In many ways, the best part of bitcoin isn’t bitcoin – it’s the stuff hidden underneath. Vermont, of all places, thinks it can take advantage of this.
“This is a very interesting, potentially widespread tool. . . . If we can be six to 12 months ahead of the pack on using it, all the better,” said Oliver Goodenough, director of the Center for Legal Innovation at the Vermont Law School.
Goodenough is part of Vermont’s very interesting push to take the block chain protocol that underlies bitcoin and turn it into a tool for government. And not just government.
“Almost any place where you’re interested in having an open but hard-to-alter record chain, this is a good solution,” Goodenough said.
Many financial institutions, some as huge as the Bank of England, are looking into the technology as a way to streamline international finance, and Goodenough said it could be used for things as close to home as digitizing voter registration lists at city hall and as exotic as verifying artwork.
“If you wonder, ‘Is this really a Picasso print, because Picasso was known to have made 100 prints and there are 500 on the market?’ then this could be used,” Goodenough said.
More in a moment about Vermont’s unusual push, which appears to be unique in the country. But first, what is block chain?
Block chain is the term for a technology protocol first developed by Satoshi Nakamoto, the name used by the anonymous developer or developers of bitcoin. It is a distributed database, basically a digital ledger in which every bitcoin transaction is recorded.
The key point is that this ledger is automatically copied and distributed to all participating nodes, and there are thousands of them, every 10 minutes.
As a result, if you tried to alter the ledger – to make it seem like your fake print is a true Picasso print, say, or to erase the fact that you spent a bitcoin so you can spend it again – then automatic comparisons against other copies of the database will expose your shenanigans.
This solves digital currency’s biggest problem of determining legitimacy.
If I give you a dollar bill, its physical property assures you that it hasn’t already been given to somebody else. If I write you a check, you depend on the bank as a trusted third party to ensure the validity.
But digital currency has no physical limits, and bitcoin has no trusted third party overseeing it. The block chain fills the gap.
There’s no reason it couldn’t take what it does for cryptocurrencies like bitcoin and do it for, say, property records.
Goodenough says the World Bank is looking into that possibility for developing countries, where maintaining secure and trustworthy government records is difficult.
“In New Hampshire nobody’s messing with the property registration. You don’t have people sneaking in during the night and altering the records, or the town clerk suddenly owning three-quarters of the interesting properties in town, but in third world you sometimes do,” he said. If the records were digitized and secured with a block chain, they’d be tamper-proof.
Vermont is neither in the Third World nor Silicon Valley, so why did that state legislature pass a law in June that created a government body to study block chain? Here’s a hint: It’s part of a bill titled “An act related to promoting economic development.”
As Goodenough explained the thinking, if Vermont can lead the pack in making use of this geekiest of technology, it will burnish its reputation among tech firms looking to relocate or 20-somethings looking for a place to move and work, above and beyond enjoying savings in cost and efficiency.
As for Goodenough, his expertise isn’t technical but legal, not surprising for a professor at the Vermont Law School, although he notes “the distinction between lawyer and geek has been going away.”
Clarifying block chain’s standing in laws is a vital step, he said. “For something to get wide acceptance, the legal status of the thing has to be clear.”
Right now, for example, block chain-based evidence wouldn’t be accepted in court during a lawsuit over a contract or over who owns what. But if standards can be developed and laws passed that would change judges’ opinion, it would make all the difference.
“If the block chain becomes a legally recognized way of proving a fact, which is what it’s good at . . . it could push the thing forward,” said Goodenough.
As evidence of the need to update laws in this area, you need look no further than Vermont itself. Earlier this year, it forced the state’s only bitcoin ATM to shut down, not for technical or financial reasons but because the owner hadn’t obtained the proper state license.
(David Brooks can be reached at 369-3313, firstname.lastname@example.org, or on Twitter @GraniteGeek.)