In April, the city of South Burlington, Vt., issued what is considered the first property deed using blockchain technology. The effort was little more than a pilot project that mostly involved the company which provides mobile and Web-based property transactions. But the transaction has been heralded as a first and a glimpse of government’s future in which information can be stored and exchanged by a network of computers, without a centralized host. Often referred to as decentralized ledger, blockchain makes it nearly impossible to alter or hack the data.
But was this a breakthrough moment as some have thought, or was it another example of what has become the latest in a string of tests and experiments using blockchain that has generated lots of hype but little in the way of practical, widely used applications? It’s not a trivial question. Blockchain advocates believe the technology will be the next big disrupter in business and government. Dissenters see blockchain as a solution in search of a problem that will generate little in the way of transformation.
Blockchain got its start in 2008 when a person named Satoshi Nakamoto wrote a white paper that described a peer-to-peer version of electronic cash known as bitcoin. In order for the digital, cryptocurrency to work, it needed a system of trust. That turned out to be blockchain, a process in which information about the currency can’t be altered thanks to its unique transparency using time stamps that record each transaction, all of which is stored securely on a decentralized network of computers.
“At its core, blockchain is an open, decentralized ledger that records transactions between two parties in a permanent way without needing third-party authentication,” explained Bernard Marr in a column
for Forbes.com. “This creates an extremely efficient process and one people predict will dramatically reduce the cost of transactions.”
Predictions about a technology that can make a wide range of transactions better, faster and cheaper, quickly caught the attention of industry, government and investors. In 2017, venture capital investments in blockchain startups reached $911 million, an 88 percent increase over 2016, according to Pitchfork
, a financial data company. Nearly 15 percent of financial institutions are using blockchain, according to Marr.
The public sector quickly latched on to the potential benefits of using blockchain in a variety of applications, resulting in a steady drumbeat of new projects. Start with the promise of doing things better, faster and cheaper. For government, “blockchain solutions could reduce redundancy, streamline processes, decrease audit burden, increase security and ensure data integrity,” according to a report
by Booz Allen Hamilton. For example, blockchain could provide a permanent audit trail that could lead to faster reconciliation of the trillions of federal dollars in intragovernmental transfers that take place each year.
But blockchain could also help governments build trust in citizens by creating verifiable land registries to resolve property disputes, and it could protect sensitive data by reducing single-point-of-failure risk, according to the report.
On a more transformative level, experts see blockchain as a means to create a safe and reliable platform to allow online voting. In March, West Virginia became the first state to allow Internet voting by blockchain
, offering the technology so that overseas military service members and their families in two counties could vote online. The state ran a pilot test using the technology in the May 8 primary election, involving a couple dozen voters. Election officials hope to expand the program statewide (for overseas military only) during the November general elections.
But pilot projects don’t necessarily mean a groundswell of change is about to happen. A close reading of articles on blockchain reveal tests, experiments and prototype uses; nowhere is there a killer app for blockchain in widespread use. Even that 15 percent figure for financial institutions is somewhat misleading; the majority of banks that use the technology are testing its capabilities, not deploying it.
Take bitcoin, for which blockchain was created. The cryptocurrency has yo-yoed in value, has been branded the currency for online criminals and has hardly knocked Visa, Mastercard or American Express — considered financial dinosaurs by bitcoin advocates — out of the market. And, as one expert
explained, “the world already has a costless, instant way to exchange value without a middleman: cash.”
Similarly, skeptics have pointed out that many of the problems that have been suggested as solutions for blockchain can be readily solved with existing databases. Others wonder if the rush to use blockchain as a replacement for legacy processes — from voting to property deed transactions — could end up disrupting old systems before the new technology has been proven to be reliable.
“Somebody needs to ask the question: ‘Is it actually better? Is it measurably better?’” Angela Walch, a research fellow at the Center for Blockchain Technology at University College London, told The New York Times.
Twenty-five years ago, local governments thought they had discovered a killer app. Called the “24-hour city hall,” it was a kiosk that merged together a variety of new technologies — from touchscreens and microprocessors to low cost databases and emerging networking protocols — to create government in a box. Citizens would be able to carry out a number of routine transactions, from paying parking tickets to responding to quick survey questions, essentially handling just about anything that took place at a city clerk’s front desk. It would be like bank ATMs, only better.
Kiosk enthusiasts were sure the technology would transform local government and usher in a new era of customer service. But it didn’t happen. The technology never lived up to its optimistic billing and the kiosk concept quietly went away. Times have changed, of course. Technology is far more advanced and blockchain is going through a wide variety of tests and experiments across a range of industries and in the public sector.
But it wouldn’t hurt to be cautious about the hype, especially for state and local governments, where prudent investing in technology is expected and disruptive technologies can be challenging. Unintended consequences can be far more damaging in government than in the private sector, so let the testing continue.