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Blockchain’s Potential Impact on Federal Agencies

The panelists discussed blockchain technology's potential to transform federal government business processes.
The panelists discussed blockchain technology’s potential to transform federal government business processes.

The Northern Virginia Technology Council (NVTC) recently presented an expert panel discussion on blockchain technology’s potential to transform federal government business processes. Kudos to the panelists for making this mysterious and quickly-evolving technology a bit less formidable.

At the most basic level, blockchain (also referred to as “distributed ledger”) stores transactions in a growing set of blocks (records) that are securely linked together, and enables complete transparency of any actions that occur in the chain―making them visible and trustworthy. The blockchain technology layer sits on top of existing networks, and enables new combinations of proven technologies to be put to new use. Public chains are permission-less―anyone can participate; private chains are permission-based and governed by access rules.

Already used in other countries, the panelists say blockchain could be the next big thing for government here at home. The key to adoption will be the value to the specific use cases where blockchain is applied. Supply chain sourcing, where third parties are regularly involved, is a prime use case that several panelists referenced; for instance, reducing fraud, waste and abuse in food stamp programs, verifying authenticity and accuracy of outsourced spacecraft parts for NASA, or tracking project grants issued by USAID. The greatest value will be for environments where processes must be scaled; for example, starting with supply chain visibility, then adding dispute resolution, and then payment processing.

Here are a few of the specific insights from the event:

  • Mark Fisk, Partner and Blockchain Leader for IBM’s Public Service division, explained that it’s best to start a blockchain initiative with the business ecosystem―understand what the common goal is and where trust, transparency and visibility issues need to be solved.
  • Susie Adams, CTO of Microsoft Federal, noted that because blockchain is immutable, the technology validates that everyone is playing by the rules, which is a huge value-add for government purposes. It can also help lower costs through incenting higher performance or reducing middlemen in multi-party transactions.
  • Sherri Sokol, Innovation Leader at the Defense Information Systems Agency (DISA), discussed challenges she is facing with stakeholders’ reservations about blockchain, often due to myths or erroneous assumptions such as equating blockchain with Bitcoin cryptocurrency (they are different). She sees many potential government use cases – in healthcare, identification support, supply chain, and in interoperability as transactional federations develop and need to intersect.
  • Patrick South, Senior Manager, Accenture Federal, described the opportunity with digital supply chains, where code could be traced back to a given developer, greatly increasing security.

While there are myriad potential opportunities, blockchain is still in its infancy and not ready for enterprise deployment quite yet―but according to the panelists, it soon will be. Governance is seen as the biggest adoption hurdle; trust will need to be designed into the system up-front, accommodating factors such as the business case, existing business process, appropriate data modeling and dispute resolution procedures. Access permissions will need to be carefully allocated; and with public-private applications, the government may not own the blockchain, limiting its control.

A major challenge will be the disintermediation of some third parties. There are established industries that facilitate government transactions, and they’re not going to go quietly. The panelists compared current fears with those seen around early cloud computing adoption; Fisk specifically acknowledged that disintermediated companies will need to re-determine their value to stay relevant. Formal challenges to blockchain initiatives are already being seen at some state government levels.

The lack of standards complicates blockchain interoperability, but standards are under development by organizations such as W3C, the ISO/TC 307 working group and the Department of Homeland Security’s Science and Technology Directorate.

Security is another stakeholder concern, although the panelists noted that blockchain doesn’t introduce any more security risk than already must be defended in existing IT infrastructure. Sokol explained that good cyber hygiene requires the same protocols and procedures regardless of the systems in use.

Despite these early challenges, the panel sees unprecedented collaboration between government and business around the blockchain opportunity. The current market is especially good for smaller businesses. A Congressional blockchain caucus has been established, because policy will be needed to drive required changes to the playing field. While it will take time, blockchain’s potential across a myriad of use cases can ultimately drive greater efficiencies and improved trust in federal level operations.

Kathy Stershic is a Senior Director of Content for W2 Communications. She has earned two certifications, Certified Information Privacy Manager (CIPM) and Certified Information Privacy Professional – US (CIPP-US), from the International Association of Privacy Professionals. She writes and speaks on privacy implications for marketing in the digital age.