The 18 Trillion Dollar Question of Blockchain Adoption by Governments

"...If we continue to move into a cryptocurrency environment, how does the government collect taxes? If they can’t see the transactions, they can’t enforce their laws, manage their debt, manage their economy..."

Gerard Dache is the Founder and President of the Government Blockchain Association, and an extremely quotable man. There are at least a half dozen snippets I could have picked to grab your attention for this interview. I chose this particular quote though, not only for it's clickbait impact, but because it embodies a large part of the problem which the GBA are setting out to address. Paying taxes, or conforming to government regulations may not be anyone's favourite past-time, but it is a necessary evil. And while a world without politicians may sound utopian to some, living without the public sector services they coordinate? Well, this could prove trickier in our current climate.

This in mind, it may come as no surprise that the GBA are a very busy bunch indeed, so let's dive in, shall we?

"Hi, Gerard. Thanks for finding time to speak with me! First thing first then, March 4th you held a debate on Blockchain Voting. It was a heated affair you could say! Why do you think blockchain and voting is such a contentious issue?"

"Well, you know it’s interesting, if we go back to the early days, when I would first talk to people about Bitcoin, I would find a trend. The first time you talked to them about Bitcoin, they were angry. Then, after a while, they essentially dismissed it, but it seems eventually they’re embracing it. I think it is because it’s a change in paradigm. I don’t know if you’re familiar with the term cognitive dissonance, but when things don’t match up with how we understand the world to be, there is a breakdown. So for years, there has been a paradigm on voting, that it is done with paper, it’s done with poll workers, and that it is done in a certain way. This concept is cognitive dissonance. It just doesn’t line up in light of what we’ve seen for many years with paper ballots — which people still believe is the answer. So when you talk to them about electronic options, or anything having to do with this, they immediately think of hacks. They think about all of these things like Nigerian Princes and email scams and all this stuff and it just doesn’t line up! It really takes someone a while to dig in deep and pull the onion layers back to really understand this before they can say, ‘okay, this is something I can buy into’. But overall you’re going against paradigm, you’re going against regulations, and I don’t fault people for being against it because any rational person would be against it, until they fully understood it. Even with that understanding though, it’s going to take time to deal with regulators and all that, and traditionally it’s a journey. It’s not like you’re going to say ‘Hey let’s do blockchain voting’ and they’ll say ‘That’s a good idea!’. It’s a big uphill battle"

"This sense of cognitive dissonance sums up a lot of sentiment in the world right now, as ironic as this sounds sitting behind screens connecting electronically! So in broader terms, what do you feel were the major catalysts behind the 2020 US post election drama?"

"Well, this is why it’s a great place for blockchain: it’s all about trust. We don’t trust the media anymore, here in the US a lot of people don’t trust the health authorities, don’t trust our politicians, we don’t even trust each other! We believe that even our own families, they’re listening to this news, or that news, so they’re ill informed. So we’ve got a significant problem with trust, and blockchain essentially came into the world based on solving the trust issue. It’s not an easy issue to solve, but I think this is the main issue. It’s not just here in the US either. I mean, we had a lot of drama, and a lot of news, but it’s an issue that happens everywhere in the world. Blockchain became popular with Bitcoin, but blockchain has been around since 1991. The work by Stuart Haber, Scott Stornetta, Hal Finney et al, had the first operational blockchain in 1991. Now they did this to solve the issue of validity and authenticity around digital records. They thought, ‘if the world is going digital, what would it be like to live in a world where you couldn’t trust digital records?’. Bitcoin popularised this notion, and cryptocurrency, well, happened, but the basic idea is around securing digital records, and like I say, this doesn’t just affect the US."

"We’re not without our issues here in the UK, so agreed fully it is an international thing. I don’t mean to pick on the US or any particular region!"

"No, I mean it’s obvious there was a lot of election drama. I don’t let anybody know my political leanings, right, because in my position it’s just not appropriate — although I have strong political leanings But the amount of people on both sides calling the other sides liars, and all the stuff about the courts, you know, ‘you can’t trust the courts’, even now, post-election, I mean, we still have people who are arguing about the Bush Gore election to this day, so this isn’t going away any time soon!"

"Absolutely, there is a huge disconnect there between how the different sides call things and see them. So antagonists of the technology have brought up the point a few times that electronic, online and blockchain based voting have links with increased voter apathy. What would you say to this?"

