Unchaining Innovation: Could Bitcoin’s Underlying Tech be a Powerful Tool for Government?

The technology, known as the blockchain, is a sort of infinite running ledger, keeping exact track of every bitcoin transaction -- and it may have far-reaching impacts in government.

by / July 10, 2015

Money becomes more abstract over time. Instead of trading apples for chickens, we start trading apples for beads. Beads (pretty and useful) eventually are replaced by gold (still pretty, less useful), which is supplanted in turn by paper money. Paper money is a vast abstraction over chickens, but in time people come to accept it. It isn’t “real” in any meaningful sense, but it gets the job done, and it can be handed back and forth with little fanfare.

Now we have reached the next level of abstraction, in the form of digital money. We don’t mean gold-backed paper money merely funneled along through PayPal or Amazon, just another credit card transaction. We mean electronic currency: “Money” that exists purely in the digital space and can be traded directly between individuals. Let’s start racking up the worries. Data can be copied, right? So couldn’t somebody just “mint” more money? And who will keep track of all those financial comings and goings? Every layer of abstraction is met with similar concerns.

Enter bitcoin, a digital currency scheme that seems to satisfy most of the worries, with encryption that prevents it from simply being copied ad infinitum. Even more interesting to some, bitcoin’s underlying technology takes care of the who’s-in-charge dilemma. Known as the blockchain, bitcoin’s driving force is a sort of infinite running ledger, keeping exact track of every bitcoin transaction.

And it could be a powerful new tool for government.

Keeping a ledger is easy. Early man cut notches in bone to count the moons. Sumerians struck cuneiform writing into clay tablets to record grain and livestock inventories 5,000 years ago. The ancient Egyptians scribbled virtually everything on papyrus. Modern banks track billions of transactions among tens of millions of users daily. So what’s the problem?

Typically a ledger rests with a single bean counter, and while PayPal and a few others have nominated themselves as the Internet’s financial hub, there’s really no central online bank yet. Still, digital currency requires accountability, some means of ensuring accuracy in the absence of that trusted third party. Electronic records also must be tamper-proof.

The blockchain presents the latest iteration in record-keeping, one custom-tailored for the needs of a digital transaction. It’s decentralized: Everyone who participates in the system is plugged in, so there’s no vulnerable hub, no single keeper of the keys. It’s transparent for all to see. And it is said to be inviolable, a chronological record that cannot be altered. If anyone did try to tweak it, well, everyone else would know.

And now we come to the really fun part. Here’s this decentralized, transparent, tamper-resistant means of keeping records. In the realm of pure speculation, let us ask: What can government do with this?

Starting Point

Experts in the bitcoin (and therefore blockchain) universe say the low-hanging fruit for government ought to be obvious. First up is electronic voting. Government needs an accurate record of how many people voted and when. Why not hand out digital tokens, each worth one vote and each tied to the blockchain for accuracy? If it is transparent, anyone can see how many people actually pulled the lever in Ward 6.

“We are talking about radical transparency,” said Perianne Boring, president and founder of the Chamber of Digital Commerce, a trade association focused on promoting digital assets to policymakers. “Anyone can look into the blockchain and look into every transaction that ever happened on the blockchain. And you can use it for any type of provable fact.”

Another provable fact would fall under the heading of land records, a flavor of government ledger-keeping that would benefit from a digital upgrade. Land records are kept over very long periods of time, exponentially expanding the possibility of error. They must be sufficiently visible so that anyone with an interest in a parcel can track ownership easily and accurately.

The blockchain satisfies all this, while potentially lowering operating costs for the municipality. “Keeping these records involves hiring people, training these people, auditing these people, paying for the building, paying for pensions. So blockchain simply removes a lot of that inefficiency, along with a lot of the busywork,” said Aaron Lasher, a board member of the iPhone bitcoin wallet, breadwallet.

If paring down on traditional record-keeping really can trim costs, there’s a temptation to look even further afield. Voting and land records are the blockchain uses that come most readily to mind, but proponents say the technology’s potential could go much further than that.

Tracking Services

Take, for instance, the human services aspect of government. An analyst at Blue Hill Research, James Haight foresees blockchain as a means to ensure validity in social service programs like food stamps and welfare checks. A blockchain record would guarantee that recipients received their allotment, while potentially helping government to track when and even where those funds were used. Such transparency could help ensure the system’s

Doing Government Better

Experts predict blockchain could be a game-changer for:

  • Contracts
  • Electronic voting
  • Health care
  • Land use
  • Motor vehicles
  • Patents
  • Purchasing
  • Social services
  • Taxes
integrity.

