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Blockchain a 'Next Big Transformational Technology' in Government

In a new brief, NASCIO said blockchain — now the subject of five pilots by the state of Illinois — may be a game changer.

Blockchain is among the “next big, transformational technologies” being eyed for use by government in its ongoing quest to provide residents with easy, online access to services and transactions, the National Association of State Chief Information Officers (NASCIO) said in an introductory brief released Tuesday, May 16.

The encrypted digital recording of a transaction or event via a shared “incorruptible” ledger is not currently in common usage among public agencies. But in Blockchains: Moving Digital Government Forward in the States, NASCIO authors forecast change, citing a survey of 19 state CIOs and singling out the state of Illinois, which is analyzing and in various stages of implementing five blockchain pilots, an official confirmed.

Eric Sweden, a NASCIO official and an author of the brief, told Government Technology that blockchain “was not on anyone’s priority” list during the organization’s annual conference in 2016 — but is now “on a very steep acceleration.”

The private sector, Sweden said, is getting into blockchain “probably more out of fear of being left behind than anything else,” but as with other technologies, this is driving interest in the public sphere.

Though blockchain isn’t mentioned by name anywhere in NASCIO’s State CIO Top 10 Priorities for 2017, it registered when the company asked CIOs to what extent blockchain technology and economics were on their agendas.

Twelve of 19, or 63 percent, said they were investigating blockchains in state government through informal discussions. Five, or 26 percent, said they weren’t discussing blockchain, but one official said his or her agency was engaged in “formal discussions” of blockchain.

Another CIO, representing 5 percent of the total, said his or her agency “had adopted blockchain technology in support of some state government services.”

“When this arrives on that Top 10 list, that’s going to tell us we’ve got a critical mass here in terms of the number of state CIOS that are considering this as a high priority,” said Sweden, NASCIO program director of enterprise architecture and governance.

Agencies weren’t identified by name in the survey, but Sweden said given what’s known about levels of state interest, “it’s probably Illinois” — though the state of Delaware’s Division of Corporations is in the “very early” stages of exploring blockchain.

Illinois is looking at five focused pilots for blockchain, according to Jennifer O’Rourke, business liaison for the Illinois Blockchain Initiative (IBI) which was formally created in November by six state and municipal agencies.

Member agencies are the Illinois Pollution Control Board; state departments of Commerce and Economic Opportunity, Innovation and Technology, Finance and Professional Regulation, and Insurance; and the Cook County Recorder of Deeds.

They first came together informally during the spring and summer of 2016, making it official by year’s end with three goals for blockchain: ensuring thoughtful and light-touch governance as it applies to the technology; supporting building out the ecosystem from an economic development perspective; and promoting government integration of the technology itself.

Among its outreach, Illinois has joined a pilot exploring the use of blockchain to transfer property titles that was begun last year by the Cook County Recorder’s office, O’Rourke said.

John Mirkovic, the county’s deputy recorder of deeds, said the agency likes “the idea of making it harder to steal your neighbor’s house” and believes it’s completely legal “to trade property using a blockchain.”

“It makes property records a natural fit for a distributed ledger or a blockchain. It’s a chronological timestamp ledger of a chain of events. That’s why it also makes sense for land records because that’s also how land records are kept,” Mirkovic told Government Technology.

The state of Illinois also intends to:

  • work with a community college to reflect some of its course credentials through a blockchain;
  • work with health provider registries to reconcile data planes — which currently costs insurers about $2 billion annually — ensuring the accuracy of multiple input points and enabling customers, O’Rourke said, to do something “as simple” as check their doctor’s licenses and insurance through an app;
  • start an energy credit marketplace to track Renewable Energy Credits, tradeable features generated by creating 1 Megawatt-hour of electricity through wind turbines or solar panels. These are traded on secondary and tertiary markets and it may not always be clear when they’re retired; and
  • hold a vital records pilot with a hospital, starting a blockchain to record a birth. The fact that this is “the most appropriate starting place for digital identity is not lost” on agencies, O’Rourke said.
“If we were going to start the digital octopus of digital identity, it’s most appropriate to do so at the beginning,” said O’Rourke, who is also assistant deputy director for the Illinois Office of Entrepreneurship, Innovation and Technology.

