Blockchain: Emerging Technological know-how Gives Positive aspects for Some Applications but Faces Challenges

What GAO Located

Blockchain combines various systems to give a trustworthy, tamper-resistant history of transactions by multiple events without having a central authority this kind of as a financial institution. Blockchain can be used for a selection of money and non-money applications, like cryptocurrency, offer chain administration, and lawful information. GAO discovered that blockchain is useful for some apps but constrained or even problematic for other people. For instance, for the reason that of its tamper resistance, it may possibly be valuable for purposes involving lots of members who do not necessarily have faith in each individual other. But it may well be overly advanced for a few dependable buyers, in which standard spreadsheets and databases might be more valuable. Blockchain may well also existing protection and privateness challenges and can be power-intense.

Blockchain has a vast selection of likely non-money uses (see figure).

Blockchain has a lot of probable non-fiscal purposes

For case in point, it could be applied to arrange source chains, develop less hierarchical corporations, and document title registries for serious estate. Nevertheless, most this kind of endeavours are not nonetheless past the pilot phase and encounter troubles. For instance, most blockchain networks are not created to be interoperable and can’t converse with other blockchains. Organizations that want to use blockchain also deal with legal and regulatory uncertainties, and have observed it hard to find skilled staff to put into action blockchain.

Money apps of blockchain have the possible to lower expenditures and boost obtain to the monetary procedure, but they also facial area multiple difficulties. Cryptocurrencies, most likely the most extensively recognized application, are a digital illustration of worth protected by cryptographic mechanisms, which facilitates payments. Some are identified for volatility (i.e., recurrent or immediate adjustments in worth), but a type regarded as stablecoins may help decrease this risk. Similarly, an rising location regarded as decentralized finance delivers providers such as blockchain-based lending and borrowing, which also facial area numerous worries. For example, blockchain-primarily based monetary programs can aid illicit action, could lower buyer and trader protections in contrast to conventional finance, and, in some conditions, are matter to unclear and complex guidelines.

GAO developed four plan alternatives that could assistance enhance added benefits or mitigate difficulties of blockchain technologies. The policy selections discover possible steps by policymakers, which may include things like Congress, federal organizations, state and nearby governments, tutorial and study institutions, and field. In addition, policymakers could pick out to keep the status quo, whereby they would not choose supplemental motion beyond any present-day endeavours. See beneath for facts of the policy solutions and pertinent possibilities and criteria.

Policy Selections That Could Support Boost Positive aspects or Mitigate Issues of Blockchain Systems

  Options Criteria

Criteria (report p. 38)

Policymakers could collaborate to unify standards that focus on the improvement, implementation, and use of blockchain systems.

  • Could simplify fragmented specifications and enable identify gaps and lower overlap in standard-location initiatives.
  • Could recognize the spots in which criteria would be most helpful across various sectors of the overall economy or applications of blockchain.
  • Could enable deal with troubles close to interoperability and information safety.
  • Could need consensus from a lot of general public- and personal-sector stakeholders, which can be time- and useful resource-intensive.
  • May not be crystal clear which entities really should take the guide in establishing internationally identified specifications for various technologies and software places.
  • May perhaps need new funding or reallocation of existing methods to assistance new initiatives.

Oversight (report p. 39)

Policymakers could clarify current oversight mechanisms, such as rules, or make new mechanisms to make certain ideal oversight of blockchain programs.

  • Obvious, field-precise U.S. oversight frameworks could present the clarity required for persons and companies to extra properly engage in blockchain-related commerce in the U.S.
  • Policymakers, like regulatory entities and developers, could use equipment to make oversight mechanisms in addition to testing revolutionary items and products and services.
  • Could present coordinated and timely clarity to boost security and soundness, consumer protection, and compliance with applicable legislation and laws to battle illicit activity in blockchain-associated commerce.
  • Policymakers will need to have to determine the suitable level of oversight. Intense oversight could hamper innovation and levels of competition as the know-how matures, whilst too minimal oversight could go away people and enterprises unprotected.
  • Soliciting enter throughout a selection of stakeholders in different sectors may perhaps be time consuming and tough.
  • May demand new funding or reallocation of existing methods.

Educational components (report p. 40)

Policymakers could assist the advancement of academic materials to assist users and regulators improved comprehend blockchain technologies past present monetary apps.

  • Could empower instructors to teach a workforce qualified in developing, implementing, and utilizing blockchain-centered solutions.
  • Could raise consumer literacy and help minimize detrimental community perceptions of blockchain.
  • Could encourage significant considering and innovation, as properly as prompt revolutionary exploration and enhancement.
  • Could aid prepare policymakers to greater use and control the most up-to-date technologies.
  • Academic products will possible require to be personalized to fulfill a huge wide range of discovering demands throughout multiple goal audiences.
  • May possibly be tricky to determine who could most proficiently create instructional elements for any distinct goal viewers.
  • May have to have new funding or reallocation of current sources, primarily to handle the require for schooling about innovative works by using of blockchain further than existing fiscal purposes.

Ideal uses (report p. 41)

Policymakers could support functions intended to identify whether blockchain is proper for attaining unique missions and objectives or to mitigate precise problems.

  • Actively investigating in which and when blockchain would be the most valuable could let entities to seize the comprehensive added benefits the technology might provide.
  • Supporting blockchain use, wherever suitable, could improve transparency and accountability of current methods and companies.
  • Legal or regulatory uncertainty may hinder some possible people from benefitting from blockchain.
  • Could be difficult to revert to a non-blockchain technological innovation once an entity has invested a substantial amount of money of time and assets.
  • May perhaps demand new funding or reallocation of current sources.

Source: GAO. | GAO-22-104625

Why GAO Did This Research

Economies count on central authorities and dependable intermediaries to aid business enterprise transactions. Blockchain is a engineering that could minimize the need for these types of entities even though establishing a program of verification. It may consequently make improvements to a wide variety of economic and non-financial programs. Having said that, the use of blockchain technologies raises a variety of moral, legal, financial, and social problems.

GAO was requested to carry out a technological know-how evaluation on the use of blockchain, with an emphasis on foresight and policy implications. This report discusses (1) non-fiscal applications of blockchain, including potential positive aspects and worries, (2) fiscal applications of blockchain, together with likely gains and troubles, and (3) plan options that could support enhance advantages or mitigate worries of blockchain technologies.

GAO assessed blockchain applications designed for or applied in finance, governing administration, offer chain administration, and corporation administration interviewed a assortment of stakeholder groups including governing administration, market, academia, and a undertaking funds business convened a meeting of experts in collaboration with the Nationwide Academies of Sciences, Engineering, and Medication and reviewed crucial stories and scientific literature. GAO is figuring out policy solutions in this report.

For a lot more details, speak to Karen L. Howard at (202) 512-6888 or [email protected]