The blockchain is here. Now what?
The internet is not about about routing bits its about routing money. -David Clark
Bitcoin is routing money, is it also something that can route bits? -Andy Lipman.
The blockchain, the technology that drives Bitcoin, is no longer a future technology, it is here, now. Blockchain technology will change the way cities interact with their citizens and how cities provide services.
This article is about blockchain, not Bitcoin. The blockchain is what allows Bitcoin to function, allows it to “route money.” There are many very good resources for explain the difference between the two so I won’t elaborate here. The blockchain is a distributed ledger technology and financial firms and institutions see the technology as a way to “…radically simplify and speed-up post-trade processing.”[1] The Australian Stock Exchange, ASX, recently hired the firm Digital Asset to develop a “…blockchain replacement for its entire clearing and settlement system, with full production likely to proceed next year.[2]” The financial services company The Depository Trust and Clearing Corporation (DTCC), the firm that many blockchain enthusiasts feel is most at risk for disruption by the technology, has thus far embraced the technology. DTCC concludes that, “a mature, supported, integrated distributed ledger technology has the potential to help improve a number of existing financial market infrastructure limitations.” [3] The blockchain is embraced by financial firms because it is very good at routing money.
Routing money is something cites need to do also, and need to do well. Certainly, cities will benefit from routing money in this way but using blockchain to route money is not something cites should focus on yet. The financial industry has the money and the need to drive that innovation forward. But what’s next? Blockchain has the potential to do more than just route money. Right now, innovators and startups are devising ways to expand the blockchain technology so that other industries can take advantage of the security and cost savings the technology promises. Just like the early internet no one is sure yet what the new system will look like and what will be the standard. No one is sure yet how the blockchain will route bits, which is what is essential for the next step.
City agencies and officials should start looking at blockchain now and get comfortable with how the technology works. Just as with the early internet blockchain and cryptographic technology can be confusing but, just like the early internet, a firm grasp of the underlying principles can pay dividends. Cities who were early adopters of the anti-crime technology CompStat, which is at its core just a database technology, gained significant benefits from the system. Blockchain will prove to be very similar and cities who can understand the technology will be able to push its development forward in a way which is most beneficial to them and their citizens.
Works Cited
[1] Capps, M. (2016, November 16). bitcoinmagazine.com/articles/. Retrieved from Bitcoinmagazine.com: https://sec-panelists-on-astonishing-but-not-very-sexy-blockchain-achieving-network-effect-will-produce-winners-1479316357
[2] Digital Asset. (2016, January 21). Digital Asset, Media. Retrieved from Digital Asset: https://digitalasset.com/static/documents/PRESS_RELEASE_ASX_Selects_Digital_Asset_To_Develop_Distributed_Ledger_Solutions_For_The_Australian_Equity_Market.pdf
[3] DTCC. (2016). Embracing Disruption. Tapping the Potential of Distributed Ledgers to Improve the Post-Trade Landscape. New York: DTCC.
[4] Wyman, O. (2016). CIO Explainer: What Is Blockchain? CIO Journal. Wall Street Jounral, New York, New York.
