When Bill Gates attended a small conference about an unknown entity called the World Wide Web, in 1995, he was one of the first to realize this could be big. He returned to Microsoft headquarters with gargantuan plans for using this thing called the Internet for disrupting society and business. Back then, most governments were slow to recognize cloud computing. They found it indecipherable, among other issues. Twenty-three years later, Blockchain technology appeals to governments largely because of its interoperability and reduced cost outcomes.
What is blockchain?
"When you actually look at it, one of the things that you'll realize is [blockchain] is actually not technologically that hard to understand," said Jose Arrieta, deputy assistant secretary for procurement and acquisition at the Department of Health and Human Services. "It's just a 100 percent paradigm shift in the way that business is done, and that is what's so hard to understand."
Bockchain is one humongous general ledger. “Think of an accounts payable or accounts receivable ledger,” Mark White, chief technologist at Deloitte Consulting, told Federal Drive, “Think of perhaps a non-financial ledger like a list of land records or a list of professional licenses.”
Think of a ledger streched between hundreds and thousands of computers that is unhackable, invulnerable, resilient to natural disaster, crash, or the Apocalypse.
That’s why local, regional and national agencies use the blockchain, to manage and maintain records like wedding certificates, veterans’ benefits, business licensing, property transfers, HIPAA-protected health data, criminal activity, and even tax audits. Each individual, group or agency has its own copy of the digital data that is replicated on each of the computers on the p2p network. There is no need for a notary, since all digital documents come with their own cryptographic signature/timestamp to validate accuracy.
Blockchain is different from standard centralized systems, in that governments can store an inordinate amount of data on the ledger and keep on storing with no imposed limit. There’s no shutdown or collapse, since if there were thousands of other systems would simultaneously crash - and that would be impossible. The digital documents are permanently encoded on the most confidential system possible. And the blockchain accomplishes the security that government touts but has yet to deliver.
In 2015, for instance, hackers obtained personal details, Social Security numbers, fingerprints, employment history, and financial information of 21.5 million individuals from the Obama administration. That same year, there were more than 780 data security breaches, according to the ITRC Data Breach Reports, with govenment constituting 8.1% of the breaches. In 2016, hackers logged an uptick of 38%, and by 2017 cyberattacks happened at double the rate of the year before. Hackmageddon recorded dozens of cyberattacks each month. Blockchain encryption methods are never foolproof but the blockchain has yet to be hacked.
Governments use blockchain for three situations:
Blockchain technology is the perfect communication channel for national protection and for investigating identities.
- In 2016, the Department of Homeland Security awarded $199,000 for a blockchain contract to “Prove Integrity of Captured Data From Border Devices”.
- The Department of Defense is working to create a system where individual parts and products cross a p2p network and are, thereby, protected from cyber attacks.
Government encourages its contractors to trade with them by giving them access to the benefits of the blockchain.
- The SAP Leonardo innovation system with its early-stage blockchain capabilities and its blockchain co-innovation program “which aims to provide an opportunity for participants to explore the applications of blockchain technologies.”
- The NoSQL (or more scalable and efficient) MongoDB platform that supports various commercial blockchain applications and is widely used by the U.S. federal government and by the General Services Administration (GSA) to automate and speed up contracts review.
The blockchain could be the conduit for improving citizens trust for government. Today, many of our systems are under attack. It’s been said the Russians have tampered with the voting system, the FBI distorted reports, mass media contorts the truth. With America’s current Administration it’s hard to know whom to believe. Blockchain could straighten that out, with programmers encoding and timestamping important documents, such as votes, into its ledger. Documents on the ledger can only be hacked by someone breaching each of the hundreds of thousands of computers on the chain. The blockchain, therefore, is the ultimate witness against conspiracy theories.
Other use cases:
- The Food & Drug Administration is exploring the possibility of using the blockchain to exchange influenza patient data at clinical sites administered by the United States Critical Illness and Injury Trials Group (USCIITG).
- The Office of Personnel Management is looking into leveraging blockchain technology for storing the data of all federal employees.
- The Department of the Treasury has developed a pilot project for a prototype blockchain to manage physical assets (such as computers and cell phones).
- The US state of Delaware is piloting a blockchain-based corporate registry system, while New York, Illinois, and Texas have started testing or piloting their own decentralized platforms.
Additionally, governments in more than a dozen countries - including Canada, Brazil, Australia, China, India, Switzerland, Denmark, Russia, and the UK - have either announced, are testing, or have implemented blockchain-based applications for internal use. According to Deloitte, the 10 most active public sector use cases are: digital currency/ payments, land registration, voting (for elections), identity management, supply chain traceability, health care, voting (by proxy), corporate registration, taxation, and entitlements management.
The blockchain has its own issues. For one, if everyone has access to the blockchain, who owns it and who owns the data? There’s also the debate about payment and budget responsibilities and the wrangle about how to regulate it.
That’s precisely why Congress recently established a Blockchain Caucus “to see how blockchain technology can improve government services.”
Blockchain is less colorful and less dramatic than internet was in the '90s. It is a more behind-the-scenes technology that evolves and develops in piecemeal stages.
At the same time, it is too early to determine exactly how blockchain will change the world. But change the world it will - and governments are its early adopters.