Non-financial uses of blockchain have been discovered, despite its prominence in the cryptocurrency industry. Using a variety of technologies, the blockchain creates tamper-proof transaction records that can be used by multiple parties without the need for a single authority. Non-financial applications, such as supply chain management, real estate, voting, digital IDs, and legal records, can also benefit from blockchain technology.
In some cases, however, its use may be restricted or even problematic. For example, blockchain technology can be useful in applications involving many participants who do not trust each other, while it may be overly complex in situations where only a few trusted users are involved, as in spreadsheets and databases. In addition to these potential drawbacks, the technology itself can be energy-intensive and pose a security and privacy risk.
There are currently pilot projects utilising blockchain technology in non-financial applications, according to the GAO. According to the agency, those applications face challenges. Because most blockchain networks are not interoperable, they are unable to communicate with other blockchains. Additionally, organisations that want to use blockchain face legal and regulatory uncertainty, as well as difficulty in securing the necessary workforce.
While the financial applications of blockchain have the potential to reduce costs and improve access to the financial system, they too face multiple challenges.. The agency cited cryptocurrency as an example, noting that while they are a digital representation of value, many are also volatile in their values. “Decentralized finance offer services,” which include blockchain-based lending and borrowing, can also be problematic because they can facilitate illicit activity and reduce consumer and investor protections compared to traditional finance, with sometimes unclear and complex rules.
Policymakers should collaborate to unify standards for blockchain technology implementation and use; policymakers should clarify existing oversight mechanisms or create new mechanisms to ensure blockchain application oversight, according to the GAO, which suggested four policy options for improving benefits and mitigating challenges from blockchain technology;educational materials and activities to help users and regulators understand blockchain technologies beyond financial applications; and activities to determine whether blockchain is appropriate for specific missions and goals, or to mitigate specific challenges, should be supported by policymakers.