THE GREAT REWRITE: E Pluribus unum and THE BLOCKCHAIN

Forbes - - CONTENTS - BY LEONARD BRODY

As con­sumers, we live much of our lives dig­i­tally. As cit­i­zens, that’s not al­ways the case. When we in­ter­act with gov­ern­ment agen­cies — in per­son, by mail, on the phone — we brace our­selves and an­tic­i­pate de­lays or mis­takes. The con­ve­niences that on­line re­tail­ers have built — web­sites that re­mem­ber who we are, what we did be­fore, our pref­er­ences — may be un­com­mon ex­pe­ri­ences when we try to ac­cess gov­ern­ment ser­vices. Most old-fash­ioned pa­per checks that are still writ­ten to­day are pay­ments to and from gov­ern­ments. The blockchain has the po­ten­tial to change that. “To­day as cit­i­zens we ex­pect to deal with gov­ern­ment the way we deal with ev­ery other part of our life. Gov­ern­ments can use blockchain tech­nol­ogy to move the nee­dle,” said Lorna Stark, na­tional ad­vi­sory in­dus­try leader for state and lo­cal gov­ern­ment at KPMG.

In the sim­plest terms, a blockchain is a shared data­base that’s dis­trib­uted across a net­work of mul­ti­ple sites or in­sti­tu­tions. More specif­i­cally it’s a dis­trib­uted ledger, a shared but se­cure way to record trans­ac­tions and own­er­ship of as­sets. That may not sound rev­o­lu­tion­ary, but con­sider how the World Wide Web stan­dard­ized the way doc­u­ments are linked and eas­ily ac­cessed on com­put­ers any­where in the world. That wasn’t pos­si­ble be­fore, and only a few vi­sion­ar­ies imag­ined the vast trans­for­ma­tions that link­ing files on dis­parate com­put­ers would bring. Blockchains could cre­ate a se­cure, univer­sal record of who owns what, and the pos­si­bil­i­ties, sim­i­larly, are bound­less.

Gov­ern­ments around the world have be­gun to ex­per­i­ment with blockchain tech­nol­ogy projects to rewrite the way they man­age in­for­ma­tion and serve con­stituents. The im­pli­ca­tions are big and small.

“Just think if you could put all of your re­quired in­for­ma­tion into one gov­ern­ment por­tal, into the blockchain,” Stark said. “Your name, your ad­dress, all that per­ti­nent in­for­ma­tion. And then you don’t

have to re-en­ter it 10 times to get your driver’s li­cense, to get your CPA li­cense, to record your ti­tle trans­ac­tion, to pay your taxes. Imag­ine that world where you only have to give the gov­ern­ment your in­for­ma­tion one time.”

Iron­i­cally, blockchain tech­nol­ogy was de­vised as a way to avoid cen­tral gov­ern­ments. The anony­mous in­ven­tors of the dig­i­tal cryp­tocur­rency bit­coin cre­ated the method­ol­ogy as a way for the com­mu­nity at large to main­tain an agreed-upon, im­mutable record of who owns how much, with­out hav­ing to en­trust record­keep­ing to a sin­gle au­thor­ity such as a gov­ern­ment cen­tral bank. All par­tic­i­pants in a blockchain net­work can ac­cess iden­ti­cal copies of the ledger, and up­dates hap­pen al­most in­stantly. Dig­i­tal “keys” and sig­na­tures cryp­to­graph­i­cally con­trol who can up­date and view records. The as­sets tracked in the shared ledger can be phys­i­cal or elec­tronic, and they can be “smart” — con­tain­ing com­puter code that can self-ex­e­cute new trans­ac­tions when set trig­gers are reached (for ex­am­ple, a bond that dis­perses its own coupon pay­ments).

The State of Delaware em­braced blockchain in 2016 when then-gover­nor Jack Markell launched the Delaware Blockchain Ini­tia­tive. The state has unique record-keep­ing re­quire­ments, but its ef­forts merit at­ten­tion. “The more we learned about it, the more we thought there’s some­thing here for the state,” said An­drea Tini­anow, di­rec­tor of the Delaware Blockchain Ini­tia­tive.

Delaware’s in­ter­est be­gan as a way to bol­ster the busi­ness it does in com­pany in­cor­po­ra­tions. Thou­sands of busi­nesses, in­clud­ing about twothirds of For­tune 500 firms and more than 80 per­cent of Amer­i­can IPOS, are in­cor­po­rated in Delaware. A re­quire­ment is that com­pa­nies tell Delaware how many shares they have has is­sued and then track who owns them. Some cor­po­ra­tions have ex­pressed in­ter­est in us­ing blockchain for that, in part to avoid record-keep­ing er­rors. The num­ber of shares a com­pany has is­sued of­ten doesn’t match the num­ber it has reg­is­tered with the state, and when a ma­te­rial event such as an ac­qui­si­tion oc­curs, there can be dis­putes. Record­keep­ing us­ing a blockchain — a sin­gle “golden record” — could elim­i­nate in­ac­cu­racy. Delaware is amend­ing its laws to make it crys­tal clear that it is le­gal for a com­pany to is­sue and track its shares on the blockchain.

