Blockchain and Suitability for Government Applications — US government report

In 2018, a report was published by the USA federal institution Department of Homeland Security (DHS) under the name “Blockchain and Suitability for Government Applications”. This report was written by several individuals from different federal institutions responsible for aspects as law enforcement, terrorism and crime.

The report starts with the presentation of blockchain and similar tech by a formulation that “Distributed Ledger Technologies (DLT, commonly referred to as blockchain), an alternative architectural approach to managing data, and removes the need for a trusted authority to store and share a perpetually growing set of data”.

According to the report, an oundational characteristic of a blockchain is trust since blockchains have digital signatures and use keys to authorize and check transactions and positively identify the initiator. Including the fact that once a piece of certain information recorded to the chain, a blockchain record cannot be deleted or manipulated. This is because new blocks may only be appended to the chain, ensuring data integrity and creating a verifiable audit trail where the shared ledger provides visibility to all participants, simultaneously.

Regarding the usage of blockchain by public institutions, the report states that governance of blockchain systems can be achieved by appointing a central group to determine how the application should evolve over time, rather than trying to gain consensus among thousands of stakeholders for every change. Furthermore, it states that heightened security and privacy a blockchain may be closed to unknown or untrusted entities as when it comes to the “permissioned blockchain” model that is allowing trusted entities privileges to update the chain in an accountable fashion.

The report also takes up aspects such as regarding the current challenges with blockchain development — scalability, data security, custody, legality issues etc. When it comes to public blockchain scalability, it is stated that public, permissionless blockchains like Bitcoin are vastly slower than standard credit card transactions. According to the report, this is a result of its PoW consensus mechanism since permissionless blockchains become slower with each additional participant, consequent to their Peer-to-Peer verification.

The report is also focusing on topics concerning interoperability. It states that already thousands of blockchain projects in existence, many of which are cryptocurrencies or fintech generally. It also states that there is an increasing diversification in non-fintech blockchain projects covering supply chain management, Internet of Things, identity management and many more. And it also states that many of these projects, if not most, are unable to communicate with each other directly which is seen as a recurring problem that only becomes more complex as the larger ecosystem expands.

Furthermore, the report states that interoperability will become a serious question for legacy systems like SWIFT32, which would be unlikely to connect to public blockchains. Also, the report states that while public, fully decentralized blockchains have no real central authority, complicating governance nor interoperability the case is that private, permissioned blockchains, which are simpler to govern, have spent less time examining interoperability in comparison to the public blockchain space.

When it comes to digital aspects, the report states that outside of the financial and token-based applications of blockchain technology, enabling digitized commerce is quickly becoming hard to overlook as more individuals and businesses are shifting into a predominately globally digitized existence. According to the report, this is the case because blockchain technology attracts these individuals and companies in large part because it empowers the user to gain global interoperability and connectivity, speed and accuracy, provides immutability of records, provenance, and promotes an unrestricted reach.

Regarding legislation and law-issues, the report states that the current blockchain ecosystem is essentially unregulated and operates largely without oversight, consumer protections or comprehensive guidance from any U.S. or international regulatory body. It also states that proactive efforts to resolve these matters requires greater collaboration and contributions between U.S. and international regulators, financial institutions, and technology leaders. Additionally, the report states that regulators have failed to adopt prudent legislation that embodies clear user and data protections, uniform language, and guidance for expanded law enforcement interventions.

Another interesting case regarding the law-related discussion in this report is the case of immutability which is one of the core function of the blockchain. Partly because the report is referring to the current European GDPR regulation which includes “the right to be forgotten” where EU-citizens can demand their information to be removed as from Google search which at the moment is not possible to apply on immutable blockchain systems. And partly because the report includes ideas that a “mutable blockchain” system is possible and should be established.

In the report, it is mentioned that Dr Matthew Green, who is a cryptologic expert and a Professor for the Department of Computer Science at Johns Hopkins University, believes that it is feasible to make a mutable blockchain since the mutable blockchain is a blockchain whose records could be updated. According to tot the report, this would solve the privacy concerns with storing Personally Identifiable Information in an immutable way, it undoes the principal advantage of using a blockchain — the intrinsic integrity of its records.

For more information and insights, click on the following link to download the report “Blockchain and Suitability for Government Applications”

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Vladan Lausevic

Vladan Lausevic

I am active as a social and policy entrepreneur. SEEDS ambassador. Motto: I have no identity, I have only identities.