Blockchain is a revolutionary technology that secures critical data. It is a system in which a record of transactions made in bitcoin or another cryptocurrency are maintained across several computers that are linked in a peer-to-peer network. Each transaction, or block, is an addition to the chain and verified by the specific blockchain network. Blocks cannot be altered, manipulated or deleted, which is what makes blockchains secure, reliable sources of transactional information.
There are many applications of a blockchain, but the most common is cryptocurrencies like bitcoin. While blockchain has become more common in the financial industry, governments are now exploring other applications that can save money and improve local services.
1. Payment Processing
One area where governments are exploring blockchain is payment processing. Currently, the process of sending and receiving money can take up to 72 hours to clear. When consumers, businesses or government agencies make a payment, banks send the request to the ACH network. The ACH network sorts the transactions in batches. Up to 72 hours later, the money is made available to the recipient. The Federal Reserve has proposed using blockchain to dramatically reduce the time it takes to transfer funds. The proposed Fed Now real-time payments service would use the blockchain to process and verify fund transfers 24/7. The new service, set to launch in 2023, will mirror moves by governments in Europe and Asia. While there are few details at this time, in theory, Fed Now will make real-time payments available to all Americans.
2. Land Registries
One of the more innovative applications of this technology is in real estate. Managing databases to determine ownership of and rights to parcels of land is a complicated process. Databases are often managed by local agencies and property transfers require multiple parties to ensure the integrity of the process. Local governments are looking into how to make land registries more secure and transparent. The city of South Burlington, Vermont is working with startup Propy, Inc. to move all property transactions to blockchain. The system is being designed to reduce the cost and complexity of maintaining real estate documents. A separate goal is to eliminate the need for title insurance, which businesses purchase to protect against disputes over a property’s title. If the program is successful businesses will enjoy faster and more secure property transfers. Teton County, Wyoming is exploring a similar system. Blockchain has the power to completely transform land registries and the way we secure land ownership.
3. Securing Healthcare Data
The healthcare industry has been slow to embrace blockchain in part because there is a dense set of regulations protecting patient healthcare data. However, every year, $82 billion in counterfeit drugs enter the legitimate pharmacy pipeline. Those counterfeit drugs can seriously harm patients. Tracking counterfeit drugs is difficult given the complexity of the supply chain and large numbers of contract distributors. Poor communication across these parties makes it difficult to track specific drug deliveries to the point of origin. In response, the FDA is partnering with IBM, Wal-Mart, and Merck to use blockchain to secure the drug supply chain. The program will create a healthcare blockchain to track and trace prescription drugs. The system would allow pharmacies to trace the source of a specific bottle of pills and ensure it’s been properly stored. A test of this healthcare blockchain will be completed later this year. If successful, the project could increase consumer safety and lower supply chain costs.
Cryptocurrencies may or may not survive, but the underlying blockchain technology will eventually become mainstream. Any local government process that requires secure records of transactions has applications on blockchain. Blockchain allows local governments to provide a range of services more efficiently and securely.
Read more about payment security and other topics for local governments here.
Photo credit: MH&L