In April, the city of South Burlington, Vt., issued what is considered the first property deed using blockchain technology. The effort was little more than a pilot project that mostly involved the company which provides mobile and Web-based property transactions. But the transaction has been heralded as a first and a glimpse of government’s future in which information can be stored and exchanged by a network of computers, without a centralized host. Often referred to as decentralized ledger, blockchain makes it nearly impossible to alter or hack the data.
But was this a breakthrough moment as some have thought, or was it another example of what has become the latest in a string of tests and experiments using blockchain that has generated lots of hype but little in the way of practical, widely used applications? It’s not a trivial question. Blockchain advocates believe the technology will be the next big disrupter in business and government. Dissenters see blockchain as a solution in search of a problem that will generate little in the way of transformation.
Blockchain got its start in 2008 when a person named Satoshi Nakamoto wrote a white paper that described a peer-to-peer version of electronic cash known as bitcoin. In order for the digital, cryptocurrency to work, it needed a system of trust. That turned out to be blockchain, a process in which information about the currency can’t be altered thanks to its unique transparency using time stamps that record each transaction, all of which is stored securely on a decentralized network of computers.
But blockchain could also help governments build trust in citizens by creating verifiable land registries to resolve property disputes, and it could protect sensitive data by reducing single-point-of-failure risk, according to the report.
But pilot projects don’t necessarily mean a groundswell of change is about to happen. A close reading of articles on blockchain reveal tests, experiments and prototype uses; nowhere is there a killer app for blockchain in widespread use. Even that 15 percent figure for financial institutions is somewhat misleading; the majority of banks that use the technology are testing its capabilities, not deploying it.
Similarly, skeptics have pointed out that many of the problems that have been suggested as solutions for blockchain can be readily solved with existing databases. Others wonder if the rush to use blockchain as a replacement for legacy processes — from voting to property deed transactions — could end up disrupting old systems before the new technology has been proven to be reliable.
“Somebody needs to ask the question: ‘Is it actually better? Is it measurably better?’” Angela Walch, a research fellow at the Center for Blockchain Technology at University College London, told The New York Times.
Twenty-five years ago, local governments thought they had discovered a killer app. Called the “24-hour city hall,” it was a kiosk that merged together a variety of new technologies — from touchscreens and microprocessors to low cost databases and emerging networking protocols — to create government in a box. Citizens would be able to carry out a number of routine transactions, from paying parking tickets to responding to quick survey questions, essentially handling just about anything that took place at a city clerk’s front desk. It would be like bank ATMs, only better.
Kiosk enthusiasts were sure the technology would transform local government and usher in a new era of customer service. But it didn’t happen. The technology never lived up to its optimistic billing and the kiosk concept quietly went away. Times have changed, of course. Technology is far more advanced and blockchain is going through a wide variety of tests and experiments across a range of industries and in the public sector.
But it wouldn’t hurt to be cautious about the hype, especially for state and local governments, where prudent investing in technology is expected and disruptive technologies can be challenging. Unintended consequences can be far more damaging in government than in the private sector, so let the testing continue.