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Eric Crusius is a Tysons attorney in Holland &
Knight'sTysonsoffice and Mary Beth
Bosco is a partner in Holland & Knight's Washington D.C.office
This is the seventh blog post in a series analyzing the
current draft of the 2018 National Defense Authorization Act (NDAA)
as signed into law on December 12, 2017. Stay tuned for more blog
posts covering additional topics in the near future from Holland
& Knight's
Government Contracts Team.
The term "blockchain" remains a mystery to many, but
its potential is extremely intriguing, particularly as applied to
the government contracting industry. As reflected in the 2018
NDAA (
H.R. 2810), the federal government is cautiously entering the
blockchain waters. This blog post will first attempt to
explain what blockchain is, and then will review some of the
government's efforts to understand how blockchain can improve
its business processes.
Holland & Knight attorneys
Shawn Amuial,
Josias Dewey, and
Jeffrey Seul recently authored The Blockchain: A Guide for Legal and Business
Professionals. The book explains the blockchain
concept in a readily understandable manner: Blockchain is a
distributed ledger existing across many computers that can record
transactions or other data. The transactions are mined into blocks
and each block is given a unique hashtag that is copied onto a
subsequent block, which form a chain (hence, the term
blockchain). Changes to the blockchain are very difficult
because the blocks are chained together and distributed across a
wide network.
This technology – distribution of data over multiple
computers that is linked together and has a unique identifier
– is of particular interest to the government contracts
industry. For example, blockchain technology potentially may
produce "smart contracts," which would be virtually
self-executing and self-administered. It may also be useful
in tracking supply chains or distributing energy. The
Government accordingly is studying blockchain technology,
especially whether it is resistant to cyber-attacks.
The 2018 NDAA encapsulates the Government's approach to the
blockchain. Section 1630C instructs the Secretary of Defense,
within 180 days of the NDAA's enactment, to report back to
Congress on the potential offensive and defensive cyber
capabilities of blockchain technology and other distributed
database technologies. The report must examine blockchain
technology's cybersecurity capabilities. Specifically,
DoD is to assess the use or planned use of blockchain technologies
by the United States Government or critical infrastructure
networks, and the vulnerabilities of such networks to
cyber-attacks.
Congress' determination that any risks posed by blockchain
technology must be studied before broad government adoption of the
technology is reflected in other agencies' establishment of
pilot programs to test the utility and security of this distributed
ledger technology. For example, in June 2017, the General
Services Administration (GSA) issued a small business set-aside
Request for Quotations (RFQ) aimed at obtaining contractor support
to develop a proof of concept for DLT (Distributed Ledger
Technology), automated machine learning technology, and/or
artificial intelligence based exchange implementation into
GSA's Multiple Award Schedule (MAS) FAStlane new offer proposal
review processes.1 The RFQ gives interested
contractors three months to present a fully functional proof of
concept.
The Department of Treasury's Office of Financial Innovation
and Transformation is running a pilot program to determine whether
blockchain technology is capable of monitoring and tracking the
agency's physical assets as they are transferred from person to
person. This particular program will provide insight into
blockchain's abilities to track and manage supply chains.
The Department of Homeland Security is awarding Small Business
Innovation Research grants to develop a use case for blockchain
technology's role in border security.
Each of these examples confirms the Government's interest in
blockchain technology as well as the myriad of uses to which the
technology applies. Because it is still emerging, the
potential range of the uses of blockchain technology are not yet
known. We will, however, continue to explore potential uses and
blog about how it could impact the government contracts industry in
the months and years ahead.
Bitcoin is one of the most visible uses of blockchain
technology. In the midst of a historic price run-up, one unlucky
bitcoin owner realized he had thrown away the hard drive that
contained the keys that would have unlocked his bitcoin (which
is now worth a reported $80 million). According to news reports,
the former owner of the hard drive is dumpster diving (on a large
scale) in an effort to recover the bitcoin keys.
Beyond bitcoin, blockchain is promising technology. Just beware,
however, that there are limitations. Just ask a couple in
London searching a dump for $20 million in bitcoin.
Footnotes
1 At a recent Professional Services Council event, a GSA
representative described how the agency had already incorporated
blockchain technology to speed up the application process for
prospective GSA offerors.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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