State gets ready to capitalize on blockchain
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A Texas work group found opportunities for the technology in smart contracts, records management and governance models.
A statewide working group seeks to position Texas as a leader in blockchain technology, which the group’s chair described as “another emerging avenue” to bolster its economy.
The report from the Texas Work Group on Blockchain Matters, formed by a 2021 state law, described potential use cases for the technology, which is essentially a decentralized digital ledger that securely and immutably records transactions.
The work group said blockchain has a number beneficial use cases for Texas, including smart contracts, property records management and governance if the state embraces decentralized autonomous organizations (DAOs). Carla Reyes, an assistant professor of law at Southern Methodist University’s Dedman School of Law and the work group’s chair, said the state already has a “robust” blockchain industry, but it can do more.
Blockchain could help governments usher in an era of smart contracts if the state’s Uniform Commercial Code that governs transactions is amended to deal with new technologies. Using blockchain can aid with “incentivizing performance of obligations” that are either contractual or required by law, Reyes said, and make the administration of those contracts more efficient.
The work group also called on the state to encourage counties to pilot the integration of blockchain technology into its land registry system to support the preservation of real estate records, allowing a “more thorough, auditable record of the history of the land,” Reyes said. A related use case could enable an easier transfer of land ownership using blockchain via the ownership of non-fungible tokens.
Individuals’ digital identity could be made safer and more secure with blockchain, the work group said, and give people more autonomy over what information they share with the government. Reyes gave the example of the current requirement to show a driver’s license as a proof of age to buy alcohol. That identification contains all manner of personally identifiable information that could fall into the wrong hands, she said.
Blockchain could provide what Reyes called “self-sovereign data,” which gives people the ability to share only the credentials that are needed. Such a system provides individuals “more granular control” over their data, she said, and could prevent governments or businesses using that data for monitoring or surveillance.
The group’s final report, which came after more than a year of study by its 16 members, also said Texas should amend its business enterprise law to give DAOs more freedom to form and operate. Managed by a combination of algorithms and human members, DAOs are designed to be more transparent and have a “flatter” corporate governance model, Reyes said. In theory, that could mean decisions are made in a more democratic way.
The work group also recommended a lesser tax burden for electricity purchases used to power a Bitcoin mine or other large flexible loads. Reyes noted that the recent volatility associated with cryptocurrency has “very little to do with the underlying [blockchain] technology.”
Despite the optimism around blockchain technology, others are not as convinced of its utility. In an open letter to lawmakers in June, a group of 1,500 computer scientists, software engineers and technologists said blockchain is “poorly suited for just about every purpose currently touted as a present or potential source of public benefit,” calling it a “solution in search of a problem.” The group also said the technology has “few, if any, real-economy uses,” and it has “severe limitations and design flaws” that prevent it from being as secure as proponents say it is.
In response, Reyes said while people can “legitimately disagree” about blockchain use cases, there are already several that businesses are being built around it.
To help support the state’s nascent blockchain economy, the work group also advocated the state legislature support “educational initiatives” related to blockchain, something that is already underway at several colleges and universities across the state. Reyes said academic institutions are “catching on and starting to provide the curricula and coursework necessary to educate folks” on the technology, and those efforts should continue to grow.