*HomeU.S. Government Accountability Office*
Menu

      close


          
          
                          	
				
				
	
	
					Reports & Testimonies
									
																				
				
				
	
	
								Reports & Testimonies
													
																												
																						
							
																Recommendations Database
							
																												
																						
							
																Month in Review
							
																												
																						
							
																Order Copies
							
																												
																						
							
																Restricted Reports
							
																												
																						
							
																View Topics
							
																												
																						
							
																View Agencies
							
																												
																						
							
																Bid Protests & Appropriations Law
									
																				
				
				
	
	
								Bid Protests & Appropriations Law
													
																												
																						
							
																Bid Protests
							
																												
																						
							
																Appropriations Law
							
																												
																						
							
																Federal Vacancies Reform Act
							
																												
																						
							
																Other Legal
							
																												
																						
							
																About
									
																				
				
				
	
	
								About
													
																												
																						
							
																What GAO Does
							
																												
																						
							
																U.S. Comptroller General
							
																												
																						
							
																Careers
							
																												
																						
							
																Contact UsFor Congress
                                
                          
        
                Press Center
                                
                          
        
                Careers
                                
                          
        
                BlogSearch Breadcrumb
        Home
                            Reports & Testimonies
                            Science & Tech Spotlight: Blockchain & Distributed Ledger Technologies
    Science & Tech Spotlight:
                          Blockchain & Distributed Ledger Technologies **GAO-19-704SP**
        Published: Sep 16, 2019. Publicly Released: Sep 16, 2019.Jump To:
    Jump ToElder Abuse
          Services for Older Adults
          State and Local-Level Drivers and Trends
          State and Local Fiscal Projections
          Federal Borrowing
          Managing the Debt
          Summary of Funding Provisions
          Auditing the Government's Books
          Unpacking the Financial Report
          Highlights
          Recommendations
          Background
          About This Work
          About This Work
          Trends
          About the Center
          Why It's High Risk
          What Remains To Be Done
          Key Reports
          Newest COVID-Related Reports
          AI Use Cases
          Flood Insurance
          Past Pandemic-Related Reports
          CARES Act Oversight Reports
          All COVID-19 Reports
          Report Suspected Fraud
          Subjects
          How to Get Notified
          Past Reports
          Public Health Threats
          Explore the FY 2022 and 2023 Funds
          Lessons Learned
          Agency Reports
          Recent Reports
          Recommendations
          Supplemental Material
          Full Report
          Additional Data
          View Decision
          Downloads
          Previously Identified Actions
          Related Pages
          Associated Agencies
          Tough Choices and Opportunities Ahead
          Americas Fiscal Future Key Areas
          Retirement Security Key Areas
          Current List
          About The High Risk List
          Area Ratings
          Previous High Risk Products
          Search Federal Vacancies
          Past Federal Vacancies
          Violation Letters
          About the Yellow Book
          Advisory Council
          Related Resources
          Comment Letters
          Related Publications
          Contacts and Resources
          Major Issues Facing the Nation
          Meeting Strategic Challenges
          Additional Resources
          Resources
          GAO Contacts
          Mission Teams
          Operations and Staff Offices
          Organization Chart
          Why a Career at GAO?
          Am I Qualified?
          Company Culture
          Reasonable Accommodations
          Video Gallery
          Paid Internships
          Student Volunteers
          Professional Development Program
          Advancement
          Executive Candidate Program
          Summer Associates
          Externships
          Benefits
          Contacts
                    Fast Facts
              The technology that allows Bitcoin and other cryptocurrencies to function could profoundly change the way government and industry do business. Distributed ledger technology allows the secure transfer of digital assets without management by a central authority. Instead, participants share synchronized copies of a ledger that records assets and transactions. Changes are visible to all participants.
Questions remain about the technology, including where it may be most useful, how best to regulate it, and how to mitigate its use in illegal activities.
How blockchain, a form of distributed ledger technology, acts as a means of payment for cryptocurrencies.
Illustration showing the six steps for making payments using cryptocurrency
Illustration showing the six steps for making payments using cryptocurrency
Skip to Highlights
Highlights
  The Technology

**What is it?** Distributed ledger technologies (DLT) like Blockchain are a secure way of conducting and recording transfers of digital assets without the need for a central authority. It is "distributed" because multiple participants in a computer network (individuals, businesses, etc.) share and synchronize copies of the ledger. New transactions are added in a manner that is cryptographically secured, permanent, and visible to all participants in near real time.



**Figure 1.**Difference between centralized and distributed ledgers.

**How does it work?** Distributed ledgers do not need a central, trusted authority because as transactions are added, they are verified using what is known as a consensus protocol. Blockchain, for example, ensures the ledger is valid because each "block" of transactions is cryptographically linked to the previous block so that any change would alert all other users. With an agreement on that history, users may then conduct a new transaction with a shared understanding of who has which resource.

Distributed ledgers can be either "permissioned" or "unpermissioned". With unpermissioned ledgers, which are generally public, any participant can conduct a transaction.Permissioned ledgers may or may not be public, but only trusted users can conduct transactions.

