Blockchain: A Free Market Solution to Government Burden

by Timothy Howland / /

The path to reducing government regulatory burden has long been plagued with roadblocks and false bridges. In the name of security and oversight, government mandated solutions can be bogged down in paperwork, staffpower, and departmental obscurities that cause even the simplest task to become an onerous undertaking. However, newly viable public technologies show promise that reducing this burden, and excess budgetary waste, is within reach.

Regulatory burden comes as no surprise to most of us, as anyone who has filled out the wall of forms at their local DMV can attest to, but what is the solution? Government has made many attempts to reduce paperwork and regulatory strain through technology, but was not immune to implementation failures, and still has issues with basic services even today. The trials of modernizing traditional government tasks, such as being able to pay your taxes online or renewing a vehicle’s registration on the DMV website, has done little to reduce agency encumbrance. In some cases the result has been increased failure and cost. Embracing modern technology could not break the federal government of its worst habit; central control under singular faulty systems.

When digital data is stored in one primary location, it relies on the continued service and upkeep of that location to work properly. If the location is compromised, loses power, or needs an update, the system is offline to users. The maintenance of these in-house server centers is costly, and the rise of public cloud servers such as Amazon’s AWS or Microsoft’s Azure show that businesses are smartly choosing to rent digital space in multiple locations instead to save on costs, guarantee uptime, and a lower upkeep burden.

However, the federal government has been slow to adapt to cloud technology, choosing instead to run government services on expensive servers paid for by taxpayers. Though this ensures sensitive data is only housed on government property, it leaves government simply incapable of keeping its technology up to the par of modern business. For the taxpayer this means high costs, slower processing times, and less secure data. In cases of tax fraud or a missing document, it also leaves the taxpayer in a “my word versus yours” with the federal government, an often daunting and uphill battle.

Solution: The Distributed Model

So how do we address these issues without disrupting the system financially and adding burdensome overhaul? The answer is the Blockchain.

Unlike the current server model employed by the government, the Blockchain is a distributed model. In its simplest form, the Blockchain is like a globally shared spreadsheet from millions of public locations. Each of these locations constantly talks to each other to ensure that each location is up to date. It is immutable and incorruptible by design and can hold any piece of important digital information. Think of it like a shared google spreadsheet where only one person can edit, but millions of people are tracking changes and keeping an updated copy. In short, it is a public notary with millions of approvals per transaction.

You may have heard about the Blockchain by way of its largest social commodity; Bitcoin. Bitcoin is the digital currency that has both reimagined global economies and frustrated authorities. While the two technologies are heavily intertwined, it is important to note the differences. While Bitcoin is an anonymous digital currency, the Blockchain is the system on which Bitcoin is built for success.

An easy analogy to explain the difference would be between email and the Internet. Email is the product you are using and the Internet is the systemic backbone that guarantees email delivery. When connected to the Internet you are confident of your email’s ability to be delivered due to its structural integrity. Bitcoin and the Blockchain offer a similar hierarchy. Bitcoin is the surface product that sits upon the structure that Blockchain offers.

Unlike basic Internet connection, Blockchain is so secure that it has allowed a global economy to exist on the faith of its system. Banks, governments, and private corporations have invested heavily in this open sourced system and have been rewarded; as of January of this year, 1 bitcoin = 1135.99 USD.

Benefits of a Collective Digital Ledger

This faith exists due to the collective digital source that the Blockchain operates on. Not only is a transaction between two parties verifiable by millions of machines as “digital notaries,” the transaction is assigned a publicly identifiable key. Any party can use that key[1] to look for differences in the record amongst the millions of machines that have recorded it and can do it for free in an open source search. This means records are transparent, undisputable, and easy to navigate. They are also ever-present; if 100,000 servers went down a record could still be matched on the next 900,000. Contrast that with the singular server system currently used and you can see immediate uptime benefits.

Imagine the benefit this could have with an IRS dispute. With records such as your payment to the government and W-2 on an indisputable transparent record, any error in accounting due to the taxpayer’s input or misprocessing by the IRS would be immediately identifiable from a simple search with the transaction key. No legal teams, no government oversight, just immediate transparency. The Blockchain transaction removes the burden of proof from either party involved in the dispute. This reduces the burden of the IRS, thus saving taxpayers money and reducing the budget necessary for the IRS to operate.

This policy is implementable in nearly every federal program where transparency of public record and public finances are at risk. Foodstamp programs on the Blockchain would have immediate checks on all transactions. Earmark receipts and budgeted programs for public works would have indisputable receipts and records. The game of government “telephone” when reporting records internally or publicly would come to an end.

Why Blockchain Now?

Why not? The technology has already been developed and is open source. Implementation costs are cheap, and would cause very little overhaul to current systems. Blockchain technology is not a disruptive technology. It does not exist to overthrow the current systems, but make them more efficient. Private companies like Bitfury are already guiding foreign governments to success digitizing paperwork through the Blockchain and serve as a great case study for our own implementation.

Most importantly to taxpayers, it’s inexpensive, it’s publicly maintained, and it lowers the burdens of government.

[1] * The key and secure hash created with each transaction is similar to a banking password, the information in the transaction is only accessible with this secure key and allows for anonymity and security when transferring sensitive information.