How Blockchain Technology Can Help Our Government

ADAM GINSBURG: Last winter, the astronomical rise of Bitcoin, a type of cryptocurrency, forced the concept of the blockchain into popular discourse. While many did not know what ‘blockchain technology’ was, it was in vogue--a buzzword for tech bros and average Joes alike. In the hype, Goldman Sachs invested in it, celebrities endorsed it, and some companies even changed their entire mission for it.

Though Bitcoin’s subsequent plummet (it has fallen roughly 70% since its high) did subdue buzz surrounding cryptocurrency, the blockchain, Bitcoin’s underlying technology, still carries tremendous transformative potential. While many cite its possibilities in the business world (specifically when pertaining to banks and transactions) I believe it can serve an even more profound purpose: revolutionizing the way our government works.

Before I delve into specific use cases, however, I must answer an elemental question: what is  blockchain technology?

Blockchain is basically a decentralized open ledger that verifiably records transactions between two parties. While the ledger itself is public and viewable to anyone, the parties can remain anonymous and can transact directly with each other without requiring centralized third parties to authorize the transactions through the use of cryptography and network node. (A good place to learn more is in this New Yorker article)

In its infancy, blockchain technology was used in the realm of cryptocurrency to promote a libertarian view of a world in which centralized institutions like governments and banks became obsolete as people used cryptocurrency to transact directly with each other. Over time, recognition of its possible capabilities broadened, with many recognizing its potential in organizing supply chains, upholding contracts, detecting hackers, and protecting data, among other uses.

It might seem counterintuitive that government, arguably the most centralized institution known to man, would have any use for this decentralized technology. However, as evidenced by the the example of Estonia, the blockchain technology certainly has beneficial use cases, and our government would be wise to adopt it in some capacity.

Estonia has used blockchain technology to create a digital society where medical information is available to ambulances immediately, companies come from around the globe to build, voting can occur virtually, and--best of all--hacking is virtually impossible. Unlike in the U.S., where massive multinational corporations own and auction off the data of citizens, in Estonia citizens control much of their own data and can parcel it out when necessary.

Furthermore, because the use of the blockchain eliminates institutional redundancies (Estonia has a “‘once only’ policy, which dictates that no single piece of information should be entered twice”), it has the potential to reduce government waste and save billions of dollars. In fact, Estonia estimated that it saved about 2% off of its annual budget by switching to X-Road (the name of its blockchain program), enough to completely cover the cost of its dues to NATO.

Of course, it is important to note that Estonia has gone all-in on this technology, even going so far as to confer digital citizenship on some businessmen who use their platform. To switch completely to a level of usage and trust on par with Estonia’s would incur prohibitively high transaction costs and require a reimagining of many of our central institutions--both barriers that make total adoption impossible.

However, we should still explore more limited applications of blockchain technology.

Take the grid, for example. Threats to our national grid are a question of national survival, and cyberattacks on power providers have the potential to cause trillions of dollars in damage and massive chaos. Iranian, Russian, and Chinese actors have all breached our grid, which, despite its outsized importance to maintaining our nation’s stability, is still evidently vulnerable.

That’s where blockchain could come in. Because nodes in a blockchain system are decentralized and cannot provide internal access to other ports of entry in the network, hacking into one part of the network does not ensure that a nefarious actor would have the ability to take the entire system down.

Furthermore, in a blockchain-based system, when one element is hacked or goes missing, because the information exists on a transparent ledger, the breach is immediately noticeable and, therefore, identifiable. In theory, we could immediately recognize if the system was breached and address the concern promptly.

This same logic could be used to protect sensitive information in databases (which, over the past decade, we have realized is vulnerable to hackers and leakers) or to limit the siphoning off of government funds, for instance. In reality, there are countless other potential use cases, of which lack of imagination is the major barrier to conception.

While we would need institutional buy-in to adopt this technology on a mass scale, because of its transparency, decentralized nature, and relative security, our government should not hesitate to begin exploring this option now. Sure, there this technology will face growing pains, but in an ever-changing and increasingly fractured world, blockchain technology can address some of our country’s biggest threats and, on a larger scale, reshape the relationship that citizens have with our government.

Max Magid