POLICY RECOMMENDATIONS Fiscal Health

Policy Recommendation 8:

States may consider how blockchain technology can be used in areas outside of currency exchanges such as in the agriculture, energy and insurance sectors.

The Fiscal Health Subcommittee approved this recommendation due to the various innovative potential uses of blockchain technology. They emphasized that security should be a top concern when dealing with new technology.

State Examples

West Virginia pilot tested the nation’s first blockchain-based mobile voting platform for the 2018 primary elections.5 Those involved casted ballots from cellular devices. Ballots were encrypted and stored on blockchain servers. At the close of polls, each ballot was printed and tabulated using certified equipment.

Colorado Senate Bill 086 promotes the use of blockchain technology for government record keeping. The bill recognizes that state public records are valuable targets for hackers and identity thieves. In 2017, the state’s cyber threat included up to 8 million attempted attacks a day.6 Colorado believes using blockchain will “offer transformative improvements to data security, accountability, transparency and safety.” how blockchain can be leveraged and expanded to enhance each of these economic sectors.”

— Chief Information Officer Shawn Riley, North Dakota

Blockchains are a new technology that is best known for enabling cryptocurrencies. However, blockchain does not have to relate to cryptocurrency and is promising due its heightened security and decentralized components. Blockchains are difficult to tamper with for three primary reasons:1

ƒ All activity is transparent and can be traced to the user.

ƒ Information cannot be changed or altered once recorded on the ledger.

ƒ There is no single-entry point to the database since blockchains are decentralized.

It can be useful to think of blockchain as a “next-generation” business process that, by removing the need for a central authority, can significantly reduce the cost of trust.2 Because the ledgers are immediately verifiable and tamper resistant, the time and cost of transactions can be reduced. This makes blockchain a promising technology for many industries. Agricultural professionals could track products though the supply chain and easily identify the source of a foodborne illness or validate organic claims.3 Financial services could substantially reduce transaction costs resulting in faster and cheaper settlements.4 Voting could even be done online via smartphone or computer with verifiable results. These cross-sector possibilities are still in the development stage and require significant research, design and infrastructure investment to be successful.

Additional Resources

ƒ PricewaterhouseCoopers: Making Sense of Bitcoin, Cryptocurrency and Blockchain — https://www.pwc.com/us/en/industries/ financial-services/fintech/bitcoin-blockchain-cryptocurrency.html

ƒ Brookings: Blockchain and U.S. State Governments-An Initial Assessment — https://www.brookings.edu/blog/ techtank/2018/04/17/blockchain-and-u-s-state-governments-an-initial-assessment/

ƒ Voatz: The West Virginia Mobile Voting Pilot — https://sos.wv.gov/ FormSearch/Elections/Informational/West-Virginia-Mobile-Voting-White-Paper-NASS-Submission.pdf

Endnotes

1 Stouffer, C. (2022, June 24). What is blockchain security? An overview. Retrieved November 8, 2022, from NortonLifeLock: https://us.norton.com/blog/privacy/blockchain-security

2 PwC. (n.d.). Making sense of bitcoin, cryptocurrency and blockchain. Retrieved November 8, 2022, from https://www.pwc.com/us/en/industries/financial-services/fintech/bitcoin-blockchain-cryptocurrency.html

3 Xiong, H., Dalhaus, T., Wang, P., & Huang, J. (2020, Feb. 21). Blockchain Technology for Agriculture: Applications and Rationale. Retrieved November 8, 2022, from Frontiers: https:// www.frontiersin.org/articles/10.3389/fbloc.2020.00007/full

4 PwC. (n.d.). Making sense of bitcoin, cryptocurrency and blockchain. Retrieved November 8, 2022, from https://www.pwc.com/us/en/industries/financial-services/fintech/bitcoin-blockchain-cryptocurrency.html

5 Moore, L., & Sawhney, N. (2019). Under the Hood: West Virginia Mobile Voting Pilot. Retrieved November 8, 2022, from West Virginia Secretary of State Marc Warner: https:// sos.wv.gov/FormSearch/Elections/Informational/West-Virginia-Mobile-Voting-White-Paper-NASS-Submission.pdf

6 Cyber Coding Cryptology For State Records, S.B. 86, Colorado General Assembly Regular Session (2018). https://leg.colorado.gov/bills/sb18-086