In opening remarks during the House Energy and Commerce Subcommittee’s recent Federal Trade Commission oversight hearing, Representative Doris Matsui (D-CA) announced that she is drafting legislation that would “direct the Department of Commerce to convene a working group of federal and industry stakeholders to develop a consensus-based, agreed upon definition of blockchain.” Representative Matsui believes that defining blockchain will help with the development and deployment of the technology.
Representative Matsui is not alone in having an interest in blockchain. The National Institute of Standards and Technology (NIST) released a draft report in January providing a technical overview of blockchain technology, DRAFT NISTIR 8202. In its draft report, NIST offers a definition for the decentralized ledger system.
Blockchains are distributed digital ledgers of cryptographically signed transactions that are grouped into blocks. Each block is cryptographically linked to the previous one after validation and undergoing a consensus decision. As new blocks are added, older blocks become more difficult to modify. New blocks are replicated across all copies of the ledger within the network, and any conflicts are resolved automatically using established rules.
Industry seems to generally agree that blockchain is fundamentally a decentralized ledger system. IBM defines blockchain as “a shared, immutable ledger for recording the history of transactions.” Microsoft views blockchain as “a shared, secure ledger of transactions distributed among a network of computers, rather than resting with a single provider.” And Intel describes blockchain as a technology that “distributes data across a shared network of computers, functioning as a distributed ledger.”
The more interesting question is not how we define blockchain, but rather how can we best leverage the technology to develop new and innovative services. We are seeing already the opportunities created by digital currencies like Bitcoin and Ethereum, which are supported by blockchain. Some forecast that blockchain can similarly transform the way we secure business transactions (e.g., smart contracts); maintain records, including health and supply-chain data; and even facilitate spectrum sharing.
Policymakers must give this nascent technology an opportunity to flourish. Legislative and regulatory humility will be key, as prescriptive rules at this stage could discourage industry investment. And where challenges arise, multistakeholder initiatives—convening experts from industry, government, and academia to develop voluntary, consensus-based solutions—are the ideal, first line of response.