**How mature is it?** Businesses have been using ledgers to record transactions for thousands of years, and a defining characteristic of such ledgers was their reliance on central management. Furthermore, DLT is not a new technology, but an innovative way of using existing, mature technologies. In October 2008, an unknown author using the name Satoshi Nakamoto published a white paper called "Bitcoin – A Peer-to-Peer Electronic Cash System", which is credited as the first theoretical framework of a DLT. In January 2009 the service the paper described was launched.



**Figure 2.**How blockchain, a form of distributed ledger technology, acts as a means of payment for cryptocurrencies.

Cryptocurrencies like Bitcoin are a digital representation of value and represent the best-known use case for DLT. The regulatory and legal frameworks surrounding cryptocurrencies remain fragmented across countries, with some implicity or explicity banning them, and others allowing them.

In addition to cryptocurrencies, there are a number of other efforts underway to make use of DLT. For example, Hyperledger Fabric is a permissioned and private blockchain framework created by the Hyperledger consortium to help develop DLT for a variety of business applications. The consortium is made up of companies such as Airbus, Cisco, American Express, IBM, and Intel.

Opportunities

**Transparency**. Because any user can view the ledger, DLT may result in benefits such as reduced corruption.
	**Reduced Labor Costs**. DLT reduce sor eliminates the need for human workers to track data.
	**Data quality and reliability**. Transaction information is automatically generated by a computer, which may reduce errors.
	**Wide applicability**. DLT is being explored for use across many sectors, including supply chain and logistics, news, energy, healthcare, and government. For example, Target built a system now known as ConsenSource to verify products are sourced sustainably. The New York Times created the News Provenance Project to explore a blockchain-based system for recording and sharing information published by news organizations.Challenges

**Excessive energy usage**. Some uses of DLT can be costly to operate. For example, cryptocurrencies using “proof-of-work” consensus protocols (also known as “mining”) require large amounts of computing power and energy to generate new units of currency.
	**Collusion**. Security of the network relies on the consensus protocol that maintains the ledger, and research has shown that users who collude could gain enough influence to manipulate the ledger to their benefit and gradually disrupt the protocol.
	**Security**. Entities using DLT will need to ensure data stored on a permissioned ledger is not accessible to outside actors. Additionally, holders of cryptocurrency can have their digital wallets hacked and their currency stolen.
	**Permanence**. While the permanence of transactions may be a core strength of DLT, it can also be a weakness should an entity find that it needs to regularly correct errors in its ledger, as it would be unable to easily do so with DLT.
	**Lack of transparency**. Because DLT can be used without a central authority, governments may feel uncomfortable allowing cryptocurrencies (or other DLT) to be used as a method of exchange or contracting, since they cannot easily be tracked and could be used to facilitate illicit activity (such as tax evasion and money laundering).

**Figure 3.**Permanence and lack of transparency and regulation raise concerns about adoptability.

**Lack of regulation**. Businesses may express concern about making investments in DLT because of uncertainties surrounding how such technologies might be regulated. While there have been initial efforts to regulate cryptocurrencies such as Bitcoin, much less has been done around other DLT use cases.Why This Matters

Distributed ledger technology (e.g. blockchain) allows users to carry out digital transactions without the need for a centralized authority. It could fundamentally change the way government and industry conduct business, but questions remain about how to mitigate fraud, money laundering, and excessive energy use.

Policy Context and Questions

DLT use across many sectors is increasing, but challenges remain to widespread adoption. Some key questions for consideration include:

In what situations is DLT useful, and when should it be avoided or used with caution?
	To what extent can DLT be used to facilitiate illegal activities, and how might policymakers mitigate such use?
	How are federal agencies evaluating and using DLT?For more information, contact Timothy M. Persons, Ph.D., Chief Scientist, at (202) 512-6412  or personst@gao.gov.

Full Report
    Full Report (2 pages)
              Accessible PDF (3 pages)
GAO Contacts
    
      Timothy M. Persons
            
            Chief Scientist
      
            personst@gao.gov
      
            (202) 512-6888
Office of Public Affairs
    
      Chuck Young
            
            Managing Director
      
            youngc1@gao.gov
      
            (202) 512-4800
Topics
    
      Science and TechnologyAssetsCoin and currencyData integrityData qualityData reliabilityEnergy consumptionFinancial transactionsFraudInformation sharingLabor costsMoney launderingScience and technologyTechnology assessmentTransparency
                                                      MultimediaAn artist’s rendering of the experimental X-51A Waverider
          Blog Post
              Our New “Science & Tech Spotlights”
            Thursday, October 3, 2019
      
            GAO has launched a new line of science and tech quick reads, 2-pagers providing brief overviews of...
 Receive GAO Updates
  Stay informed as we add new reports & testimonies.

    GAO Logo
      U.S. Government Accountability Office


                                   Column 1
                            Press Center
                              Contact Us
                              Inspector General
                              Restricted Reports
                              Column 2
                            Copyright & Terms of Use
                              Privacy Policy
                              Accessibility
                              Sitemap
                              Column 3
                            FOIA Requests
                              Scam Alerts
                              No FEAR Act Data
                              Health Care Advisory Committees