"There’s a phrase you hear a lot here in the US, ‘follow the science’. And they talk a lot about the data, but they never really show the data or talk about it. With voter apathy, I don’t think we really have data to show anything one way or the other. We got lots of studies and people pull these numbers out, but there doesn’t seem to be anything conclusive on this. We’ve got a lot of anecdotal information, and on the other side, Amelia pointed toward a lot of anecdotal information to make her points, but the bottom line is we will always have issues. There will always be people that won’t be able to vote for a multitude of various reasons. There will always be people whose genuine votes get thrown out. These things happen always, to some degree. When you’re talking about millions and millions of people involved in a single activity, you’re going to have all of that and more."

"This kind of mass coordination is no easy task, of course!"

"Indeed. The question is really, what can we do to help minimise the bad stuff. Clearly we’ve got to find a way for people who can’t get to the polls, to get to the polls. If they’re going to use some sort of remote technology, it just seems to me, we should use blockchain to secure that information. Now, how we do it and what the process is and whether they open-source the tools, those are all things for us to work out, but we need to figure out a way for those who can’t physically get to the polls to vote, and for their vote to count."

"There are so many variables around an issue as broad as voter apathy, to me it seems to be a case of qualitative data over any meaningful quantitative. Anecdotes only really prove there was an anecdote, as you say."

"Well, the thing it proves is that it’s happened at least once, and if it’s happened once, then it could happen many more times. We just don’t know how many more times that is. It could be an isolated incident, or it could repeat a million more times, you just never know."

"Another objection based question for you then, what would you say are the main issues around digital identity and security for potential blockchain based solutions? Can we overcome them?"

"I think we go back again to the issue of trust. Whenever we talk about an identity or credentials, the question is can you trust it, or is it a fraud? When somebody goes in to vote, are they really who they say they are? Or are they pretending to be somebody else? Then if we were to put mechanisms in order to verify the identity — and I’m going to use the term challenge and counter challenge not in that one side is right or wrong, but to say both sides have validity to their arguments — so the counter challenge to this is you’re reducing access to the vote. Both camps have a point. They also have a political agenda. The folks challenged by access are believed to vote mostly on the left side. So because of this, many people believe if you implement some sort of requirement (for identity verification), that only those who are on the economic ladder, or folks who lean more to the right, will vote. Well, now you’ve gone and introduced this sort of political dynamic into a technology and socio-economic arena! Both positions are sort of right. If you make it harder to vote, there will be fewer people voting. And those people who aren’t voting will tend to be those who either aren’t qualified to vote, or those who would vote on the left if they are qualified." 

"So it’s a bit of a sliding scale whichever way you look at it?"

"Yes, so what we’re trying to do with GBA is to look at these issues and bring people (from all sides) together to say, ‘What is the balanced approach?’. My opinion is that I don’t think it’s okay to say, ‘you don’t have to do anything to prove your identity’. Because then you’ll have lots and lots of people who don’t qualify to vote, who will vote, and lots of people will probably vote multiple times. At the same time, you need to make sure that everyone who is qualified to vote, and can vote, literally can. We have a lot of challenges in front of us! And now we bring it back into the subject of decentralised identity, which many people are very excited about, but very few really know how to do it or have the tools and capabilities to do it yet."

"What’s your opinion of the current tooling and solutions available? Of course national scale implementation is a while away, but what is the timeline for smaller scale solutions to become viable? Say, at a local election level..."

"There are a handful of tools available, and some that are being used in some elections. The thing preventing them from being used in events such as federal or presidential elections, are the regulations. So for example Voatz was just implemented for overseas and disabled voters in a presidential election and several other significant elections. Many of these tools are being used in big business, in the chambers of commerce and those types of things that don’t have the regulatory requirements. There is a lack of standards though, and this is in the way of a larger roll out. Until there are standards in place, no election official is going to take the risk on an unproven technology, unless that technology has been independently verified by an accredited third party. Officials don’t, and can’t, look at a blockchain and say we can trust it or not trust it, that it will work or won’t work. So they’re just not willing to take the risk. It’s too important. One thing GBA is doing right now, is actually developing standards for remote ballot delivery marking and, in turn, securing them with blockchain. This is the focus of our next meeting as it goes. Basically, this last meeting we had identified what the issues were — security, identity, anonymity — this next event of April 8th, we’re going to take these things and ask what are the solutions we can put into the standards, and then propose that to the Elections Assistance commission (the EAC). This way we can start contributing to standards that will make blockchain technology usable." 

"I had a stab at reading over the 200+ page document they (the EAC) produced. Needless to say, much of it went over my head, but I imagine that even for those with the background it’s no easy read?"

"Basically a lot of it was really about voter accessibility. And I think this is so critical, because we’re really talking about accessibility for those who can’t get to the polls. And this is right where we need to be now." 

