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By | December 15, 2017

Marie Wieck is general manager at IBM Blockchain, where she focuses on driving ecosystem growth around the Hyperledger Project and delivering enterprise blockchain solutions.

This article is an exclusive contribution to CoinDesk’s 2017 in Review opinion series.

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Governments are custodians of their citizens’ most precious information – their Social Security numbers, their tax information, their votes, their identities.

Now, a new technology is emerging that supports open government initiatives focused on unleashing innovation in the public sector. Using blockchain, governments can address the dual challenges of trust and transparency, and the need for data protection and privacy.

Citizens increasingly expect the same ease, efficiency and innovation from public services that they currently enjoy in the private sector. Conflicting data formats, longstanding interoperability challenges and a need to balance the benefits of openness against a need to protect privacy have made it difficult for governments to unleash the full potential of their data – until now.

Blockchain provides an immutable, transparent record of the truth, and it is changing how organizations carry out trusted transactions. Governments around the world are already exploring blockchain. For example, the U.S. state of Delaware is using blockchain to help companies incorporate.

Sweden is using the technology to test a land registry where property buyers and sellers, their banks and land registry authorities can all view and approve transactions on a blockchain in real time.

Dubai has set the ambitious goal of running its entire government on blockchain by 2020, digitizing all public documents onto this ledger to speed and increase capacity for new transactions.

Estonia has been heralded as the first government to embrace blockchain, initially with a focus on cybersecurity, but now also for citizen services like e-voting.

China put a ban on initial coin offerings (ICOs) and has been questioning the use of blockchain with respect to cryptocurrencies, but is more positive about its other, non-currency, use cases.

Japan has sanctioned the use of bitcoin and is looking at the opportunity for its own digital currency while Venezuela recently launched a crytopcurrency in an attempt to circumvent financial blockades.

The U.S. has convened a summit on the subject of blockchain, and the recent approval of the defense spending bill includes provisions for modernizing government technology specifically allowing for the exploration of blockchain.

Tip of the iceberg

These examples, however, are just the beginning.

2018, IBM believes, will be the year blockchain becomes an accepted and appreciated innovation for government, a year when the global public sector begins to look closely at this technology and a year when citizens begin to see its effects on the issues that affect them.

The fact is, blockchain is coming to the public sector.

This is revealed in a survey conducted by the IBM Institute for Business Value of more than 200 regulators in 16 countries focused on building trust in government and reducing bureaucracy. Among those regulators, 14 percent surveyed were already “explorers” with blockchain pilots in progress, and a full 90 percent had plans to do so in 2018.

The top use cases that interested regulators most were not around cryptocurrencies. They were interested in using blockchain to increase collaboration and innovation. Top projects included asset management, digital identity services and reducing the costs of regulatory compliance and citizen services like e-voting.

This amplifies the notion of open government initiatives as an area where blockchain is particularly well suited, such as protecting sensitive data while facilitating approved access where needed.

Pressing questions

With the onslaught of government regulators set to initiate blockchain pilots in the coming year, here are three questions they should consider:

1) What type of permission do government blockchain networks require?

Most of the questions on which blockchain technology to use center on a debate of whether they are public or private blockchains. The better question to ask is whether these are permissioned or anonymous blockchain networks. In permissioned networks, members are known and assigned various levels of permission based on their role in the network.

Contrast this to anonymous blockchain networks where participants are unknown and access is completely open. Most governments and other organizations clearly need a permissioned system that requires consent for use of the information on the network.

2) What’s the best way to get started? Don’t wait for new policies to be introduced, set the policy through experience with initial pilots. Blockchain is still an emerging technology.

Understand how smart contracts work and the role they can play in helping with regulatory compliance. Explore key participants in the network and how their roles differ. How can regulators, auditors, service providers, the private sector and other agencies engage?

Picking a starting point and pivoting quickly on feedback from participants is essential. This will also build skills in the expanding blockchain ecosystem.

