What blockchain technology means for local city administrators

Written by Andy Castillo

Over the last decade, cryptocurrency has evolved from a fringe millennialist hobby and conversational ice-breaker to a daily reality of modern-day life. The implications of emerging digital currencies like Bitcoin and Ethereum—which exist via a transaction tracking technology known as blockchain—are sweeping, affecting everything from private purchases to the way local governments conduct business.

Bitcoin, in particular, made national headlines a few weeks ago when the FBI was able to digitally recover 63.7 of the 75 bitcoins (approximately $4.4 million) paid as ransom during Colonial Pipeline hack. But while digital currencies might seem at first glance to be a little more glamourous, government entities across the nation are taking note of blockchain technology, which serves as the backbone of cryptocurrency and could be implemented into everyday transactions like tracking home purchases or tracing objects in the supply chain of a large-scale government purchasing system.

“Blockchain will empower cities to innovate how they work with local businesses, and invest in and improve efficiencies across many areas, such as transportation, energy and voting. Beyond city operations, blockchain promises to innovate the way we start businesses, structure investments and account for wealth creation and exchanges,” reads a report on the technology created by the National League of Cities.

When used within municipalities, blockchain allows “agencies to create a single, trustworthy collection of digital identity documents. These documents make it easier for government officials to reconcile data conflicts and provide citizens with control over their own identity,” explains an information sheet distributed by IBM. This “trustworthy” digital chain is comprised of a series of timestamped blocks, with each one linked to the previous block.

In practice, blockchain acts as a linear ledger that can sequentially and securely track individual transactions.

Cook County, Ill.—the second largest county in the United States—began real-world experimentation with blockchain in 2017 as a way to transfer and track property titles and other public records. In a 2018 report from the county’s Bureau of Technology, the board explained it’s reasons for the pilot project: “By design, blockchains are inherently resistant to data modification; once recorded, the data in a block cannot be altered retroactively. This increases security.”

Cities and counties across the nation are following suit.

From Miami to Reno, Nev.; to Jackson, Tenn., American mayors are putting forward initiatives to try and get ahead of the rapidly advancing technology. Most recently Wednesday, the Texas Blockchain Council announced the recent passage of two pieces of blockchain-related legislation: the “Blockchain Work Group Bill” (HB 1576) and the “Virtual Currencies Bill” (HB 4474).

The first bill “mandates the establishment of a Blockchain Work Group for the state of Texas, comprised of legislators and private citizens with subject-matter expertise on blockchain technology, in order to formulate blockchain-related policy recommendations for the state,” according to a news release about the development.

The second piece of legislation “updates the Texas Uniform Commercial Code to define virtual currencies, how control over such currencies is established, and how a security interest in a virtual currency is perfected.” The bill also clarifies how a virtual currency would be used to make payments and in loan disputes.

In a statement, Lee Bratcher, president of the Texas Blockchain Council, said the successful implementation of the bills, which were signed into law last month, are a step toward “making Texas a leader in blockchain innovation.” The legislation is an “opening salvo letting the world know that Texas is open for blockchain business,” said Natalie Smolenski, who serves as chair of the council.

And it’s not just the state of Texas that’s thinking more broadly about blockchain: More than 30 states across the nation have pending blockchain-related legislation in the 2021 legislative session, according to the National Conference of State Legislatures.

As communities emerge from a year spent mostly online, driven into the digital realm by the ongoing pandemic, officials in cities of all regions and sizes are returning to transformed offices. Transactions that used to be completed in-person are now done online. And as the world presses forward into the digital era, there’s no going back.

Blockchain technology has the potential to revolutionize public service delivery and operation, making it more efficient, flexible and transparent.

Amid this emerging reality, while it’s still new, blockchain technology “can help to remake our economy, our society and our public institutions,” the report from the National League of Cities says.