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Blockchain Shows Promise for Open Data, but Is Not a Silver Bullet

By Kody Carmody,

Tuesday, January 22, 2019

Trusting the data is an important foundation for decision-making, including in government. A rising technology called blockchain promises to bolster that trust with potential applications in diverse areas like absentee voting to applying smart technologies for the future of cities.

While some see the technology as a silver bullet solution for making government data more publicly accessible, in practice, blockchain may have more limited applications based on the narrow problem it solves. Using blockchain can help, but it does not address many pressing threats and challenges to open data and evidence-based policy in our society.

Government statistical agencies, such as the Census Bureau, publish data that companies use to make decisions and plan for the future and decision makers use to understand whether food assistance programs are serving the target population. Other federal agencies make data openly available about things like the weather or geospatial conditions which help in navigating cars, planes, and ships. The data must be trustworthy to be useful.

What Is Blockchain And How Does It Improve Trust?

When consumers swipe credit cards for morning coffee, they are trusting numerous firms – the coffee shop, credit card company, and bank — to keep their information confidential and to faithfully carry out a transaction. Blockchain removes the need for trust in these individual parties by requiring that transaction be verified by the rest of the blockchain’s network, while still protecting the details of the transaction. Instead of trusting an intermediary, trust is placed in the blockchain technology itself.

Trust in blockchain relies on two of its features—decentralization and incentives. Decentralization means that usually (though not necessarily) the blockchain has no single point of failure, removing some of the possibility for human error and malfunction. This scheme is ensured by a system of incentives—under normal circumstances, no single participant or group has an economic interest in attacking the system. Notably, this might not always hold for certain applications.

The structure of a blockchain is simple. Data such as the above transactions are combined into a “block,” which is then linked with other blocks of data to form a “chain.” When combined, the “blockchain” can be a continuous record of anything from coffee purchases to the deeds for houses.

As mentioned above, the true usefulness of blockchain comes from decentralization—the ledger is kept by a network, and several of these nodes in this network store copies of the entire chain. There are more than 10,000 nodes in the Bitcoin blockchain, for example, and all of the data on it is publicly viewable. This decentralization means that any attempts to tamper with data on the blockchain are evident to the rest of the network. It is extremely difficult for an individual or small group to alter data once it’s on the blockchain, and it becomes even harder the further back in the chain you go.

As more data is added to the blockchain, consensus is needed between the different nodes. The most common strategy for this is “proof of work,” the algorithm used by Bitcoin. After the nodes receive a transaction, they validate the parties’ digital signatures and make sure that it doesn’t contradict transactions already on the blockchain. They then pass it along to “miners” who build blocks from the transactions in the queue and compete to see whose block will be added to the chain next. This competition consists of solving a very difficult math problem, and the miner who is successful first is paid a fee for their work—the incentive mentioned above. This competition ensures that participants in the network all agree on the data stored in each block and their order on the chain.

How Can Blockchain Promote Trust And Integrity In Government?

While many applications of blockchain have emerged in the private sector, there are growing calls to use the approach for government data, for example to ensure consistency in data across time and political administrations. Using blockchain would also ensure that government-published data would remain public.

The federal government has already started exploring some uses of blockchain. The Government Services Administration launched a blockchain initiative in 2017, along with a federal blockchain community of practice that is exploring potential applications. The White House is also considering blockchain applications as part of the emerging Federal Data Strategy, for which numerous stakeholders provided case studies of successful deployments of blockchain relevant to government.

Some localities in the United States and overseas have piloted programs to store data on a public blockchain. In 2017, Vienna, Austria, partnered with Ernst and Young to place the city’s open government data on a public blockchain, including about 350 datasets from public transportation routes to local voting results. In 2016, Cook County, Illinois, piloted a program to record the county land registry on a blockchain. The program identified the potential application of aspects of blockchain, such as the decentralized ledger, for improving access to house titles and other verified property data.

Blockchain Is Not A Panacea For Evidence-based Policy

While blockchain has promising applications, it is not a silver bullet for open data or evidence-based policy. The technology itself faces some implementation issues, including a steep trade-off between efficiency and decentralization. For example, Bitcoin’s proof of work mechanism currently requires roughly as much energy to run as a mid-sized country. This means the approach can be costly and that applying blockchain to large government-collected datasets would likely impose substantial costs and computational burdens.

Blockchain is most useful when data are high quality, which using this approach must be the case at the outset because it does not allow improvements in data quality since content cannot be altered. Cook County’s land registry, for example, was limited by loopholes in Illinois law which let some property owners never file reports on their properties. Any benefits of accessibility and decentralization can’t materialize when, in cases like this, quality data may never make their way onto the blockchain in the first place.

Blockchain technology also does not strengthen privacy guarantees or pledges of confidentiality for sensitive data. Other database solutions and privacy-preserving technologies, such as multi-party computation, should be considered for advancing privacy systems. The rules of a blockchain system enable some safeguards for access to information. But the approach is far from a cure-all for sensitive or confidential government-collected data that must adhere to strict laws and regulations.

Blockchain has promising applications in financial services and supply chain management. And while some form of decentralized ledger may eventually play a greater role in government’s open data, there are other, more rapidly advancing approaches to managing and using government-collected data that appropriately encourage both data access and privacy protections. Several of these approaches are identified in recommendations from the U.S. Commission on Evidence-Based Policymaking, providing more practical and comprehensive data reforms than the current state of blockchain technology can promise.

KEYWORDS: COMMISSION ON EVIDENCE-BASED POLICYMAKING

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