No, government doesn’t need a blockchain for everything

Ezra Goldschlager
Oct 6, 2017 · 8 min read

Blockchain mania is in full effect. Bitcoin introduced the world to the blockchain: a new technology for creating decentralized, disintermediated trust. For the first time, it was possible for users to have confidence in a public ledger that was maintained without the need for any parties to be trusted to act honestly. With this innovation came great optimism and unbridled enthusiasm — everything could be decentralized. Along with marketplaces, media, and history books, we could also use blockchain for courts and government administration!

Much of this enthusiasm and resulting innovation will mean genuine societal improvement. Yes, governments might get in the way, or might be slower to catch on than we might like, or the magnitude of the improvement might not live up to the promises. But, for example, the possibility of competition among currencies for the first time in human history is bound to do some good. Improving our ability to ensure food safety, and making it possible to create immutable sources of “truth” are undeniable goods that are well within blockchain’s grasp.

I don’t question the feasibility of most proposed blockchain uses (at least, before the problem of scalability emerges), but “should” doesn’t always follow “can.” Below, in the context of several government services that could be moved to the blockchain, I outline factors that affect the appropriateness of such moves. Factors that weigh against adoption of a blockchain are: when the government is the “natural publisher” of the data, when a central authority or other parties can be trusted to publish the data accurately, and when there is a single source of the data (or, if there are multiple sources, when some parties should have veto power over others). Factors weighing in favor of adoption of blockchain technology are when the presence of a central authority drains value from the system or adds inefficiency, and when there is per se value in decentralizing a particular service.

I found myself questioning the contours of blockchain’s “shoulds” after I was about to put pen to paper on a proposal to move public records of our nation’s (or world’s) statutes to the blockchain. The idea was to put the publishers of statutory compilations out of business, and to create a single go-to source of all law that’s currently in effect, by creating a blockchain-based repository of statutes. A single blockchain could hold all the world’s statutes, and could stay up to date as legislators create new laws, remove old ones, and patch others. Individual jurisdictions wouldn’t maintain their own websites, or publish their own collections of statutes, and publishers like West wouldn’t have a market for their privately-compiled electronic databases and hard-copy books (or, at least, they wouldn’t have as much of a market — they might still create value-added content like West’s annotated statutes).

My moment of clarity came when I began to think about the benefits of such a system. One of those benefits would be the “one stop shop” nature of the database. Someone who doesn’t want to pay for access to Westlaw or LexisNexis (or who is uncomfortable with private, paywalled databases of public information for principled reasons) would have an easier time finding a particular statute if all statutes were in one place. There would not be a need to first find a relevant public-domain web source of the law, and there wouldn’t be a concern about whether a particular database contained up-to-date information. A blockchain-based single source of information would eliminate the time cost of searching for an individual database and would eliminate the problem of trusting its correctness or currency.

But note what’s important here: it’s that jurisdictions commit to the central repository, and commit to keeping their statutes up to date within that repository. And that could just as easily be done with a non-blockchain system. A traditional database that requires special permissions for users who want to make updates to the database’s contents would work just as well. The key innovation of blockchain systems is that they allow databases to be updated by many players over time and remain truthful, without the need for a central authority to verify the veracity of updates or to restrict anyone’s ability to make updates in the first place. The benefits of blockchain evaporate when central authorities can be trusted without question and don’t introduce inefficiency into the process.

For statutory compilations, participation of central authorities doesn’t create inefficiency. The central authority in this case is the jurisdiction itself — perhaps an office within the legislature, tasked with updating the database when new laws are enacted or when changes are made. Jurisdictions are the “natural publishers” of statutory compilations — they are the originators of the data (the statutes themselves), and can publish that data without involving any third parties.

Further, statutes in a given jurisdiction only have a single source (the legislature itself). The only party that can legitimately update a jurisdiction’s laws is that jurisdiction’s legislative body. A different case exists when multiple (or, better yet, many) parties have a legitimate say in the state of the data. (Digital currencies fit that scenario: the “data” there is the information about each party’s balance — the number of Bitcoin, for example, that a particular address owns.) But when it’s just one party that has the right to say what’s “true” for a particular data set (for statutes, that “truth” at any moment is the most up-to-date versions of all laws), the very problem that blockchains were created to solve doesn’t exist: we don’t need a mechanism for trustless, distributed consensus when there is no role for potentially untrustworthy players at all. There is no reason to distrust the central authority in our statutory compilation scenario. Jurisdictions have no reason to publish inaccurate versions of laws. And in fact, they have good reason to publish accurate versions — courts won’t enforce laws that haven’t been effectively published.