There's also movement on blockchain from other organizations in the state.

On Thursday, May 18, the collaboration catalyst organization Innovate Springfield will host an "iSPI tech talks" event to examine emerging technologies in payments, transactions and modernized governments.

Speakers will include state of Illinois Chief Technology Officer Mike Wons and Mike Redington, director of Disney financial services for The Walt Disney Company.

In June, NASCIO plans a webinar on IBI, Sweden said.

Also in June, Matthew Roszak, founder of the Chicago Bitcoin Center, said it will relaunch as the Chicago Blockchain Center, centered on programming, education, technical assistance and incubation.

The move, he said, is fueled in part by an increasing realization of the technology’s promise.

“It’s not a surprise that a lot of finance companies and, quite frankly, government agencies are looking at this as a new operating system for business, government and beyond,” said Roszak, who is chairman and co-founder of Bloq, a blockchain enterprise software company.

Agencies and companies, he added, “are really trying to figure out what it means for them in terms of identity models. All those sparks are fantastic for the ecosystem and fantastic for the potential of government to use this technology.”

In its brief, NASCIO said blockchain’s “state-of-the-art cryptography” gives it the potential to create “a steadily-growing spreadsheet of records or ‘blocks’ that create an immutable record where each block is “chained” or linked to the previous block.”

Authors counseled public agencies to focus at first on “permissioned” pilots restricted to private blockchains with limited users.

“Permissionless or unrestricted blockchains require immense computing power which is not there today. Permissionless blockchains also have a limited scalability,” they wrote.

Use cases, NASCIO said in the brief, have state government relevance across property and financial transactions as well as for public and private records and physical access.

Authors singled out as examples the managing of voting, property deeds and criminal records, birth and death certificates and health-care records; authenticating academic credentials; and administering tickets, fines and citations.

O’Rourke, however, said she sees blockchain applications for state governments as concentrated in “two large buckets”: providing identity and asset registration — documenting the registration of assets and ownership for items such as houses and property, but ultimately pushing the responsibility for one’s identity out to the citizen.

That could be accomplished through blockchain, she said, with various “participants” like schools and hospitals attesting to various attributes of one’s identity such as birth and college graduation.

Blockchain also has the potential to enhance state-level cybersecurity efforts, but will most likely change the way people work rather than add or subtract jobs, she said, citing as a similar example the fact that some law firms already require job candidates to have coding experience and characterizing this as an adaptation.

Sweden said blockchain will play an important role in cybersecurity processes with respect to identities, but it’s not yet clear what effect it could have on jobs.

“I would say anybody in any field has got to be continually considering, ‘How do I update my skills?” he said, portraying it as a “wait-and-see” situation.

Blockchain’s encryption methods are generally seen as quite robust, but Sweden warned that the technology isn’t bulletproof and will likely reveal its own vulnerabilities over time. He said it’s unclear whether blockchain’s connection to the cryptocurrency bitcoin — using the sale of a bitcoin fraction as a way to conclusively record a transaction — will count as a strike against it.

He and O’Rourke both pointed out that blockchains could eventually come to use another form of currency as a financial attribute to the transaction’s tokenization.

“We’re watching an evolution of that, but we can’t get away from the fact that bitcoin has been around the longest,” O’Rourke said, noting its value has also increased. “There’s a variety of very good things to be said about this particular cryptocurrency and the value that underlies it.”

The bottom line for blockchain and distributed ledger technologies, she said, is that they’re coming to the fore, fueled in part by their potential to resolve two persistent problems that have dogged authorities since the dawn of the Internet: establishing identity and creating trust in cyberspace.

Mirkovic agreed blockchain may have a bright future in Illinois — depending, of course, upon a variety of factors including the outcome of Cook County’s pilot, which is expected later this year with the actual sale recording of an apartment house using blockchain.

“We want the entire state to be on the same network," he said. "If this thing makes sense, which we think it does, we want everyone to do it. That’s how we intend to advocate for this technology."

Theo Douglas is news editor for Government Technology. He was previously assistant managing editor for Industry Insider — California. His reporting experience includes covering municipal, county and state governments, business and breaking news.