At the same time, Delaware is test­ing blockchain in­ter­nally to or­ga­nize the Delaware Pub­lic Ar­chives, which con­tain every­thing from his­toric pho­tos to moun- tains of pub­lic records. Older doc­u­ments are be­ing dig­i­tized. Databases and spread­sheets from dis­parate di­vi­sions are be­ing mi­grated to a new dis­trib­uted ledger. “Smart records” would au­to­mate com­pli­ance with state laws that dic­tate re­ten­tion and de­struc­tion of doc­u­ments. Ul­ti­mately the sys­tem will make it eas­ier for agen­cies statewide to sub­mit doc­u­ments to the ar­chive and res­i­dents to find in­for­ma­tion.

Records in the blockchain can be any as­set, in­clud­ing phys­i­cal prop­erty. Cal­i­for­nia com­pany velox.re, along with the In­ter­na­tional Blockchain Real Es­tate As­so­ci­a­tion, has been work­ing with the gov­ern­ment of Cook County, Illi­nois, to cre­ate a le­gal blockchain ver­sion of a prop­erty deed. That could some­day re­place pa­per deeds and cre­ate a univer­sally ac­knowl­edged, “golden record” of who owns what prop­erty. It would elim­i­nate the need for things like ti­tle in­sur­ance. For gov­ern­ments that reg­is­ter land trans­fers, blockchain prop­erty records could min­i­mize fraud com­mit­ted with coun­ter­feit deeds. “With blockchain, you can’t Pho­to­shop a fake deed,” notes Rag­nar Lifthrasir, CEO of velox.re and founder of the as­so­ci­a­tion.

Else­where in the world, the United King­dom’s na­tional land registry said it will test a blockchain-based pro­gram that “would en­able the own­er­ship of prop­erty to be changed close to in­stan­ta­neously.” In Sin­ga­pore, the cen­tral bank has com­pleted a trial of dis­trib­uted ledger tech­nol­ogy for in­ter­bank pay­ments, cre­at­ing a dig­i­tal rep­re­sen­ta­tion of the Sin­ga­pore dol­lar.

One model for where things may be headed is the lit­tle na­tion of Es­to­nia, which be­came newly in­de­pen­dent in 1991 and built its new gov­ern­ment to lever­age dig­i­tal tech­nolo­gies. The Es­to­nia ID card, a dig­i­tal iden­tity card pegged to a blockchain-like in­fra­struc­ture, gives cit­i­zens ac­cess to a broad range of pub­lic ser­vices, act­ing as a driver’s li­cense, pass­port, credit card, trans­porta­tion pass and more.

None of these gov­ern­ment projects are with­out chal­lenges. Cul­tur­ally, agen­cies that aren’t ac­cus­tomed to shar­ing data eas­ily may need to dis­cover open­ness. Mi­grat­ing legacy data to dis­trib­uted ledger sys­tems can be costly. Cit­i­zens will have pri­vacy and se­cu­rity con­cerns.

But gov­ern­ments were early adopters of com­puter tech­nol­ogy, and the po­ten­tial is there.

“In the ’50s we had the ad­vent of the su­per­com­put­ers and in the ’90s the ex­plo­sion of the in­ter­net,” said KPMG’S Stark. “And now, gov­ern­ment could har­ness the po­ten­tial of blockchain to leapfrog in the pub­lic’s per­cep­tions of ef­fi­ciency, trans­parency and trust.”

“To­day as cit­i­zens we ex­pect to deal with gov­ern­ment the way we deal with ev­ery other part of our life. Gov­ern­ments can use blockchain tech­nol­ogy to move the nee­dle.” LORNA STARK, NA­TIONAL AD­VI­SORY IN­DUS­TRY LEADER—STATE AND LO­CAL GOV­ERN­MENT, KPMG

even va­ca­tion to­gether. “I’m a busi­ness­man, but we trust each other,” says Skon­nard at Plu­ral­sight. “There’s a shared vi­sion for Utah that uni­fies us.”

UTAH’S CLOUD-BASED SURGE re­mains con­tin­gent on one thing: more out­side ta­lent. Which is why, os­ten­si­bly, Smith and James find them­selves at Oak­land’s Or­a­cle Arena, at the clinch­ing Game 5 of the NBA Fi­nals. Yes, they love hoops. But they love re­cruit­ing more, es­pe­cially from the Bay Area, in­clud­ing shelling out $10,000 per seat for the hottest ticket of the year in a re­gion smit­ten with the Golden State War­riors. Af­ter spend­ing the day in­ter­view­ing can­di­dates in San Fran­cisco, Smith works the crowd, all the way down to court­side, like a sea­soned politi­cian.

