State and Federal Blockchain Adoption
Government offices have often, rightly or wrongly, been accused of inefficient recordkeeping and slow processing times. Government entities have sought to combat these stereotypes by adopting new technology — such as web applications, databases and QR codes — with varying degrees of success. Most customer-facing entities now have a web or online interface.
The adoption of blockchain technology is a natural next step in this process. Since the blockchain can potentially enable paperless and tamper-proof records, it has many potential use cases in governance, including:
- Identity management
- Corporate recordkeeping
- Healthcare and insurance
- Tracking use and release of government funds
- Disbursement of funds and benefits to individuals, for example social security, Medicaid, Medicare, pensions, disability payments, and food stamps
- Revenue and taxation
- National security
There are several efforts underway at the state and federal levels to bring governance on to the blockchain. In this post, I will highlight a handful of these efforts.
In 2016, Delaware’s governor launched the Blockchain Initiative to promote blockchain and smart contract innovations and to welcome blockchain companies to Delaware.
Delaware has also partnered with Symbiont, a blockchain startup that focuses on smart contracts to store state archives on a distributed ledger, secured by cryptography.
Delaware has traditionally been a leader in providing institutions that promote business efficiency. Its corporation-friendly laws and speedy judicial system have resulted in over 50% of Fortune 500 companies being incorporated in the state, despite its population of fewer than a million people (ranking 45th out of 50 states).
Therefore, it is not surprising that Delaware is on the forefront of blockchain adoption. The Blockchain Initiative is primarily focused on smart contracts (digitally recorded and self-executing contracts that do not require intermediaries). Since smart contracts reduce transaction costs to nearly zero, settle within seconds, and have automatic and instantaneous dispute resolution mechanisms, a well-executed adoption of blockchain technology could cement Delaware’s lead as the jurisdiction of choice for corporations and contracting.
Illinois and several of its counties have formed an Illinois Blockchain Initiative. Last August, it partnered with blockchain company Evernym to provide ‘self-sovereign identity’ solutions.
Self-sovereign identity is the idea that people and organizations can store their identity data on personal devices, such as their phones. Then, the identity data can be shared with others and automatically validated without the use of an intermediary. (Think of it as similar to paying for a meal with Apple Pay, but without any need for Apple or Visa to validate the transactions). The idea is that identity verification would then be entirely under the control of the people or organization that is being identified.
The project therefore has the potential to provide tamper-proof identity records that could replace everything from your birth certificate to your school enrollment, and from your driver’s license to your credit card.
At birth, a government agency could use cryptography to sign identification characteristics, such as sex, date of birth, and legal name, creating ‘verifiable claims’. These claims would be stored on a distributed ledger, which would be encrypted and accessible only accessible to the identity holder. They could be updated by the identity user as required.
Service providers, governments and corporations could request as-needed access to parts of this identity, which the identity holder could choose to provide in a secured transaction as needed.
Self-sovereign identity solutions are still in their early stages, but they could one day allow people to have more control over their own identity information, while combating identity theft and fraud.
The Pentagon has several initiatives underway to explore the potential of blockchain technology to secure data and to prevent malicious behavior by bad actors, such as data theft and holding data for ransom. Bad actors have commonly been able to get into systems by exploring one weak link. For example, the point of entry for the Democratic National Committee hackers prior to the 2016 election was a single fake e-mail.
Rather than a weakness, blockchain technology turns the diffuse, ubiquitous nature of data, storing and encrypting an identical copy of all data on everybody’s computer. The encryption ensures that people can only see the data that pertains to them, and the distributed nature of the system ensures that no one weak point can be used to tamper with the data.
The Pentagon’s Defense Advanced Research Projects Agency (DARPA) has also reportedly been developing a blockchain-based messaging application for potential battlefield use. The idea is that blockchain-encrypted messages could be transmitted instantly and could not be intercepted by adversaries.
Federal agencies are also exploring the potential of ‘Homomorphic Encryption,’ a concept I recently wrote about. This is a new kind of encryption that allows for computations to be done on encrypted data without first having to decrypt the data. Using homomorphic encryption would allow for an encrypted comprehensive health profile on each person to exist and be updated with relevant information. Health care professions could access only the data they need, with the permission of the patient, without being able to access other, protected health information residing on the ledger.
The Food and Drug Administration and the Department of Health and Human Services have also collaborated to launch the Information Exchange and Data Transformation (INFORMED) incubator for tumor research, using open source solutions and blockchain technology.
Blockchain technology has a broad range of use cases in governance. At both the state and federal level, government entities are experimenting with blockchain technology for personal and corporate identity management, healthcare tracking, data protection, national security purposes, and other objectives. While several of these efforts are in early stages, innovative partnerships between public and private players can be expected to provide some mature solutions within the next few years.
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