3) How does the circle of trust expand? The value of blockchain networks increases as they expand. A key question for regulators is how that value might expand beyond geographic boundaries. Most commercial networks cannot be constrained by national borders.

Rather than fight for data locality and data sovereignty, are there broader benefits that come from sharing data with others? Addressing critical global issues like refugee aid efforts, tracking data on potential health epidemics, or combating terrorism, would all benefit from international standards and cooperation.

The time is now

Blockchain’s potential to support trust and transparency, data protection and privacy has been well established in 2017. While we’ve already seen positive benefits from blockchain, the opportunity is even greater when expanded to open government.

IBM believes that one day, just as the internet became the business standard of communication, blockchain will be how all of us share and verify data.

Government can – and should – help lead that revolution.

Disagree? CoinDesk is looking for submissions to its 2017 in Review series. Email news@coindesk.com to pitch your idea and make your views heard.

Piggy bank with chain via Shutterstock

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By | November 29, 2017

After a day of tepid approaches toward the total, the price of bitcoin rose above $10,000 on CoinDesk’s Bitcoin Price Index (BPI) for the first time in history today.

Having scaled to $9,000 this weekend, the world’s largest cryptocurrency by market capitalization hit a new high of $10,044 at 1:45 UTC, market data shows. The move came after exchanges in South Korea saw trading above that threshold yesterday and today, though U.S. exchanges had yet to mark the milestone.

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However, at press time, domestic exchanges including Coinbase’s GDAX exchange, Paxos’s itBit exchange and Gemini, were all posting spot prices above the $10,000 mark.

With the move, bitcoin is now up more than 900 percent on a year-to-date basis, with prices climbing 230 percent since a low of $3,000 in mid-September.

The meteoric rise has pushed the combined market value for all cryptocurrencies to a new high. Bitcoin’s market capitalization is now close to $170 billion, additional market data shows.

At press time, the price of bitcoin is trading at 10,038.

Image via Shutterstock

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By | September 28, 2017

Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative. 

In this opinion piece, one of a weekly series of columns, Casey considers China’s recent moves against bitcoin exchanges and ICOs in a wider geopolitical context.

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The crypto community is once again reeling from a Chinese crackdown and trying to read the tea leaves on Beijing’s next move.

China’s policymaking is far from transparent, so one can only speculate how long the new restrictions on bitcoin exchanges and token sales might last.

Still, if we view China’s actions in the context of its broader geopolitical intentions, we can at least gain a useful picture of what’s at stake and the longer-term challenges and opportunities they create for the cryptocurrency and blockchain industry.

Consider the following:

The People’s Bank of China appears to be closer to issuing a digital fiat currency than pretty much any other central bank on the planet. It has launched its own digital currency research institute with a director who openly talks about its design possibilities with publications such as CoinDesk.
China’s desire to end the U.S. dollar’s global dominance has grown more strident, as with other members of the BRICS (Brazil-Russia-India-China-South Africa) international group. Russian President Putin, speaking after the BRICS gathering in the Chinese city of Xiamen this month, said the group would work together “to overcome the excessive domination of the limited number of reserve currencies.”
Quite apart from its wariness toward bitcoin, China is committed to distributed ledger technology. A variety of high-level consortia have been formed by government and business institutions to develop and implement DLT. China’s own IT Ministry is backing a new blockchain lab, announced just days after the crackdown on bitcoin trading.
With its “Belt and Road Initiative,” estimated to entail investments of $900 billion across land and sea routes encompassing 65 different countries, China is spearheading the world’s most comprehensive international trade and infrastructure development plan, a Marshall Plan-like model for projecting economic and political influence overseas.

Cutting the (U.S.) middleman

In short, it’s clear the Chinese government wants to foster international trade under its own terms and end the financial, economic and political hegemony of the U.S.

