America Needs a Blockchain Strategy ASAP

The news is rife with wild promises made by blockchain advocates and the exaggerated suspicions of its opponents. By enabling the creation of cryptocurrencies such as bitcoin, ether, and XRP, blockchains have made some people fabulously wealthy while also, at times, facilitating fraud and money laundering. Although the technology is still in its early stages, we can attest—not least, because one of us serves on the board of a financial technology company that developed one of these cryptocurrencies—that it has enormous potential.

But so far, little has been written about the blockchain’s potential uses in the national security space, where blockchain technology could be enormously useful. If mishandled, however, it could also pose dangers. To maximize the former and mitigate the latter, it would be wise for the United States to take advantage of its early technological lead before competitors inevitably catch up. Fortunately, there are myriad ways it could do so.

First, a brief introduction to the basic technology: The blockchain is a decentralized ledger distributed across a network of computers, or nodes, that records transactions in real time. It adds new and unique “blocks” to a “chain” after the transactions are verified through consensus across the network. In simple terms, if Bob pays Jen, each computer in the network will receive a detailed record of the transaction, with sensitive information encrypted, and will then verify that Bob has sufficient funds and hasn’t already spent them elsewhere. After being confirmed, the transaction is permanently added to a block of other verified transactions and attached to the end of the chain, making it unalterable, easy to trace, and exceedingly difficult to forge.

The blockchain is sometimes described as a “trustless” system. It eliminates the need for banks or other middlemen, because every node verifies and re-enforces each transaction, logging a history that is both public and immutable. It cuts costs for users and, in some cases, increases speed and efficiency. Although many blockchains (such as bitcoin and ethereum) currently can only process a fraction of the number of transactions per second that major credit card companies can, there are efforts underway in the industry to speed up the process. 

Blockchains could revolutionize sectors including financial services, health care, data storage, and corporate supply chain management. They also have important applications for national security.