June 21, 2017

Blockchain: Top 10 Areas Ripe for Government Innovation

Information and Data Imagery

Blockchain is the new policymaking frontier — we said that in the fall. Today, it seems truer than ever.

China may soon have the first government-backed digital money. Dubai is building a “city on a blockchain.” The Republic of Georgia is now securing land titles on blockchain. Malta is on top of it too — the island country is exploring a national health registry built on blockchain.

Sure, this could all be hype. Any new technology that is off to the races faces hurdles first — and blockchain has many. Disputes around its development persist, for example.

But every once in a while, a technology comes along government just cannot ignore. Sometimes because it is dangerous (nuclear fission). But other times, because it is empowering (the internet).

Blockchain is one such innovative technology.

At this moment, instead of asking “how should we regulate blockchain” (which cannot reasonably be answered without better understanding still-unknown costs and benefits), we could ask another question: What are the big areas for government innovation with this technology?

Now may be the time to start white-boarding use cases.

In that spirit, here are 10 areas for government innovation (especially in the United States).

  1. Health care. A central problem in health-care reform is where to source the efficiencies that will drive down the fixed and variable costs of care. Deloitte has already published a white paper on how blockchain could support Health Information Exchanges.
  2. Voting. The latest general election brought significant attention to the operations of the United States electoral system. Could we have a system that supports remote voting and credentialing? NASDAQ has reported firms using blockchain for corporate proxy voting. Given the idiosyncrasies of state voting procedures, it might be a while before federal elections run on blockchain. But it seems only a matter of time before a pioneering local community attempts a blockchain-powered election.
  3. The Federal Budget. Each year, Congress exercises Article I, Section 9 of the Constitution and authorizes the US Treasury to allocate trillions of dollars (the FY2017 budget called for $3.3 trillion in receipts and $4.1 trillion in outlays, amounts that stacked in dollars bills would reach the Moon). The World Bank has long looked to ways to improve budget execution procedure in a cost-effective manner. Blockchain could be a way to ensure compliance and additional budgetary control.
  4. Tax Compliance. State and federal revenue agencies set regular targets for tax collection rates. PricewaterhouseCoopers is already exploring how blockchain could “reduce the administrative burden and collect tax at a lower cost, helping to narrow the tax gap.”
  5. Trade. With international trade agreements under fire (most notably, the Trans-Pacific Partnership), blockchain might reinvigorate cross-border trade. The World Economic Forum has argued “blockchain could restore trust in trade” by digitizing inventories, and giving more transparency to international supply chains and product provenance. IBM has been working on a blockchain-powered international supply chain management system for more than a year now.
  6. National Security. Blockchain might offer a way to strengthen national security initiatives. For example, the US Department of Homeland Security is exploring using blockchain to strengthen security at US ports of entry. Specifically, is is ensuring that cameras and other data-collection sources (which are frequently manipulated by bad actors) are un-hackable. Other government assets vulnerable to cyberattacks might also use blockchain for security. 
  7. Monetary Policy. Currently, monetary policy is conducted via the Federal Reserve’s setting of the federal funds rates. But the president of the Minneapolis Federal Reserve Bank has signaled the potential of blockchain in monetary policy.
  8. Contract Law. Next to digital currency, blockchain-powered multipart agreements, or “smart contracts,” have perhaps the most developer horsepower currently behind them. The state of Arizona just signed into law that “smart contracts may exist in commerce,” a big step towards public endorsement.
  9. Public Communications. The authenticity of published media has become a public-sector problem (some call this the “fake news epidemic”). Some startups are looking at how blockchain can battle fake news. A blockchain supported public communications system might provide credentialed, verifiable mediums to reassure the public that statements from government are — in fact — from government.
  10. Currency. Given that blockchain first came into the public limelight as the infrastructure for digital currency (most popularly, for Bitcoin), the potential for national currencies is an obvious place for innovation. Forbes has covered some of the European Commission and other governments’ steps towards blockchain-powered money.

As with any frontier, we cannot see what is over the mountains. Still — especially as policymakers — we should start thinking about what is beyond them if we want to be prepared for the day the blockchain world arrives. It seems to be coming.

Remember: government was an early adopter of the internet. We can dispute the probabilities of blockchain’s success. But the potential payoff is huge (these 10 areas give us that feeling). Blockchain might touch every aspect of life. So we must start to think about its implications for public policy — the ways to support, and empower, this frontier innovation.

The views expressed in the Government Innovators Network blog are those of the individual author(s) and do not necessarily reflect those of the Ash Center for Democratic Governance and Innovation, the John F. Kennedy School of Government, or of Harvard University.

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