James is here to treat his new chief mar­ket­ing of­fi­cer and to woo the busi­ness-op­er­a­tions ex­ec­u­tive at a di­rect com­peti­tor he’s spent weeks try­ing to re­cruit. “We’ve talked on the phone a few times, but this is the first time we’re meet­ing face-to- face,” says the vet­eran soft­ware ex­ec­u­tive. It’s cer­tainly a mem­o­rable one: The ex­ec­u­tive got to be a hero by bring­ing his son as well, and they sat one row be­hind Le­bron James and the Cava­liers’ bench. “It’s an of­fer you can’t refuse.”

Like the com­pa­nies them­selves, the pitch of­ten comes down to lower costs: a flat 5% state tax and a cost of liv­ing in Provo that’s 30% less than Seat­tle’s and 41% less than Bos­ton’s—and half that of the Bay Area, de­spite the fact that salaries are only 27% smaller, on av­er­age. The Utah cloud com­pa­nies have op­por­tunis­ti­cally brought back BYU grad­u­ates who had left the state, such as new Qualtrics chief op­er­at­ing of­fi­cer Zig Ser­afin, who had spent 17 years at Mi­crosoft as head of what be­came Skype for Busi­ness and as pres­i­dent of its Tellme unit, and Plu­ral­sight’s new CFO, James Budge, who plans to move his fam­ily from Cal­i­for­nia next year.

And these com­pa­nies have shown the flex­i­bil­ity to at­tract oth­ers from out of state, as Qualtrics alone has re­lo­cated 160 peo­ple to Utah so far this year. Want up­side? Plu­ral­sight’s Skon-

nard got Budge, the CFO of Ana­plan, to jump by pay­ing him en­tirely in stock (and $1 in salary). In­ter­nal chat­ter at Ama­zon Web Ser­vices about their hottest cus­tomers helped Domo hire its chief strat­egy of­fi­cer, who be­came in­trigued by the startup’s prospects af­ter notic­ing it spend­ing more and more with AWS.

And Utah has de­vel­oped an ef­fi­cient com­muter rail sys­tem that con­nects Provo to more cos­mopoli­tan ar­eas of the state. As re­cently as a year ago, Qualtrics op­er­ated one shut­tle from its cam­pus to the train sta­tion; the com­pany has in­creased that to five as young re­lo­cated em­ploy­ees like Je­sus Perez, an ac­count ex­ec­u­tive and Penn grad­u­ate, opt to live in high-rises in Salt Lake City—which has a gay mayor and re­port­edly nonMor­mon ma­jor­ity. Heather Zynczak, Plu­ral­sight’s CMO, says she loves the size of her house in Park City, the ski re­sort town where non-mor­mon tech ex­ec­u­tives bump into each other get­ting cof­fee or drop­ping their kids off at the lifts. Milind Kopikare, a Qualtrics prod­uct man­ager, chose Draper, a sub­ur­ban town with a bur­geon­ing In­dian-amer­i­can pop­u­la­tion. “There’s a big In­dian tem­ple there,” he says. His neigh­bors work in nearby tech cen­ters for Amer­i­can Ex­press and Gold­man Sachs.

Ex­pand­ing of­fices in Europe, Seat­tle and cities such as Chicago al­low the Utah com­pa­nies to in­creas­ingly hire ex­ec­u­tives

who work re­motely or com­mute. Plu­ral­sight’s head of sales lives in New York. Domo’s CFO and chief strate­gist and sev­eral other se­nior hires com­mute to head­quar­ters two or three days a week from out of state. And In­sid­esales’ chief rev­enue of­fi­cer, Lind­sey Arm­strong, helps keep the com­pany mov­ing from Lon­don. “I travel all the time, but not nec­es­sar­ily to Provo,” Arm­strong says. “I like to main­tain that at al­most any given time some­one is pissed off at me for be­ing in the wrong lo­ca­tion.” THE COL­LAB­O­RA­TION BE­TWEEN Utah’s cloud founders ex­tends past their reg­u­lar all-nighters. When Gold­man Sachs re- cently hosted Smith at a golf out­ing at the famed Shin­necock Hills course in the Hamp­tons with other tech ex­ec­u­tives, he noted how rare it was that he would do some­thing like that with­out Skon­nard, James or both. “The banks will ask for the ‘Utah guys,’ ” Smith says, “be­cause they know then we’re more likely to go.”

The “Utah guys” are all likely to go pub­lic soon, though “soon” is a rel­a­tive word for com­pa­nies whose life spans far ex­ceed the typ­i­cal startup story. Smith says he left money on the ta­ble when Qualtrics reached a $2.7 bil­lion val­u­a­tion in April (it was widely re­ported as $2.5 bil­lion, which suited him just

THE REWRITERS: An­drea Tini­anow, di­rec­tor of the Delaware Blockchain Ini­tia­tive; Rag­nar Lifthrasir, CEO of velox.re and founder of the In­ter­na­tional Blockchain Real Es­tate As­so­ci­a­tion

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