How State Governments Can Harness the Coming Blockchain Revolution

In the last few years, blockchain has emerged with the promise to revolutionize how states conduct procurement and finances, and it has been hailed as a way to increase trust and transparency across government. Now, a recent survey by the National Association of State Chief Information Officers provides an update on how the new software is making digital governments possible — and moving state and local agencies into the next century of government operations.

“Blockchains have the potential for opening up new markets; for allowing any participant to enter into business whether they have a lot of capital or very little capital. Blockchains open up the global economy to everyone from large communities down to small rural communities,” the report notes.

So how are state governments approaching adoption? We’ve pulled some highlights from the survey on the state of the emerging technology.

Where Does Blockchain Adoption Stand?

While there is much promise around the transformational technology and its application in the public sector, it’s still early days for blockchain.

A handful of early adopters, like Delaware and Illinois, are leading the way in introducing the technology at the state level, but these pioneers are proving to be less than 5 percent of the CIOs surveyed.

What’s promising is that the majority of CIOs, 63 percent, are investigating the technology and its application through informal discussions, the survey finds. Another 5 percent are having formal discussions on the technology.

What Are the Local Government Use Cases?

So, if you’re beginning informal discussions, where should you begin to look to focus your efforts? The report highlights a few examples:

• Property - encode and confirm/transfer of property

• Financial - transfer of currency, stock, private equity, bonds, derivatives; facilitate crowdfunding

• Public Records - managing the lineage of land titles, vehicle registries, business licenses, passports, voter IDs, death certificates, proof of insurance

• Private Records - managing and executing contracts, signatures, wills, trusts, escrows

• Physical Asset Keys - managing access to home, hotel rooms, rental cars, private car

While there is immense possibility for blockchain, governments should be careful to survey what’s possible before forging ahead.

“For example, some proponents have recommended blockchain technology for managing grants. That application is probably not a good choice. One reason is that many, if not most, applicants for grants are already challenged regarding technology investment and capabilities. They simply could not participate in a blockchain,” the report states.

For this reason, governments should focus early efforts around the technology on a permissioned network, as permissionless networks will require immense computing power.

How Can You Get Started?

While best practices, standards, legislation and regulations aren’t yet set around the technology, blockchain is coming and state governments should prepare for its adoption. Moreover, the report notes that the technology has the potential to be disruptive if not approached with a clear roadmap to guide investment.

The report lays out six early-stage recommendations for local governments eyeing the technology:

1. Begin research of blockchain technology and economics now so states can begin to grow their knowledge.
2. Given this basic knowledge, begin to explore some potential use cases to better understand how blockchains may disrupt or enable your organization.
3. Consider developing a preliminary strategy on how you could adopt blockchain technology for future use.
4. Create a state stakeholder group (from both business and technology) to inform the preliminary strategy.
5. Identify relevant use cases to harvest the benefits of blockchain technology for your organization.
6. Develop or join a collaborative with other organizations to share understanding and explore blockchain opportunities. Share knowledge and experience regarding cost reduction and innovation.