For federal agencies, the digital ledger technology known as blockchain is generating a lot of heat but not much light. There’s buzz, but not a lot of practical demonstration. High hopes, but no sure guarantee that blockchain will make government better, safer, smarter.
In the Department of Health and Human Services Office of the National Coordinator for Health Information Technology, for instance, IT architect Debbie Bucci sees potential here, but she’s treading with care.
“It could be used for identity, for alternative payment models, for auditing, for non-repudiation. We can see is being used in smart contracts and also for medical information exchange,” she said. That sounds like much of the big talk surrounding blockchain these days, and Bucci worries it may be just that: talk. “There are a lot of proof-of-concepts, a lot of potential pilots, but I have yet to see anything on the healthcare side where they actually have blockchain in production.”
Gartner analysts describe blockchain as being near the peak of the “hype cycle,” that point in the life of an emerging technology where there’s high excitement and IT executives feel pressure to make a move. But should they move? Is the time right for federal leaders to explore blockchain implementations?
Skeptical voices
Ledgers are nothing new: Ancient people made notches on a stick to tally transactions. Blockchain is merely the digital equivalent, but with some unique features. It’s decentralized: Everyone who participates in the system can access the record, so there’s no vulnerable hub.
The decentralized nature in turn makes it more transparent, which should in theory make it attractive to government. And because it is shared and visible, that should make it more secure. It’s a chronological record immune to alteration.
Blockchain advocates say this combination of factors make DLT, or digital ledger technology, a natural fit in the federal space. “As a government agency, I want to get more efficient, I want to get more automated, to do audits and compliance checking better, to detect risk and fraud more easily,” said Mark Fisk, partner, IBM Digital, U.S. Public Service.
But some are less sanguine, suggesting that the capabilities of blockchain, while impressive, may not align with government needs. Last fall, Rice University professor Dan Wallach testified before the House Committee on Space, Science & Technology on ways to make voting more secure. This is significant, since voting is a classic government use case cited by blockchain boosters, a place where a digital ledger clearly could add value.
“[I]t’s important that our election integrity not rely solely on intangible mathematics,” Wallach cautioned. “There must also be tangible evidence that can be understood without an advanced degree.”
His is not the only skeptical voice. Even blockchain’s most likely promoters express some hesitancy. The Open Data Institute, for instance, worries about “significant new privacy issues” that could arise around a shared digital ledger.
Writing in the Harvard Business Review, Harvard professors Marco Iansiti and Karim R. Lakhani urge leaders to proceed with caution. “It would be a mistake to rush headlong into blockchain innovation without understanding how it is likely to take hold,” they write. “Our experience studying technological innovation tells us that if there’s to be a blockchain revolution, many barriers — technological, governance, organizational and even societal — will have to fall.”
Within government, there are signs that some of those barriers already are falling. But even those who are moving to embrace the new technology say they do so tentatively. For government leaders who see potential value in blockchain, these are days of early exploration.
Early efforts
Clearly momentum is building. Among 200 government leaders surveyed by the IBM Institute for Business Value, seven in 10 expect blockchain will reduce regulatory compliance cost, time and risk. But those same executives see hurdles in the way: 60 percent say regulatory constraints inhibit blockchain, and 55 percent worry that the technology is immature.
In the federal government, the General Services Administration has been among the more publicly visible agencies working on blockchain.
GSA recently put out a request for companies to deliver blockchain solutions to enhance its Multiple Award Schedules FASt Lane program. The agency also hosted a forum this summer that drew over 160 participants from industry, academia and government, under the auspices of its Emerging Citizen Technology program.
Still, GSA is keeping one foot on the brake as it investigates the possible uses of this new technology.
Amid the blockchain frenzy that is growing in the business press, “we want to take that energy and distill it down to discover the practical use cases, to see which areas have the most promise for agencies that are being asked to do more with less,” said Justin Herman, who leads GSA’s Emerging Citizen Technology Program.
GSA has elicited hundreds of potential use cases from federal agency, but Herman isn’t urging agency heads to rush out in pursuit of these projects. It’s not that he doubts blockchain’s potential efficacy. Rather, it’s that he believes in blockchain as a powerful change agent, and he wants to see that power handled with care.
“People may see the potential and want to put this in the hands of every program manager, but as with any new technology, we know there will be pitfalls,” he said. “We want to make sure early adopters don’t rush to make decisions that might lock them into a vendor or lock them into a model. We all have to do our due process, to make sure we are doing this in the right way and in the open.”
Such caution is the watchword of the day among feds pursuing blockchain initiatives, of which several have arisen in recent months. There is now a Congressional Blockchain Caucus working to organize government’s embrace of the technology. The technology advocacy group ACT-IAC is working to bring government and industry together around the topic. NIST has participated in a roundtable with over 20 companies.
While some in government are eager to explore the promise of the digital ledger, however, they are equally eager to avoid a headlong rush into the unknown.
Cautious moves
The State Department for example recently put a toe in the water with the formation of a blockchain working group. The move seemed to come as much from necessity as desire, with a public announcement noting that State “cannot afford to wait” to explore the emerging tools.
That exploration is coming primarily from the Secretary’s Office of Global Partnerships, whose job it is to build relationships with businesses, nonprofits and other entities, many of whom may turn to blockchain in the coming years.
While eager to keep their finger on the pulse of emerging trends, State officials say blockchain is largely uncharted territory.
“It is being billed as ‘the next big thing that might change the world’ and obviously that gets people interested. But right now everyone is trying to find out whether there is any there there,” said Partnership Advisor Silvana Rodriguez.
Ideas abound for blockchain’s use in diplomacy: Government could use it to track foreign aid, issue identities to vulnerable populations and clamp down on illegal mining. But State would like to see something more tangible, less speculative.
“That’s why we are so intrigued by use cases and the proofs-of-concept that are actually working,” Rodriguez said. “That is a major focus for us: Taking this technology where there is a lot of hype and the applications are unclear, and trying to create an image in people’s heads around it. We want to create some context for what this technology could actually mean for our work and how it could help used to do things better.”
In movie parlance: Show me the money.
If federal agencies are edging cautiously toward blockchain, rather than running full throttle, it may be because blockchain is a systemic technology, not just a point solution. This isn’t just a new widget. It’s potentially a new way of doing business.
Thus, 35 percent of business executives surveyed by Juniper research said blockchain will likely cause significant internal disruption, and 51 percent said it will significantly disrupt relations with partners and customers.
Some may fear disruptions; others remain unconvinced of the tangible benefits to be had. “It’s a great theoretical concept, but there is just not enough evidence for it yet,” said Steve Dennis, director of the data analytics engine in the Homeland Security Advanced Research Projects Agency.
Dennis is among those looking for that evidence. Along those lines, DHS recently made $9.7 million in Small Business Innovation Research grants to 12 business in an effort to explore the feasibility of blockchain. Dennis said he sees the promise, certainly, but he also feels the pressure.
“The problem is that if you don’t take a look at it, you may miss an opportunity,” he said. “This is in the category of things that are interesting, things that we ought to understand. If we didn’t look at the possibilities and assess them fully, we would be derelict.”
That being said, Dennis echoes the feelings of many in government who may feel compelled by circumstance to investigate the digital ledger, but who are not ready to run headlong. “We are certainly not spending a whole lot of money on it at this point,” he said. “We just want to understand where it is at and start to explore the potential.”
