To Unleash Blockchain's Potential, Government Must Direct Its Growth


One of the biggest issues federal agencies run into with blockchain projects is making sure sensitive data doesn't fall into the wrong hands.

The decentralized ledger system behind Bitcoin has the potential to revolutionize everything from personal finance to international trade, but blockchain needs privacy and security standards before any of that can happen, according to federal tech experts.

As agencies begin exploring ways to use blockchain for managing health records and securing the border, the Congressional Blockchain Caucus hosted a panel where technologists from government and the private sector highlighted the specific areas where federal standards could help foster blockchain’s growth.

“We love the technology, but we also have to work out the details,” said caucus co-chair Rep. David Schweikert, R-Ariz., on Thursday. Blockchain’s uses are limited today, he said, and realizing its full potential requires Congress to pass laws that shape it into a “bulletproof” way to prove ownership and identity.

Blockchain technology allows users to manage virtual assets on an encrypted ledger that permanently records every exchange. Because outsiders can’t tamper with the transaction history, it’s an ideal system for keeping tabs on valuable data.

But one of the biggest issues federal agencies run into with blockchain is cybersecurity, said Thomas Savage, a blockchain researcher at the Centers for Disease Control and Prevention. Many government records contain sensitive personal data, and setting standards for managing that information on blockchain would build additional layers into the existing security framework, he said.

As CDC plans a pilot program for managing health records with blockchain, Savage said it would be helpful to have federal organizations like the National Institute of Standards and Technology to create a framework for securing such data. On a broader scale, such guidelines would give agencies and businesses “a way to prove the integrity” of their data, he said.

Brian Trackman, counsel for the U.S. Commodity Futures Trading Commission, recommended creating a uniform format for data stored on the blockchain. Doing so enables one blockchain system to receive information from another without misinterpreting the data, he said.

Similarly, standardizing the software that blockchain is built on would also allow groups to adopt the technology more rapidly, particularly if it’s done on an international scale, said Robert Strayer, the State Department’s deputy assistant secretary for cyber and international communications and information policy.

Interoperable software would allow governments and businesses around the world to share data, send money and trade goods “easily and without interruption,” he said, but the Congress should be wary about regulating technological development. Instead of forcing groups to build themselves around a particular software, market-driven innovation would likely create the most efficient and effective solution.

While most people directly associate blockchain with Bitcoin and other virtual currencies, Savage said they might not be seeing the big picture.

“The cryptocurrency aspect I find to be mostly a distraction to the work we’re trying to do,” he said. “There’s an intrinsic value to the technology that has the promise of bringing individual empowerment … in a number of areas.”

Editor's Note: This story was updated to clarify comments from Thomas Savage.