If you follow IT inside the government, chances are you’ve heard the hype around blockchain.
Blockchain holds a lot of promise in solving some very interesting government problems from electronic health records to supply chain. Recently Dcode, a government-focused technology accelerator, set out to validate this claim. In September, Dcode launched an accelerator program specifically around technologies in the blockchain and fintech space. We selected 8 companies to participate in their program with products ranging from payments and identity verification/authentication to products built using and protecting blockchain. Throughout the program thus far, we have worked with over 25 agencies and 50+ industry partners to discuss the reality of implementing these technologies.
Here’s what Dcode has learned so far:
- Blockchain is on the same continuity as cloud
Given the fascination and rise of blockchain and cryptocurrencies over the last few years, many people have made bold predictions that blockchain technology is going to be the coming of the next internet. Having looked at hundreds of companies, worked with dozens of systems integrators and federal agencies, and developed opportunities in government for our companies, the shift from blockchain will look much more akin to cloud computing than it will to the advent of the internet.
We feel that this is true for a couple of reasons. First, while green-field blockchain projects have the potential to reap all the benefits of the technology, government is saddled with huge legacy technical debt. Migrating to an entirely new technology architecture doesn’t seem plausible in the near term. Therefore, blockchain applications that work seamlessly with existing legacy technology are going to be most useful in government much like cloud shifted the nature in which government consumed computing power.
Second, in the same way that cloud shifted the economic model of computing and data storage from asset ownership to service provision, blockchain will most likely affect the governance and ease of use for distributed databases. Governments are likely going to use currency-less blockchain technologies or private blockchains. This will allow government to continue to perform much of the same work it did before but now with less friction.
- Blockchain isn’t magically (or even universally) secure
Often times, the way that the immutability of blockchain is referenced makes it seem like there is something magical about the technology that makes is more secure than our phones, data in the cloud, or online financial transactions. Underlying all of this are encryption algorithms. The strength of the encryption and security regarding access to keys to unlock the data is core to the security of the blockchain.
Sadly, like most answers to general questions, the security of blockchain depends on the security of a specific blockchain. Just because government adopts this technology, won’t make our data within government inherently more secure. In fact, a private blockchain is likely to inherit many of the same weaknesses as the current architecture of its parent organization.
What this means for government is that products that are making identity verification, authentication, encryption work more seamlessly and securely need to be adopted at the same pace as blockchain. And just like any other government system, security teams will need to think about how to protect the edge. If not, the benefits of the distributed nature of blockchain will simply become unsecured entry points into the government’s data.
- Legacy technology will be the biggest barrier to blockchain adoption
Data is a constant challenge in government. This is no exception. If the information that government hopes to make available to the benefits of blockchain isn’t digitized or possibly isn’t even in a database, then blockchain solutions are not going to do much to improve them. In tailored use cases or when the blockchain technology operates well with legacy technology, adoption can move smoothly.
When we looked for companies to participate in our program, we made sure the technology could easily be implemented alongside of legacy databases, case management software, and payment systems. Without the ability to play well with legacy, blockchain product will have to hope for government to significantly modernize systems and databases. If your company has a product that leverages blockchain and is thinking of entering the federal market, this should be the number one consideration.
- Government is moving more quickly than it did with cloud
Many years ago, policymaking pushed agencies to adopt cloud computing technology more rapidly. In that case, most agencies went kicking and screaming towards what is now the most widely available and accepted computing and storage method in the world. In the case of blockchain, agencies are moving much more quickly and intelligently towards adoption and breaking off small pilots to understand how the technology works within the mission of the agency. The promise of the technology is extremely valuable to the mission of government and that is where the hook has been most effective. There has also been a significant shift in overarching government interest and encouragement to adopt emerging technology.
The most successful products in this space in the public sector are those that rely on a private blockchain that provides overall privacy not necessarily anonymity, currency-less and blockchains that were purpose-built for enterprise that allow permissioned access, and the ability for transactions to be undone.
The case for optimism: Join the conversation!
When we began down the path on a blockchain accelerator for government, there was some hesitation that there would be very few agencies thinking about this next generation technology. It has been encouraging to see such a difference in the attitude in government towards an emerging technology. There are multiple pilots happening across government and our hope is that the more that agencies learn the potential benefits the larger the market becomes.
Join us on Dec. 12 at the National Union Building to join the conversation and see these blockchain and fintech technologies live in action. Register today!
Andrew McMahon is the director of strategic partnerships for Dcode. A former Obama Administration appointee focused on technology policy and building sustainable innovation in government, McMahon worked to change how the federal government invests in people, technology and companies so that it can better serve the public and businesses. During his time in government he helped to build 18F, the Presidential Innovation Fellows Program, and the GSA’s Technology Transformation Service.