Finally, decentralization is not a virtue per se in this realm. Sometimes, adding checks and balances through the dispersal of ultimate power away from a single authority is valued for philosophical reasons. But while there is room for a healthy diversity of philosophies about the virtues of decentralizing the power to make laws, the power to simply publish the laws that have been made doesn’t carry the same philosophical weight.

What about intellectual property registries? Would blockchain-izing the USPTO or WIPO databases inch us closer to a decentralized utopia? No — turning these databases into a blockchain (or two, separate blockchains) is feasible, but wouldn’t add much, if any, value.

I’ll stick to the USPTO database for this example — WIPO is no different. The USPTO is the natural publisher — they are the ones who grant and expire trademark registrations and patents, and so they are the first ones to know about necessary updates to the database. In fact, the USPTO is the only entity or party that ever should (i.e., has the legal right) to make those updates. When a single party says what goes, the signature benefit of the blockchain (decentralized, trustless consensus) doesn’t exist. Here too, decentralization is not a virtue per se. The analysis changes when the central authority isn’t fully trusted — e.g., in jurisdictions with actual or suspected corruption. In that case, decentralization does confer a benefit, both in actually maintaining the legitimacy of IP rights, and in creating a higher expectation of the legitimacy of IP rights, which in turn makes people more likely to invest in developing IP in the first place.

Even if it would be helpful to bring the WIPO and USPTO (and maybe other jurisdictions’ registries) under a single roof, so that a single search could query them all, this could be accomplished without a blockchain. A single, traditional (non-blockchain) database could exist, with permissions granted to each body to populate and update information about their own jurisdiction’s IP. Or, a third party could gather them all under one roof without a blockchain (Google is already on the road to this with Google Patents).

Sometimes, the information that goes into a database comes from multiple sources. EDGAR, for example, is a database of company public filings. The companies themselves author the filings, not the SEC itself. The Consumer Products Safety Commission’s is a hybrid — sometimes, it publishes its own reports and recall statements, and sometimes it publishes responses or other information that the companies themselves have submitted.

That isn’t, however, enough to call for EDGAR and to move to a blockchain. There is value to allowing the government agencies to act as gatekeepers; sometimes, for example, the CPSC might want to modify parts of companies’ statements. There will never be times when we want to privilege the companies over the CPSC itself — they should not be able to publish immutable data. When we want a certain party (or certain parties) to have more say than others in the state of the database, a traditional database is more suitable than a blockchain. Finally, there is no per se value of decentralization in these areas.

Things are different for databases of property (in this case, land) rights. There are as many parties with the legitimate need to update the database as there are buyers and sellers of land. Traditionally, buyers and sellers record deed changes by, in effect, asking government entities to update their records. This system, if moved to the blockchain, could be made more efficient by cutting out the central authority. Unlike with IP databases, there is no single natural publisher, because of the fact that changes to ownership are agreed upon by private parties. Unlike the USPTO, which grants a trademark and in so doing creates the need for an update to the database of active registrations, any land owner can create the need to update the database of land ownership by agreeing to and executing a sale of property.

Instead of a single authority recording and updating land ownership records, a blockchain system decentralizes the task, and allows updates to be made without a trusted, central authority. A blockchain could be particularly beneficial for jurisdictions without existing, efficient computer databases of land titles. And even more so when there’s concern about local authorities holding all of the power. Corruption can be sidestepped when the blockchain decentralizes the power to say who owns what.

And finally, there is per se value to decentralization with land-title registries. A blockchain title system would give new meaning to “ownership” — landowners would truly hold the keys to their land (together with lien-holders, of course, as part of a system requiring multiple signatures to transfer title), without the need to refer to an outside authority to validate their claims.

Instead of embracing blockchain technology for every application, we should be mindful of the factors that weigh for and against its adoption.

Image license information: The blocks component of the composite image accompanying this article is by Mark Fischer, and is used under the Creative Commons Attribution-Sharealike 2.0 Generic license. The composite image, by Ezra Goldschlager, is available under the (CC BY-SA 2.0) license.

Ezra Goldschlager

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Associate Professor of Law, University of La Verne College of Law

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