October 12, 2016

The New Public Policymaking Frontier Is Blockchain

Information and Data Imagery

A primer

Good government requires good records. A school, police force, utility, tax collection, army, or agency — none operates without ledgers, spreadsheets of rows and columns. Securing “life and liberty” could be brand language for keeping and enforcing records.

Efficient markets require good records, too. A single lightbulb engages hundreds of ledgers: the original glass and raw material inventory, the safety stamp on the production line, the payroll of the handlers, the arrival time of the shipping truck, the stock at the hardware store, the family tab the bulb is charged on, the sales tax, the electricity meter activated when the bulb flicks on; just to name a few. You see only light, but in computers and file cabinets from the factory floor to the hardware store, records are kept.

And that is just a lightbulb. Imagine a cellphone or an election. Aware or not, we live among trillions of ledgers.

Many exciting new technologies may shape the next century. Startups in augmented and virtual reality, artificial intelligence and machine learning, on-demand and geolocation applications are already recasting human potential. Meanwhile, we are navigating trenches of the deep unexplored sea and touching down on distant planets.

But — it now seems overwhelmingly likely — the next technological epoch will be something much simpler. It will not recast our place within or beyond Earth, but it will transform one of our most basic, everyday tasks: how we keep records. 

That technology is blockchain.

Overview of the technology

A Google search or our past coverage will give you a deeper understanding of blockchain. Simply put, it is a way to keep track of things. More specifically, blockchain is software connecting geographically distributed computer databases where we store records. Records of payments. Records of obligations. Records of rights. Records of certifications. Records of ownership.

Connecting databases has a basic but profound innovation: one record. Sectors, industries, and nations encounter daily the consequences of multiple conflicting records. Books not balancing, credentials not “checking out,” votes not adding up. Such disputes are costly; worse they are bottlenecks denying progress.

Advancements in computing power, cryptography, and Internet penetration have given blockchain promise, resilience to realize its original vision. We are not there yet — scalability, security, not to mention cooperation of firms, governments, and private citizens must be sorted out.

But discounting blockchain for these shortcomings is like ignoring the Internet in 1993 because a browser took too long to load on a dial-up landline. The tech will be resolved.

And maybe sooner than later. This year alone, $1.1B in venture and strategic capital has been deployed towards blockchain. More than 1,000 startups across nearly every industrialized country are working on blockchain efforts in education, retail, media, governance, financial services, and information technology.

Over 40 of the world’s largest banks have formed the R3 consortium to explore blockchain. Twenty-five hundred blockchain patents have been filed. Over 90 central banks are evaluating it. Over 90 corporations have launched initiatives. Amazon is developing blockchain as a service. Sony Global Education is too. Hallmark brands and unheard of startups are fast at work in a quiet frenzy like the emerging moments of the World Wide Web.

For this audience of the forward thinking in government and others with an interest in public-sector innovation, blockchain is particularly important. It is a new frontier in policymaking, like aerospace or the Internet, for which we have no precedent, no courses, no analogs, no articles, no common law or statutes. Right now, blockchain is the Wild West, and while some governments are paying attention, those that are not better start.

To illustrate blockchain’s potential, I’ll explore a policy area where it could be particularly helpful: music copyrights.

A use case for government: music copyrights

Streaming a song on Spotify, Apple Music, SoundCloud is nice and simple for a music fan, a simple click of a button. But on the backend is a rights management nightmare.

Today, the ownership of a song can be sold like any asset: in percentages. It is not unheard of, for example, for a music rights management company to own 7 percent of a single song on an album.

We have this model because, at least in the United States, we rally behind a historical commitment to creators and authors, a tradition we inherited from British law. In 1710, British parliament vowed to protect authors by recognizing their workings as property. In the United States, we wrote in our Constitution a clause granting creators “the exclusive Right to their respective Writings and Discoveries.”

What the revolution-era government did not anticipate is the complexity that these provisions would cause. Over time, creators began selling their creative rights like shares of stock. This allowed a body of work or a single song to have near infinite permutations of rights. Record keeping for copyrights became very, very complex. Just ask the Supreme Court.

In its recent report on Copyright and the Music Marketplace, the United States Copyright Office acknowledged that, while the United States has “the most innovative and influential music culture in the world,” there is “widespread perception that our licensing system is broken.”

Why is it broken? Because music consumption is globally distributed but locally measured. A label in Berlin keeps their roster in Excel, a digital service provider in London monitors song streams in their own database, and a government agency in Washington hosts a separate repository of copyrights. Anything affecting any one of those databases — a song stream, a lead singer leaving the band, a viral YouTube cover — requires involved parties to notify each other. And that does not always happen.

Blockchain, as a distributed ledger, eliminates the need to notify. Any transaction, any change to the ledger is updated instantly, transparently, indisputably, and universally. A music blockchain would reduce the entangled global web of music rights to the smartphone in your pocket.

And there is already momentum. Nick Mason, drummer for Pink Floyd, has stated that blockchain may be the technology that transforms the music industry. The Open Music Initiative, led by a collective at Berklee School of Music, M.I.T, and IDEO, may be trailblazing the first industry-wide application of a blockchain-supported database for copyright management.

For those in government with an entrepreneurial mindset, a willingness to try things different, blockchain is a massive opportunity. And not just for practical reasons — like reduced costs in legal proceedings — but because blockchain could improve government performance in one of its original tasks, at least in the United States: protecting the intellectual property of its creative class. Not only musicians, but filmmakers, artists, scientists, and inventors too. People making something from nothing.  

As Pink Floyd’s Mason said, “If blockchain technology is going to be the future, we need to dig in and make it happen.”

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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