Will 2018 be the year for blockchain for government?

Government application of the ledger technology lags behind the hype, but expect more experiments to take off in the coming months.

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While 2017 was the year everyone in government talked about blockchain, 2018 may finally mark the year of action.

For all the discussion and hype, there are few use cases of the technology to highlight. Jose Arrieta, former director of the General Services Administration's IT Schedule 70 Contract Operations, told FCW in a November 2017 interview that GSA's use of blockchain to automate and speed up contracts review for its FAStLane program was -- as far as he knew -- the only actual proof of concept of a blockchain enabled system in the federal government.

Arrieta is one of a handful of government officials who spent much of 2017 educating the public -- and federal agencies -- on how the technology works and how it could be applied. He acknowledged that there remains an education gap among federal decision-makers around blockchain, but believes the enduring confusion is less about the technical details and more about its potential to upend established business and bureaucratic processes.

"When you actually look at it, one of the things that you'll realize is [blockchain] is actually not technologically that hard to understand," said Arrieta, now deputy assistant secretary for procurement and acquisition at the Department of Health and Human Services. "It's just a 100 percent paradigm shift in the way that business is done, and that is what's so hard to understand."

Arrieta said this shift is in large part due to the immutability of data stored on the blockchain. That reliability and accuracy not only allows agencies to confidently share and use the same data, but also facilitates a level of automation that can drastically shrink the paperwork and bureaucratic red tape involved in government projects that go through multiple and complex layers of interagency review.

"Because you have accuracy as it relates to that record, it gives you a ton of flexibility to interact with multiple parties, or in our case, agencies," he said.

Still, the gap between hype and adoption in the federal government remains large, and not everyone is sold on the technology's transformational potential.

In a Dec. 22 post on Hacker Noon, Kai Stinchcombe, CEO and co-founder of True Link Financial, argued that proponents are unable to point to viable examples of blockchain at scale in the private or public sectors because no one has yet been able to translate the technology's potential into an actual use that is measurably better or more efficient than the status quo.

Stinchcombe documented a range of examples, from micropayments and bank-to-bank transfers to smart contracts and distributed storage, where implementation in the private sector has failed to deliver on expectations or created tradeoffs that most institutions find unacceptable.

"Blockchain enthusiasts often act as if the hard part is getting money from A to B or keeping a record of what happened. In each case, moving money and recording the transaction is actually the cheap, easy, highly-automated part of a much more complex system," he wrote.

Still, there are signs that 2018 may be more fruitful. Mark White, principal at Deloitte, said he has seen a shift among federal agencies in the past six months. While adoption remains low, he said that is true for virtually every other sector and that globally, governments are among the leaders in blockchain adoption behind the financial services industry.

"If we move the lens to the U.S. government, while the majority of the work being done is still…prototypes or early stage pilots, the stance is very aggressive," said White. "Throughout the government, I actually can't think of a major department that is not at least exploring or experimenting with it."

A look at GSA's Emerging Technologies Atlas page, which tracks the application of new tech throughout the federal government, shows that while interest is high, many agencies are still in the research and evaluation phase and exploring where the technology may be best deployed.

A select few appear ready to move to implementation, however.

The Department of Defense currently is working to create a new digital supply chain powered by 3D manufacturing. The department envisions a system where individual parts and products are digitally shared, and believes that blockchain ledgers will help protect this new solution from cyber attacks.

The Center for Disease Control spent much of 2017 working on proofs of concept to use blockchain to better manage and automate the interplay between its fragmented and labor-intensive data systems. Officials believe development of usable applications in 2018 is a real possibility.

The Office of Personnel Management put out a Request for Information in September 2017 for a new Federal Employee Digital Record System to house all federal employee data that includes a preference for solutions that leverage blockchain technology.

Finally, the Department of the Treasury has engaged with a contractor in a pilot project to develop a prototype blockchain to manage physical assets (such as computers and cell phones), noting the technology has "great potential for streamlining burdensome reconciliation operations that are involved in many financial transactions."

Wendy Henry, specialist leader and federal blockchain expert for Deloitte, said the government will likely move more quickly to adopt the technology in areas like supply chain management and identity management. White said Deloitte is preparing for and banking on greater contract activity around the tool over the next year.

However, Henry said roadblocks, such as how agencies work out payment and budget responsibility as well as the lack of ownership inherent in the blockchain, create regulatory and policy implications that will need to be fleshed out before moving on to wider applications.

"I think in government we're still between that explore and experiment stage," said Henry. Officials are coming around to the idea that "while technology is driving the transformation around what blockchain is and can be, there are a ton of other things that need to work together for a solution to drive the value it can drive."

That means that even as enthusiasts stand behind blockchain's vast potential over the long term, application in government over the next year will likely be confined to smaller, more isolated instances as agencies continue to experiment and build viable use cases to support broader adoption in the future.

"I think that the key with blockchain [right now] is not to reimagine how you can redesign your entire technology infrastructure," said Arrieta. "The key is to ask yourself dispassionately 'can this help me solve a problem?' And if it can, let's try to do it in a very small fashion."

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