Blockchain Has Potential to Redefine Data Economy

By: Henry Rademacher

On Thursday, December 5, The Congressional Internet Caucus Academy held a panel discussion on blockchain, a rapidly evolving digital ecosystem expected to play a major role in the future of the global economy. The event was moderated by Lydia Beyoud of Bloomberg Law. 

A blockchain is defined as “a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network.” Essentially, a blockchain is a list of records connected through cryptography and maintained by a peer-to-peer network of moderators who are collectively responsible for verifying new blocks. Although blockchain is most commonly associated with cryptocurrencies, it can theoretically be applied to any service that requires data storage. Therefore, it has the potential to be used in virtually every sector of the economy.

The event began with a discussion of online privacy and the role that blockchain can play in improving digital security for both businesses and consumers. Amy Davine Kim, chief policy officer at the Chamber of Digital Commerce, described the internet as “very insecure” and stated that blockchain can be “transformational” in improving security.

The technological specifications of how will improve online security are complex. According to the MIT Technology Revue, there are two unique features that make blockchain secure, “a cryptographic fingerprint unique to each block, and a ‘consensus protocol,’ the process by which the nodes in the network agree on a shared history.” 

Although blockchain has frequently been described as inherently more secure than traditional methods of online data storage, the past few years have seen several high profile cases of blockchains being hacked. Kim clarified that blockchain should be thought of as a “base layer,” upon which various software applications can be developed. She believes that, in the long run, blockchain will substantially improve online security.

Next, the panel discussed the implications blockchain could have on digital identity, “an online or networked identity adopted or claimed in cyberspace by an individual, organization or electronic device.” Digital identity can be problematicbecause digital nuisances such as malware can cause individuals to have false or misleading information associated with them online that is not actually a part of their identity. 

The panelists were in agreement that blockchain can make digital identities substantially more reliable. Dan Bachenheimer, principal director of Accenture Security, stated that, in an ideal blockchain-based system, digital identity would consist of “identity attributes that are signed by a trusted agency.” He added that an “identity wallet could have hundreds of attestations in it” with no central repository but the individual holding all of that information.

Kim pointed out that an individual’s digital identity is already dependent on “third party validators of who you are.” These validators vary wildly in terms of accuracy. Therefore, it is reasonable to think that, in the future, a blockchain based system of validating digital identity could benefit consumers and businesses. 

James Cross, vice president of product strategy at Workday, spoke at length about the applications blockchain will have in the business world. He believes that it will have a massive and beneficial impact on businesses, employees, and consumers. 

He stated that consumers are “increasing (their) awareness of data privacy” and that they “increasingly expect to be in control of their career data and they want to know how their data is being used and they want to get utility from their own data.” As consumers’ concerns about their data continue to increase, businesses involved in the data ecosystem will need to adapt to the changing market.

Cross’ employer, Workday, is a multi-billion-dollar software vendor and developer. They have been at the forefront of utilizing blockchain in data software marketed to corporations. According to Cross, Workday’s goal is to “solve problems for our customers and do so in a way that puts users in control of their data.” 

Tiffany Angulo, legislative director for Representative David Schweikert (R-AZ), echoed Cross’ belief that blockchain can empower consumers. She stated that it has the “potential, as we’re seeing, (to) empower the individual” and “help (consumers) have more say” in what data is shared with others

Regarding what needs to happen for blockchain to reach scale in the marketplace, Bachenheimer stated that there needs to be governance sufficient to encourage consumer trust. He praised the eIDAS system, “a European Union regulation that establishes standards for electronic identities, authentication and signatures” within the European Single Market. Although eIDAS is a fascinating concept, similar regulations are not practical for the United States.

Given the current regulatory climate, it is unlikely that federal legislation mirroring eIDAS could be passed in the United States. eIDAS has also suffered from security flaws and concerns over government overreach. Dr. James Shook, mathematician at the National Institute of Standards and Technology, stated that NIST is “nowhere near setting a government standard” on blockchain policy. 

The question of scalability will be important for the future of blockchain. Financial investment in blockchain is extremely high and expected to continue growing. However, it is not yet a ubiquitous feature in systems of data storage, the networks for which it is most commonly described as a killer app. Financial institutions have led the way in private sector blockchain investment, and it is not yet an essential component of the global financial system. 

Although blockchain has not yet revolutionized the global economy, all of the panelists at Thursday’s event believe that it will in the future. Change takes time, and the huge amount of capital invested in blockchain show that the private sector is bullish on its economic potential.

It has also been suggested that blockchain can save taxpayers a large amount of money if governments adopt it, because it is cheaper than traditional methods of data storage. However, cost analysis remains inconclusive. 

In summary, blockchain has the potential to revolutionize data and data economics in a number of different ways. It can, potentially, increase security across the board. It can, potentially, empower individuals to have more control of their data. Most importantly, it can be applicable to practically every sector of the economy, since data collection and storage is now an economic universality. 

Photo credit: TLC Johnson (flickr)