With President Donald Trump embracing “America First” protectionism and a disdain for diplomacy that angers U.S. allies, Beijing sees an opportunity to seize the mantle of global leadership. (Whether it can or not is a question we’ll address later.)

Given its investments in this space, it seems clear that Chinese authorities see blockchain technology as a potentially useful, disintermediating tool for advancing its regional interests, especially in trade. Much work is being done, for example, to incorporate smart contacts, tokens and other aspects of blockchain technology into supply-chain management systems that enhance information-sharing and efficiency.

This month’s launch of the Hong Kong-based Belt and Road Blockchain Consortium offers an international framework for tying the technology to China’s larger ambitions.

High-tech Chinese-backed upgrades to supply-chain logistics will only make those blockchain solutions more viable. One such upgrade, announced at the Xiamen summit, is the BRICS “E-Port network,” which the group described as “an integrated electronic platform to process and monitor cross-border movement of merchandise and transportation vessels at a port level.”

More aggressively, China could use this technology to directly go after U.S. interests and the dominance of the dollar. We know that China and Russia are already collaborating on blockchain-based securities settlement.

It’s not a stretch to imagine these two powers exploring blockchain solutions – perhaps a combination of smart contracts and multi-signature escrow accounts – that would let their respective importers and exporters settle trade debts with direct cross-currency swaps.

This could end the dollar’s role as the intermediating currency when exporters or importers wish to protect themselves from adverse moves in their local currencies. It would cut out Wall Street’s middleman correspondent banks, slash transaction costs and undermine a triangulating system that has given the U.S. great influence on trade.

It’s far from the only reason China and Russia are exploring a digital currency, but it’s fair to say that fiat digital currencies would make bilateral swap solutions far more viable.

For the U.S., the fallout could be intense.

If Chinese and Russian businesses no longer needed to make trade payments in dollars, their governments might not have to hold greenbacks as a reserve currency, either. Meanwhile, if this disintermediated trade solution worked, most other countries would surely follow it.

Americans cannot afford to be complacent about the dominance of the dollar and the advantages – lower interest rates, for starters – that has afforded them over the past 70 years.

China’s challenge

So, does this mean China will ascend to dominant superpower status? Not necessarily.

The main reason to bet against such an outcome is that China’s current, closed economic system limits its capacity to innovate. Chinese companies are excellent at copying others’ ideas, but in general, they aren’t great inventors (with the exception of cutting-edge advances in solar technology and payments).

Closed, planned economies don’t encourage open innovation; you can’t order creativity into existence through government diktat.

This is where China’s moves against ICOs and bitcoin could backfire. Both phenomena are part of an emerging global system of permissionless innovation – an anything-goes, chaotic soup of ideas. In that system, developers can monetize new decentralized applications and profit from collaboration rather than rely on restrictive, litigated intellectual property protection.

It’s understandable that China’s central planners are unnerved by this seemingly anarchic world of crowdfunded ideas, one over which they have no control. It’s also why most China-based blockchain research is likely focused on permissioned ledgers over which the government can exert control.

Yet, by curtailing the power of unfettered, open-source innovation, China is cutting itself off from the new ideas and dynamic solutions that it needs to stay ahead of the West.

The Communist Party’s survival depends, paradoxically, on relentless, continued economic growth on the one hand and control of information, money flows and ideas on the other. But you can’t achieve the former if you’re practicing the latter. Ultimately, China will be powerless to compete against bitcoin and its successors, since they directly enable a decentralized, censorship-resistant system of exchange that levels the playing field and fosters a global, self-perpetuating pool of unbeatable innovation.

Given the current policy priorities of the Trump administration, the U.S. won’t likely be the winner in this. But neither will China if it continues on its present course.

The age of cryptocurrency will deliver the spoils to countries, businesses and individuals that operate within a system of open access, property rights and free trade – the principles upon which U.S. hegemony was originally built.

One Belt, One Road” image by Shutterstock

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