GAO Outlines Potential Benefits, Challenges of Blockchain in Government

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The Government Accountability Office (GAO) highlighted the potential benefits and challenges of implementing distributed ledger technologies (DLT) – like blockchain – in government, in a report released today.

GAO said that DLT offer certain opportunities that agencies can take advantage of:

  • “Transparency. Because any user can view the ledger, DLT may result in benefits such as reduced corruption.
  • Reduced labor costs. DLT reduces or eliminates the need for human workers to track data.
  • Data quality and reliability. Transaction information is automatically generated by a computer, which may reduce errors.
  • Wide applicability. DLT is being explored for use across many sectors, including supply chain and logistics, news, energy, healthcare, and government.”

Despite the benefits, GAO also listed a number of challenges that come with implementing DLT solutions. These include excessive energy usage and cost of operation, since some DLTs require large amounts of computing power and energy to create new units of cryptocurrency; collusion and security concerns; and a lack of regulation.

Elements that may offer benefits, such as permanence and transparency, also create some challenges.

“While the permanence of transactions may be a core strength of DLT, it can also be a weakness should an entity find that it needs to regularly correct errors in its ledger, as it would be unable to easily do so with DLT,” GAO said, adding that “Because DLT can be used without a central authority, governments may feel uncomfortable allowing cryptocurrencies (or other DLT) to be used as  a method of exchange or contracting, since they cannot easily be tracked and could be used to facilitate illicit activity.”

For creating policy around DLT, GAO recommended that lawmakers consider questions, such as:

  • “In what situations is DLT useful, and when should it be avoided or used with caution?
  • To what extent can DLT be used to facilitate illegal activities, and how might policymakers mitigate such use?
  • How are Federal agencies evaluating and using DLT?”

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