Hype or hope for government agencies?

The debate about the blockchain is getting a little heated.

In one corner there are people like the NYU economist Nouriel Roubini, who in a written testimony told a Senate hearing this month that "Blockchain is the most exaggerated technology ever," defining it " mother of all scams and (now busted) bubbles. "

In the other, there are people like the head of the Department of Health and Health Services Jose Arrieta, who the following day told a government technical symposium that federal officials from the I'm on board the blockchain train "they are very close to being irrelevant".

So what is it?

Federals and other government agencies are exploring the possibilities of using blockchain for financial transactions, supply chain monitoring and other uses. It has even been proposed as a way to guarantee a safe vote in the elections and to protect the electricity grid. But the debate on its validity continues.

Roubini, one of the heavyweights of economic circles that was among the few to predict the 2008 economic crisis (and was nicknamed "Dr. Doom" after making the prediction in 2006), is not just among technology critics, some of whom say that his promise will not hold up in practice.

But blockchain also has many supporters. Wal-Mart is working with IBM on the use of a blockchain system to ensure the supply chain of fresh products against diseases such as E. coli. The financial sector uses technology for a variety of functions, from identity management and smart contracts to the protection of cross-border payments. The CEOs of several large banks have said they expect the global banking sector to move on the blockchain in about five years.

Arietta also has fellow believers in the government and in the army. A member of the Naval Innovation Advisory Council wrote last year that the blockchain could "revolutionize additional shipbuilding, finance and logistics, and this is only a scratch on the surface".

Basics on Blockchain

Blockchain is a digital ledger system known to subjugate the volatile world of cryptocurrencies like Bitcoin, but the transparency and security of technology have attracted the interest of many other areas, including the government.

In a blockchain, each involved party has access to every transaction, recorded in blocks or data sets, which are generally, but not exclusively, about 1 MB in size. Each party maintains its own database, identical to the other parts, "and is able to see and verify it directly, without the involvement of third parties.With each transaction, all copies are updated simultaneously and permanently and each transaction is visible to all the others associated with that blockchain, as explained by Marco Iansiti and Karim R. Lakhani in a detailed blockchain roundup in the Harvard Business Review.The transactions entered in the database can not be changed, as each block in the chain is linked to every other block (You can see where the name comes from.) It can also be programmed to activate transactions automatically.

Blockchain suffered a bit of guilt by association due to some high-profile hacks of Bitcoin and other cryptocurrencies, but Iansiti and Lakhani point out that the weaknesses of those hacks were with cryptocurrency users rather than any vulnerability in the blockchain. But there are other criticisms of the blockchain: it is complicated and difficult to use, and therefore it will be difficult to see widespread adoption, and it could increase transaction costs (even if others will project it to reduce them). Some pointed out that there is no clear definition of blockchain, with exceptions to almost all the rules, making it difficult to implement far-reaching.

Prudently opportunist

Apart from concerns about the feasibility of technology, government agencies are at least dipping their toes into the water. HHS is exploring using blockchain in several areas, including medical image sharing, tracking and acquisition records. The Department of Homeland Security is testing the blockchain to keep counterfeit goods out of the supply chain. The State Department is working with Coca-Cola on a pilot project to create a register of blockchain workers to combat forced labor worldwide. The Treasury Department has launched a pilot test for the management of IT resources.

The Bloomberg government reported at the beginning of the year that the federal agencies had allocated about $ 8.4 million in blockchain contracts. A recent report by the IDC market analyst highlighted eight examples of the use of blockchains in public administrations and indicates the areas most likely to be seen in use: among these are the smart contracts, asset management and the land registry. term, and possibly electronic voting and identification of refugees in the long term.

And while they do not buy the technology at wholesale, the agencies are giving a hard look. In 2018 the National Defense Authorization Act, Congress ordered the Department of Defense to conduct a comprehensive study on the blockchain. The National Institute of Standards and Technology published this month the NIST Internal Report 8202, an overview of the blockchain that states will lay the groundwork for a series of more comprehensive examinations of the technology.

Despite some occasionally flammable rhetoric on both sides, agencies need to keep in mind that blockchain is a developing technology. Iansiti and R. Lakhani compare it to TCP / IP in the early days of the Internet, open, distributed and shared, but still in need of development. They observe that blockchain is not so much a disruptive but a foundational technology and suggests that it will probably take decades before it can become an integral part of economic and social infrastructure, if it ever does.

"The adoption process will be gradual and constant, not sudden, while the waves of technological and institutional change gain momentum", they write.