning to go from having no online banking and only one ATM to using blockchain technology.
Aerial view of Amatuku island in Tuvalu. Photo: ©UNDP Tuvalu/Aurélia Rusek
Tuvalu's government aims to become the world's first paperless society, using blockchain technology to create a national digital ledger.
This would mean all of Tuvalu's data - be it legislative, executive, judicial or financial - would be stored online using Bitcoin Satoshi Vision's (BSV) public ledger.
It also wants to turn its cash economy into one using some form of digital currency.
In a nutshell, a blockchain is a digital ledger of transactions shared by a network of computers.
Any input or change to the blockchain was traceable to its source and recorded by all computers on the network.
In theory this made it near impossible to hack or cheat and rendered any data stored on it immutable.
Tuvalu's Minister for Justice, Communications and Foreign Affairs, Simon Kofe, said this made the technology perfect for something like a national registry.
"The vision is really to explore what is out there that could really give Tuvalu an advantage or at least close the gap with other countries," Kofe said.
Tuvalu seafront, less than 13,000 people live on the Pacific Island country's nine islands. Photo: Supplied
There are less than 13,000 people living on Tuvalu's nine atoll islands.
The country had only one bank and no credit card facilities.
Kofe said Tuvalu's small size, its isolation and vulnerability to climate change presented huge developmental challenges.
But he believed technology could level the playing field.
"The benefits that people will see is that they will have greater access, work will be more efficient…there's a lot of things that we can do, and it is going to impact the people in a very positive way," he said.
The runway at the airport in Funafuti, Tuvalu. With only three flights a week, the runway doubles as the small atoll's main recreation area. Photo: RNZ / Jamie Tahana
Auckland lawyer Campbell Pentney - an expert on blockchain and cryptocurrency - said Tuvalu's proposed digital transformation jumped a whole heap of technological solutions.
"We already store documents online using databases and typical computers. So there is an argument as to why would you need the blockchain to actually store these?" Pentney said.
On the other hand, Pentney said he understood why Tuvalu was interested in the technology.
"Effectively the blockchain records cannot be deleted. So that is the argument for having information on a blockchain where there is no location of it. It is sort of in the cloud or on the blockchain and it is there for eternity," Pentney said.
Community consultations on the ambitious project were well underway and were scheduled to conclude in April.
Then the Tuvalu government and its partners nChain, Faiā and Elas would define its scope and cost and look to start implementation.
nChain Director of Commercial and Strategy, Simit Naik, said learning about the needs of the Tuvaluan community was an important first step.
"We have been doing interviews with citizens from across all the different islands, taking and understanding the drivers - what people find difficult," Naik said.
He said one of the biggest issues raised by Tuvaluans was the difficulty of accessing cash across Tuvalu's nine island groups.
Naik said whatever the end-product, it was important it improved the lives of Tuvaluans.
"We are, alongside our partners Faiā and Elas, all focussed on ensuring that we deliver solutions that not just meets the demands of the government but also meets the demands of individuals, citizens."
At this stage Tuvalu was not leaning towards Bitcoin or any of the other readily available cryptocurrency options.
It seemed more interested in creating a digital currency of its own to enable citizens to access government services and for trading within the Tuvaluan economy.
Tuvalu's Minister of Justice, Communication and Foreign Affairs Hon. Simon Kofe. Photo: Tuvalu Government Media
Kofe said for Tuvalu the digital transformation project was not just about modernising - it was about survival.
"You know Tuvalu is facing this climate change and sea-level rise…The mobility of this, putting all of our data on a blockchain secures it and we can basically operate from anywhere and that is essentially the idea behind it," said Kofe.
But there was still a lot of controversy surrounding blockchain and cryptocurrency.
Those opposed to the technology alleged its circumvention of traditional banking systems made it easy game for criminal and terrorist organisations.
And even more neutral parties had security concerns and questioned whether it could be properly regulated.
However, Pentney said the traceability of data on a block chain made it difficult to hide criminal activity.
"It would probably be quite dangerous or foolhardy to use Bitcoin to be able to transact in criminal activities," Pentney said.
"There are other coins called privacy coins and they are designed to mask the transaction history and they are even more controversial and encountering all sorts of regulatory headwinds.
"So as long as you are outside the privacy coin network, I think that the claims that Bitcoin is used predominantly for criminal purposes is very much overblown," he said.
As to Tuvalu's proposed digital transformation, Pentney said someone must be first. Simon Kofe said who better than Tuvalu?
"Because Tuvalu is small and we are able to implement new technologies quite quickly on a national level and that could be a prototype a pattern for other countries to also follow suit," said Kofe.
But was this all feasible? On the technical side, Naik said while the scale of the project was large, they were not actually creating any new technology but rather making the most of existing blockchain infrastructure.
The most interesting challenge he anticipated was linking Tuvalu's visionary new digital economy to the rest of the world's.
On the financial side, Kofe said Tuvalu was funding this "discovery phase" itself but he said it would consider other options once the cost of the project was fully determined.
Tuvalu is one of the countries most vulnerable to the negative impacts of climate change. Photo: Supplied
One possibility that had been proposed was leveraging funding through the renewal of the rights to Tuvalu's lucrative internet domain name ".tv" which was extremely popular among internet streaming sites like Twitch.
The rights for its distribution, currently held by American company Verisign, expired this year.
But that was a whole new story in itself.
"Technology is simply a tool. It is a tool that can be used for the good and it can also be used in a negative way to impact people," Kofe said.
"But we are hoping that what we are doing here is positive, it is something that is going to improve life for the ordinary Tuvaluan."
