The emergent technology blockchain has been roiling the technology and financial services industries for months, and, now, people in other industries and government agencies are asking questions about it. Iâ€™m convinced that it has the potential to transform not only the way commerce is done but the interplay between governments, businesses and citizens.
Thatâ€™s why I was pleased to be asked to testify today before the U.S. House of Representativesâ€™ Energy and Commerce Subcommittee on Commerce, Manufacturing & Trade.
Members of the subcommittee are looking into what they call â€śdisruptiveâ€ť technologies to assess their potential impact on businesses, government and the economy, and they asked me to give my views on blockchain.
Theyâ€™re right to call blockchain disruptive. Itâ€™s a revolutionary technology. Blockchain-based systems could help radically improve whole industries, beginning with banking and insurance. But its impact could be much broader. It could make a difference whenever valuable assets are transferred from one party to another and whenever you need to know for certain that a piece of digital information is unique and unchangeable by any party without the agreement of all parties.
There are four key points that anybody learning about blockchain for the first time, including government officials, should understand:
Blockchain creates trustworthy and efficient interactions. While blockchain is the core technology that enables the Bitcoin crypto currency to operate, it can be used for entirely different purposes.
Itâ€™s a distributed ledger shared via a peer-to-peer network that maintains an ever-expanding list of data records. Each participant has an exact copy of the ledgerâ€™s data, and additions to the chain are propagated throughout the network. Therefore, all participants in an interaction have an up-to-date ledger that reflects the most recent transactions or changes. In this way, Blockchain reduces the need for establishing trust using traditional methods.
Blockchain technologies must be enhanced to meet the needs of businesses. The core technology must be adapted to further address security and privacy concernsâ€”creating an enterprise-ready blockchain. In addition, computer systems and networks must be architected so they can scale up to handle an immense volume of transactions as industries and governments begin using the technology to handle their core organizational processesâ€”and complete their tasks in seconds rather than minutes.
Blockchains must be open and interoperable. For blockchain to fulfill its full potential, it must be based on non-proprietary technology standards to assure the compatibility and interoperability of systems. Furthermore, the various blockchain versions should be built using open source software, with a combination of liberal licensing terms and strict governance, rather than proprietary softwareâ€“which could be used to suppress competition. Only with openness will blockchain be widely adopted and will innovation flourish.
There are several open source blockchain projects, but only the project managed and sanctioned by the Linux Foundation, called The Hyperledger Project, offers industry-friendly terms and multi-company governance. Thatâ€™s why weâ€™re participating in the Hyperledger project and urging others to do so as well.
Blockchain will greatly benefit from government participation. Itâ€™s critical from a national competiveness point of view for US companies and government agencies to lead the world in understanding the potential of blockchain and putting it to use. Because of the transparency made possible by blockchain, government agencies will be able to understand better whatâ€™s going on within financial and commercial systemsâ€”and spot potential problems before they become critical. Blockchain will also enable more efficient interactions between government and businessesâ€”regarding everything from taxes to land use.
Take the US Social Security system, for instance. It involves the federal government, millions of employers, their payroll service providers, and more than 200 million beneficiaries and working individuals who are paying into the system. This is a model scenario for blockchain. There are many parties, many rules, many steps in the process of administering the system, and a critical need for very high levels of privacy protection and security from breaches.
Blockchain is a classic emergent technology. It appears to have a broad set of uses and benefits, but itâ€™s so strikingly different from what people are used to that many business and government leaders alike are adopting a wait-and-see attitude. We applaud judicious caution, but, at the same time, we believe that organizations and institutions that donâ€™t quickly assess the potential of blockchain and begin experimenting with it risk falling behind as the world undergoes what we see as a tectonic shift.
Therefore, we urge Congress and the Obama administration to study and discover the best uses of blockchain for the US government and the best regulatory approaches to maximizing its potential while protecting the interests of citizens. Blockchain may have begun its existence in the shadows of the crypto currency realm, but it now stands in the openâ€”a powerful tool ready to serve business and society.