Treasury’s Fiscal Service wraps up ‘incredibly positive’ blockchain proof of concept

Five months of testing are over and the results are in — the Treasury Department’s Fiscal Service is here to tell you that blockchain can enable “much better” physical asset management.

In September 2017, the Office of Financial Innovation and Transformation kicked off a proof of concept project aimed at discovering if blockchain can improve the oversight and management of physical assets like computers and cellphones at the department. The hope was that the project would serve a dual purpose: It would be a way to experiment with a new technology as well as a way to make that technology (often very hype-laden) more down to earth and “tangible.”

So the team decided to test whether blockchain is a good solution for tracking agency-issued mobile phones. “We were trying to just prove out whether or not we can use blockchain to improve this process,” program manager Craig Fischer told FedScoop.

Currently, asset management is largely a manual, spreadsheet- or even pen-and-paper-based process, focused on reconciling a physical asset with a description of its status. “Across the government there are hundreds, perhaps thousands, of property custodians who every quarter have to reconcile a master list of inventory against the physical, you know, entities that are on that inventory,” the Office of Financial Innovation and Transformation’s John Hill told FedScoop in January. “It’s a reconciliation process.”

The upshot of transitioning this old-school process to the blockchain? Marked improvement in transparency and efficiency, Fischer said. For example, blockchain allows property custodians to see where an asset is in real time, instead of just at a moment in time, as a traditional spreadsheet does. The project had “incredibly positive findings,” Fischer added.

But this end result is only part of the real value of the project. Fischer and team learned lots, both on the technical and organizational or management sides, during the proof of concept’s five months.

In many ways, Fischer told FedScoop, what they learned was that utilizing a blockchain is a bit more complicated than initially expected. For starters, you really have to understand the problem you’re trying to solve.

“Probably half of [the five month process] was just mapping out everything that we do from acquiring the cellphones when they come off the truck all the way through disposal,” Fischer said. “And there’s a lot that happens in there.” This data is what powers the blockchain solution — understanding it in detail is key.

In some ways, organizing the data like this meant shifting the inefficiencies inherent in many stages of the manual process to the beginning of that process. Using a blockchain solution, the team found, required not-insignificant startup effort, and not just in an organizational sense.

On a more technical level, the team quickly found that you can’t really “just download a blockchain and get started.” For example there are a number of platforms one can use and, according to Fischer, no good criteria by which to choose which is best for your project. The team decided to use Ethereum, but “we could have probably used anything,” Fischer said. “But we had to start somewhere.”

From there you also have to choose what kind of consensus mechanism to use (how one validates the transactions made on the blockchain), where and how to host the blockchain (in their case, in the cloud) and much more.

“There’s a lot of other choices you have to make to kind of put the complete package together,” Fischer said. And then, once you have your blockchain set up, you have to build the applications that go along with it. In the case of this proof of concept, that was a mobile app downloaded to all of the participant phones.

“We don’t really have a lot of off-the-shelf solutions when it comes to blockchain,” Fischer said. This is a relatively new technology, after all.

Fischer said one thing the Office of Financial Innovation and Transformation did well was build a diverse team to conduct the proof of concept — technical and non-technical, blockchain enthusiasts and blockchain skeptics.

“When we had a lot of pro-blockchain people in the room you would try to force a square peg into a round hole,” Fischer said. “But when the skeptics were there they were like ‘why don’t we just do what we’re doing, why is this better, why is blockchain better’ — it really forced you to think through some of those things. So that was actually a really important lesson learned.”

This kind of critically minded approach will be front-and-center as the team asks what comes next, Fischer said. Despite the encouraging transparency and efficiency gains, there are a lot more questions to be explored. For example, how will this work once it is taken out of the innovation sandbox and placed into the actual federal context? And is the added efficiency and effectiveness really worth the upfront investment?

These questions will likely need to be answered on a case-by-case basis, Fischer said, and through more pilots.

But a positive first experiment is a good start.

“This strange idea that we had about a year and a half ago actually worked,” Fischer said. “That to me is exciting.”