"Optimistically speaking then (as I mostly try to do), do you see a time scale for when some sort of potentially hybrid or compromise solution could be found?" 

"Absolutely, it’s happening now. Utah County just did a Federal election using blockchain technology. We’ve got our toe in the water. The question is now, when do we just dive in? I think it could be a decade, maybe two, before the full plunge. But it will be incremental. It’s not just going to be all or nothing. We’re going to keep moving in that direction."

"Of course, a sliding scale like you say. Okay, so let’s move away from voting a little bit. What other aspects of the work being done at the GBA are you particularly excited or want to give a humble brag to?"

"Sure, we’ve actually launched a report, probably coming within the next month, called ‘The Impact of Cryptocurrency Adoption on Governments’. This is a 140, 150 page report looking at data sources such as block explorers and a lot of finessed reporting data to help government and private sector financial policy makers understand the size, trajectory, and velocity of the cryptocurrency ecosystem. I.e., what the impacts will be on Governments. So, for example, let’s say we wake up tomorrow and we’re all using some kind of peer-to-peer cryptocurrency. Now, we’re no longer going through the banks. Well, the Government uses the banks to influence regulatory control within their countries and their societies, their communities. If money isn’t running through the banks, then the Government loses its eyes and ears and its ability to exert influence. In the US we just took our money supply through the roof. After about 250 years of developing an economy, in March 2020 there were around $4 trillion in circulation. Over the course of the next 15 months we’re going from $4 trillion to $18 trillion."

"Wow. I knew the situation was escalating quickly, I didn’t realise those figures were that extreme!" 

"What happens when things get so extreme with money — which is of course a game of supply and demand, after all — is that the value of the dollar is going to go down. A lot of people share the concern that it may be significant. When we do that, we don’t just make US citizens poorer by devaluing the money in their bank account, ~60% of global reserves are in this currency! So now you’ve got guys like Michael Sailor, who leads a company called Micro Strategy, putting millions of US dollars into Bitcoin. And this is because they recognise the US dollar is a melting ice cube (as they’re saying it). He’s not the only one. You’ve got family offices, and institutional investors now moving their treasuries and reserves into something other than the fiat currency, into cryptocurrency. Well, if we’re not using US dollars, and our Government has lost the ability to live within its spending limits, and we just keep printing more money, well what happens if they can’t do that? And then this also affects foreign policy. For example, we tell other countries and people in them that if you want to be part of the US banking system, you can’t do business with certain actors in, say, Iran or China. Other countries around the world, especially in Eastern Europe or Middle Asia, may not want to live under US sanctions, but they have to if they want to be part of the US global banking system. Now they have other places to go. So if we continue to move into a cryptocurrency environment, how does the government collect taxes? If they can’t see the transactions, they can’t enforce their laws, manage their debt, manage their economy — it’s an enormous impact! So our tax working group is completing this report, and it should be out in the next couple of weeks." 

"Fascinating stuff! You’ll have to let me know when this is out."

"Will do! The other big thing we’re working on right now is building the ‘Government Blockchain Business Platform’. So this is a multi-blockchain platform, with connections to lots of other blockchains. Anybody who builds a blockchain solution, regardless of the technology, be it Ethereum, Eos, Hyperledger, whatever, they can connect their solution to the GBBP and then that solution will become available to governments all over the world. This means instead of every government buying, building and maintaining their own technology for each use case, they can purchase that service through the GBBP. Basically, we’re connecting the blockchain vendors and providers of blockchain services and solutions directly to governments."  

"Sounds huge!"

"This is just a couple of examples as well! We’ve about 50 different working groups, everything from voting, to cannabis, healthcare and aviation! And if you look at our chapters, we’re incredibly international!" 

"I’ll make sure to drop a bunch of links into the article for those who want to find out more then. So, just before I let you get off, I’d be remiss if I didn’t ask you for a few words on what you think of the work and progress over on Free TON."

"Glad to! They’ve brought an entirely new and innovative way to produce solutions that are exactly what we need. We come back to paradigms, but their paradigm of open communities coming together to solve problems, that’s right in the bloodstream and DNA of blockchain. I’m super excited that they’re GBA members and we want to work very closely with them to help find solutions to public sector problems. Couldn’t be any happier with them."

"Well, if that isn’t quote worthy, I don’t know what is. It’s been great speaking with you, Gerard. I’ll be sure to keep my ear to the ground for future GBA events!" 

"Thanks, Ben. Be great to see you at the next Blockchain and Voting event, April 8th."