One could follow the possibility a step further. Rather than dole out cash, cities and states could distribute benefits in the form of “civic tokens,” online cryptocurrencies similar to bitcoin. This could make it possible to insist on verification of identity prior to use, with blockchain keeping track of the transaction, said Melanie Swan, an affiliate scholar at the Institute for Ethics and Emerging Technologies and principal of the MS Futures Group.

While the management of human services benefits might be a boon to civic leaders, it’s also a bit abstract. Perhaps something more concrete is in order?

Patent … Verified

Now consider patents and intellectual property. It’s a natural fit, “if a court can be convinced that information in the blockchain is permanent and unforgeable,” said Shaun Appelbaum, special projects director at law firm Mearkle Trueblood Adam, which specializes in cryptocurrency and bitcoin. The blockchain would also show who got there first, resolving any question about patent precedence.

Doesn’t government already record (and thereby protect) intellectual property filings? Absolutely. But as with all these hypotheticals, the question is not whether the Egyptians are still writing on papyrus but whether we can use blockchain technology to do it better.

One thing we could do better is file taxes. The blockchain is decentralized — it exists among all users. In principle this means that the same record could be shared between employer and employee. This means the W-2 as recorded by the employer and the income as described by the taxpayer could co-exist in a shared space and be reconcilable by a means more efficient than ever tried before.

Nifty.

This notion of interoperability across the blockchain could have ramifications throughout government. “So many different government systems could interact so much more cohesively,” Swan said.

Take an example from the often frustratingly complex and fragmented world of health care. Suppose the patient, insurance company, doctor and a government payer all had their financial records come together on a single ledger, visible to all, for any given transaction. The potential for transparency would be matched only by the opportunities for new levels of efficiency.

Swan offers another vision: Suppose motor vehicle departments could share a blockchain from state to state. There’d be a single record to verify and transfer vehicle ownership or to confirm a driver’s identity or status.

Who Are You?

This notion of identity verification is among the more intriguing visions of a governmental blockchain. Within the nature of the blockchain it is possible for a user to create a digital signature, one that cannot be spoofed or utilized by another user. Such a signature could be used to authenticate or witness documents, sign transactions and verify identity — all of which would leave a verifiable, demonstrable mark in the chain.

This has interesting implications for the public sector. Take for example the emergency management function. Blockchain “would give mobile phones and digital wallets the ability to store private keys, which can be used to prove the identities and attributes of first responders anywhere in the world with an Internet connection,” said Steven Sprague, blockchain expert and CEO of cybersecurity firm Rivetz.

When it comes to identity verification and skills assertion among rescuers, “the blockchain is an ideal solution, because it is very scalable and extremely hard to destroy,” Sprague said. “In the case of an attack, a government contractor with a list could easily be taken down, creating confusion. However, it is extremely hard to eliminate access to the blockchain as it is an Internet-scale resource. As long as one copy exists, the integrity of the network remains safe.”

Among the broad array of possibilities, it would be remiss to overlook a major function of government that could be helped by the blockchain: buying stuff.

Suppose a government wanted to acquire American-made police cars. “Right now, I don’t know where the rubber or the metal came from. It just looks like a car to me,” said Stephan Tual, chief communications officer at Ethereum, a Web publishing platform helping to drive bitcoin development. Imagine instead a future world in which, in order to sell to government, manufacturers would be required to keep blockchain logs of all their processes. “This would be a way to track each component at each stage through the production process,” Tual said.

In much the same way, blockchain could be used as a means to ensure that contracts were executed, as those doing business with the city could be required to mark milestones with their digital signatures. It would cut down on record-keeping expenses and help ensure accuracy.

What’s Next?

All of this is purely theoretical, but such is the nature of these things. In times of upheaval, speculation precedes actualization. Bitcoin advocates are eager to point out the parallels to past experience: This is like the early days of email or the Internet. We can’t even begin to guess where it might take us.

Naturally, skeptics take this to mean we should all be looking over our shoulders. While some view voting as a great test case for the blockchain, for example, others have just the opposite reaction.

“This is a bad idea,” Appelbaum said. “Anyone with sufficient funds could purchase participants’ voting tokens. Additionally, linking a participant’s digital wallet to their real-life identity would result in votes being made public.”

The only certainty in all this, so far as the public-sector technology community is concerned, is that whatever is going to happen will likely happen sooner than expected. Just as bitcoin blasted past the theoretical stage on its way to becoming a reality, the blockchain is too powerful a tool to be ignored for very long.
 

Adam Stone Contributing Writer

A seasoned journalist with 20+ years' experience, Adam Stone covers education, technology, government and the military, along with diverse other topics. His work has appeared in dozens of general and niche publications nationwide.