Blockchain: Background and Policy Issues (CRS Report for Congress)
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Release Date |
Revised Feb. 28, 2018 |
Report Number |
R45116 |
Report Type |
Report |
Authors |
Jaikaran, Chris |
Source Agency |
Congressional Research Service |
Older Revisions |
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Summary:
The rise of cryptocurrencies like Bitcoin and the use of Initial Coin Offerings to raise capital has
drawn increased attention from both the public and private sector concerning the use of digital
ledgers to conduct business (called blockchain technology)
and
its potential.
Yet many remain
unclear
on what the technology actually is, what it does, and
the
tradeoffs for its use.
A blockchain is a digital ledger that allows parties to transact without the use of a central
authority as a trusted intermediary.
In this ledger, transactions are grouped together in blocks,
which are cryptographically chained t
ogether in a way that
is tamper
-
proof and
creates a
mathematically
indisputable history
.
Blockchain is not a new
technology;
rather it is an innovative way o
f using
existing
technologies.
The technologies underpinning blockchain are asymmetric key encryption, hash values, Merkle
trees, and peer
-
to
-
peer networks.
Blockchain
allows parties who may not trust each other to agree
on the current distribution of asse
ts and who has those assets, so that they may conduct new
business. But, while there has been
a great deal of
hype
concerning
blockchain
’s benefits
, it also
has certain pitfalls that may inhibit its utility.
With blockchain, as transactions are added, the
identities of the parties conducting those
transactions are verified, and the transactions themselves are verifiable by other users
.
The strong
relationship between identities, transactions, and the ledger enables parties that may not trust each
other
or
an
individual computing platform
to agree on the state of resources as logged in the
ledger. With that agreement, they may conduct a new transaction with a common understanding
of who has which resource and their ability to trade that resource
.
Blockchain
is not a panacea technology. A blockchain records events as transactions when they
happen, in the order they happen, and in an add
-
on only manner. Previous data on the blockchain
cannot be altered, and users of the blockchain have access to the data on th
e blockchain in order
to validate the distribution of resources. Though there are benefits to blockchain, there are also
pitfalls and unsolved conditions which may inhibit blockchain use. Some of those concerns are
data portability, ill
-
defined requirement
s, key security, user collusion, and user safety
.
As with
adopting any technology, users must examine the business, legal, and technical aspects of that
technology.
Blockchain is currently being tested by industry, but at this time does not appear to be a
complete
replacement for existing systems.
Although
the adoption of blockchain is in its early stages,
Congress may have a role to play in several areas, including
the
oversight of federal agencies
seeking to use blockchain for government business,
and
ex
ploration of
whether
regulations are
necessary to govern
blockchain’s use in the private sector
.
Some federal agencies are seeking to better manage identities, assets, data, and contracts through
the adoption of blockchain technology. In addition, some fed
eral agencies are issuing guidance on
industry use of blockchain, and whether or not the current legal framework governs blockchain
use.