Blockchain can power up government processes, GAO says

Seeing the potential of blockchain in sectors past finance, the place it’s mostly used right now, the Authorities Accountability Workplace just lately launched 4 recommendations that would improve the know-how’s advantages and mitigate its challenges.

“Blockchain is beneficial for some purposes however restricted and even problematic for others,” based on GAO’s technology assessment on blockchain. “For instance, due to its tamper resistance, it might be helpful for purposes involving many contributors who don’t essentially belief one another. However it might be overly advanced for just a few trusted customers, the place conventional spreadsheets and databases could also be extra useful. Blockchain can also current safety and privateness challenges and will be energy-intensive.”

Areas with potential embrace voting, organizational construction and ID administration. Actually, some states have mentioned that utilizing a blockchain-based voting system would improve remote-voting safety and election audibility. West Virginia was the first to experiment with it in 2018. Final yr, a bill was launched in Alaska proposing to undertake the know-how in its voting safety system.

In accordance with GAO, blockchain-based voting would contain 4 steps. First, a jurisdiction must generate the digital equal of unmarked poll ovals. Second, it must credit score votes to the registered voter’s nameless ID. Third, when the voter votes, that creates a debit on their account and a credit score on the chosen candidate’s account. Final, officers would add the credit to vote totals to find out the winner.

“In accordance with one vendor of blockchain-based voting methods, such methods would seemingly should be hosted on a permissioned blockchain community managed by a certifying authority, similar to a state’s Chief Election Officer,” GAO’s report states. “This authority may management the variety of blockchain nodes, the bodily location of the servers that act as nodes, and the id of the auditors of the system.”

Potential disadvantages of such a system embrace rising the assault floor due to the numerous nodes required and eradicating anonymity as a result of blockchain networks depend on timestamps to create an unchangeable file of transactions. These stamps might be used to hyperlink a vote to somebody’s id.

Organizational construction is one other potential use case for blockchain as a result of the know-how has enabled a brand new organizational kind known as a decentralized autonomous group (DAO), that are “entities wherein teams of individuals collaborate and govern themselves on-line utilizing a blockchain-based system of sensible contracts and tokens.” DAOs have a diminished hierarchy, with token holders voting on proposals and votes weighted based mostly on what number of tokens members have. Wyoming handed a regulation that started permitting in July 2021 some DAOs to register as authorized entities. As of final December, greater than 100 had finished so.

ID administration can also profit from blockchain, the report states, by including transparency, traceability and decentralization, and defending privateness. 

“A blockchain-based digital ID might give a person higher management over private information than conventional ID methods,” the report states. “For instance, specially-designed blockchains utilizing sensible contracts and superior cryptographic strategies for digital IDs may present proof of age with out revealing another data. In distinction, a driver’s license consists of private data similar to a birthday and driver’s license quantity that might not be needed for acquiring a particular service, unnecessarily exposing such private data.”

Different states are contemplating utilizing blockchain-based data, similar to sensible contracts. Vermont was the primary to take action in 2016. Two years in the past, “Illinois enacted the Blockchain Know-how Act, which partly makes sensible contracts and blockchain data admissible as proof in authorized proceedings. Arizona and Tennessee, amongst different states, have handed related laws addressing sensible contracts,” based on GAO.

The report lays out 4 coverage choices that GAO believes may assist give readability to blockchain’s use, though it additionally notes the place issues may but lie. One choice includes setting requirements that target the event, implementation and use of blockchain. The report identifies alternatives similar to discovering and filling gaps, figuring out the place requirements can be most useful, and addressing challenges with interoperability and information safety. Potential downsides – GAO calls them “issues” – embrace determining who ought to take the lead in establishing internationally acknowledged requirements and complexity in getting consensus from many private and non-private stakeholders.

The second choice is about oversight – particularly, clarifying present oversight mechanisms, together with laws, or creating new ones. This could create frameworks that would supply readability round utilizing blockchain and round compliance with legal guidelines associated to blockchain-related commerce. Figuring out simply how a lot oversight is sufficient is a serious consideration, the report provides.

A method to enhance oversight is thru regulatory sandboxes. Arizona has been internet hosting the FinTech Sandbox since 2018, and though solely 13 firms have participated, no less than two contain blockchain.

GAO’s third coverage choice is producing instructional supplies to assist customers and regulators perceive blockchain. Benefits embrace enabling coaching of a workforce expert in blockchain merchandise, prompting revolutionary analysis and growth and making ready policymakers in regulating the know-how. The challenges lie in guaranteeing that the supplies meet many studying wants throughout many audiences and figuring out who may most successfully create the supplies.

Fourth is acceptable makes use of. Alternatives right here contain investigating when and the place blockchain can be most helpful and utilizing the know-how to extend transparency and accountability of present methods and providers. “Authorized or regulatory uncertainty might hinder some customers from benefiting from blockchain,” the report states, including that it “might be tough to revert to a non-blockchain know-how” after an company invests time and assets in it.

Stephanie Kanowitz is a contract author based mostly in northern Virginia.