There remains a significant amount of hype surrounding blockchain, and more broadly, distributed ledger technology. Although the future of this technology is unknown, the Bureau of the Fiscal Service at the U.S. Department of the Treasury is playing an integral role in helping the federal financial management community advance the government’s collective understanding of this innovative, yet largely unproven, technology.
Many federal agencies have launched proofs of concept and pilots to explore blockchain’s potential for solving problems. These projects are helping us develop a body of knowledge that will ultimately determine if and how this technology can be used within a federal environment. So, where do we go from here?
To answer that question, let’s first look at what we’ve learned.
Earlier this year the Office of Financial Innovation and Transformation at the Bureau of the Fiscal Service completed a successful proof of concept using blockchain technology to tackle a common, but labor-intensive task that all agencies must do: track physical assets. More specifically, we used blockchain technology to track, manage and transfer mobile devices. This proof of concept helped build a foundational understanding of the technology and left us with some important key takeaways for others interested in pursuing a blockchain project.
We learned that the technology could complete many of the manual functions agencies typically perform for inventory management. For example, instead of someone walking to an employee’s desk to validate information was correctly entered into a database upon receiving a new mobile device, blockchain technology enabled peer-to-peer asset transfers, removing the need for another person to complete an additional manual action to update the database.
Likewise, instead of someone stopping at every employee’s office to scan a barcode on their mobile phone for the annual inventory, blockchain technology allowed for real-time awareness of inventory simply by employees using their mobile phones. The blockchain solution we built was fast, transparent and reduced the need for manual intervention for carrying out inventory checks.
From a performance perspective, the solution we built demonstrated it may improve key metrics related to managing and tracking physical assets, such as inventory accuracy, resource and time usage, and internal controls. Given these successes, we should all start building blockchain-based applications, right? Well, not so fast.
Our proof of concept gave us a much better understanding and appreciation for blockchain technology. But, in the end, we learned that we still have a lot to learn. We still don’t have a thorough understanding of whether this technology will survive the rigors of the government’s unique IT governance processes. We also don’t have a complete understanding for how we would design, build or govern blockchain-based applications for use by multiple agencies. Moreover, as a federal community, we still do not have a feel for what blockchain-based applications are, let alone when it is appropriate to use them.
These unanswered questions are why we at the Fiscal Service are figuring out what’s next by launching phase two of our blockchain initiative. Through two new work streams, we aim to further explore the technology, learn more about when it may be advantageous to use blockchain-based applications, and get a better sense of how to design and govern multi-agency distributed applications.
Our first step is to understand whether this technology will work in a federal environment. To do this, we are moving our physical asset blockchain solution from a proof of concept to a pilot to increase the scrutiny of our blockchain-based application in a rigorous yet safe and responsible way.
Another step we are taking is launching a proof of concept to see if we can build a blockchain-based application to manage, track and monitor the use of software licenses. The challenges related to software license management are well documented (for example, see this 2014 GAO report with its 135 recommendations made to agencies). Not only will we learn a lot about the pros and cons of tracking and managing digital assets, but also how agencies can come together to build, govern, and transfer assets using blockchain-based applications. The Fiscal Service will be enlisting support from a cross-agency working group to carry out our proof of concept, which will serve as a venue for continued education and collaboration with respect to blockchain ledger technology.
In the Fiscal Service’s efforts to transform federal financial management and the delivery of shared services, innovative technologies have the potential to greatly improve how federal agencies operate. We are hopeful that our next steps will move all agencies closer to determining how blockchain technology can be used within a federal environment.
To learn more or get involved, reach out to Craig Fischer and Cassandra Madden at firstname.lastname@example.org.
Craig Fischer is a program manager in the Office of Financial Innovation and Transformation within the Bureau of the Fiscal Service. Fischer is responsible for managing an innovation portfolio that includes blockchain, process automation and artificial intelligence.
Cassandra Madden is a senior management & program analyst in the Office of Financial Innovation and Transformation within the Bureau of the Fiscal Service. Madden is responsible for carrying out emerging technology pilots and proofs of concept to educate the federal financial management community.