Blockchain: Novel Provenance Applications

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Blockchain: Novel Provenance Applications
April April 812, 2022 , 2022
Blockchain, generally, is a database technology that records and stores information in blocks of Blockchain, generally, is a database technology that records and stores information in blocks of
data that are linked, or “chained,” together. Data stored on a blockchain are continually shared, data that are linked, or “chained,” together. Data stored on a blockchain are continually shared,
Kristen E. Busch
replicated, and synchronized across the nodes in a network—individual computer systems or replicated, and synchronized across the nodes in a network—individual computer systems or
Analyst in Science and Analyst in Science and
specialized hardware that communicate with each other and store and process information. This specialized hardware that communicate with each other and store and process information. This
Technology Policy Technology Policy
system enables tamper-resistant recordkeeping without a centralized authority or intermediary. system enables tamper-resistant recordkeeping without a centralized authority or intermediary.

There are multiple types of blockchains, and, depending on the type, recorded data may be There are multiple types of blockchains, and, depending on the type, recorded data may be

accessible to all users or only a designated subset. All blockchains share common characteristics, accessible to all users or only a designated subset. All blockchains share common characteristics,
including decentralization (i.e., no centralized authority), immutability (i.e., the blockchain records are unalterable), and including decentralization (i.e., no centralized authority), immutability (i.e., the blockchain records are unalterable), and
pseudonymity (i.e., how users’ real-world identities are handled). Certain blockchain types may offer greater levels of pseudonymity (i.e., how users’ real-world identities are handled). Certain blockchain types may offer greater levels of
decentralization and pseudonymity than others. New blockchain applications, such as smart contracts, non-fungible tokens, decentralization and pseudonymity than others. New blockchain applications, such as smart contracts, non-fungible tokens,
and decentralization autonomous organizations, may automate processes or replace intermediaries in a variety of fields. and decentralization autonomous organizations, may automate processes or replace intermediaries in a variety of fields.
Recent developments in blockchain governance protocols and consensus mechanisms have raised concerns about the Recent developments in blockchain governance protocols and consensus mechanisms have raised concerns about the
environmental impact, oversight, and accountability of blockchain networks. environmental impact, oversight, and accountability of blockchain networks.
Since its creation in 2008, blockchain has been most commonly associated with cryptocurrencies—digital currencies that Since its creation in 2008, blockchain has been most commonly associated with cryptocurrencies—digital currencies that
users exchange through decentralized computer networks. More recently, public and private sector actors have used users exchange through decentralized computer networks. More recently, public and private sector actors have used
blockchain applications in fields such as supply chain management, identity management, and asset registration. Blockchain blockchain applications in fields such as supply chain management, identity management, and asset registration. Blockchain
technologies may enable establishing the provenance of goods and tracking their progression through a supply chain; technologies may enable establishing the provenance of goods and tracking their progression through a supply chain;
identity-management with digital credentials; recording the ownership of digital and physical objects; and the transfer of identity-management with digital credentials; recording the ownership of digital and physical objects; and the transfer of
property, rights, or goods without a third-party intermediary. The United States is a hub for private-sector blockchain property, rights, or goods without a third-party intermediary. The United States is a hub for private-sector blockchain
development, and many states and federal agencies are experimenting with novel blockchain provenance applications, development, and many states and federal agencies are experimenting with novel blockchain provenance applications,
including the Food and Drug Administration and Department of including the Food and Drug Administration and Department of the Treasury. Treasury.
Proponents claim that blockchain can increase transparency and efficiency in many fields by enabling auditable and Proponents claim that blockchain can increase transparency and efficiency in many fields by enabling auditable and
immutable recordkeeping. However, immutable recordkeeping. However, ~~there are equally~~opponents have significant concerns. Blockchain technologies are maturing and fully significant concerns. Blockchain technologies are maturing and fully
developed use cases outside of the financial sector are relatively limited. In some applications, blockchain technologies can developed use cases outside of the financial sector are relatively limited. In some applications, blockchain technologies can
add unnecessary complexity compared with using conventional databases or other alternatives. The technology may also pose add unnecessary complexity compared with using conventional databases or other alternatives. The technology may also pose
security and privacy risks if sensitive information is permanently recorded on a blockchain, encryption algorithms are broken, security and privacy risks if sensitive information is permanently recorded on a blockchain, encryption algorithms are broken,
smart contracts malfunction, or digital wallets and other blockchain applications are hacked. Some blockchains also use smart contracts malfunction, or digital wallets and other blockchain applications are hacked. Some blockchains also use
energy-intensive processes to validate transactions, which can consume as much energy as small nations. energy-intensive processes to validate transactions, which can consume as much energy as small nations.
Individual states have passed legislation or established initiatives to develop, incentivize, and regulate blockchain Individual states have passed legislation or established initiatives to develop, incentivize, and regulate blockchain
technologies. Some states have taken vastly different approaches to blockchain technologies, so the state-level regulations technologies. Some states have taken vastly different approaches to blockchain technologies, so the state-level regulations
that do exist vary widely. A handful of federal agencies have released guidance on blockchain technologies in specific that do exist vary widely. A handful of federal agencies have released guidance on blockchain technologies in specific
sectors, such as finance, but there is little guidance for blockchain applications in other fields, such supply chain logistics, sectors, such as finance, but there is little guidance for blockchain applications in other fields, such supply chain logistics,
identity credentialing, or intellectual property and asset registration. In the meantime, China and the European Union have identity credentialing, or intellectual property and asset registration. In the meantime, China and the European Union have
invested heavily in blockchain technologies and developed their own respective regulatory frameworks, so international invested heavily in blockchain technologies and developed their own respective regulatory frameworks, so international
regulations may also conflict with one another. regulations may also conflict with one another.
Congress may Congress may ~~wish to~~ consider the appropriate role, if any, the U.S. government may play in the development or regulation consider the appropriate role, if any, the U.S. government may play in the development or regulation
of blockchain technologies and applications. Congress could consider funding research into blockchain technologies, of blockchain technologies and applications. Congress could consider funding research into blockchain technologies, ~~support~~supporting
standards development, or standards development, or ~~direct~~directing federal agencies to create guidance on certain blockchain applications, among other options. federal agencies to create guidance on certain blockchain applications, among other options.
Congress may also consider the roles of the public and private sectors in addressing the potential risks associated with Congress may also consider the roles of the public and private sectors in addressing the potential risks associated with
blockchain technologies generally, as well as within specific sectors and with specific applications. For example, Congress blockchain technologies generally, as well as within specific sectors and with specific applications. For example, Congress
might consider whether existing privacy regulations are adequate to address potential concerns arising from the use of might consider whether existing privacy regulations are adequate to address potential concerns arising from the use of
blockchain technologies and blockchain-enabled provenance applications. blockchain technologies and blockchain-enabled provenance applications.
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Appendix B. Glossary ................................................................................................................... 25

Contacts
Author Information ........................................................................................................................ 26

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Introduction
Blockchain is a database technology that records and stores information in blocks of data that are Blockchain is a database technology that records and stores information in blocks of data that are
linked, or “chained,” together. Data stored on a blockchain are continually shared, replicated, and linked, or “chained,” together. Data stored on a blockchain are continually shared, replicated, and
synchronized across the nodes in a network—individual computer systems or specialized synchronized across the nodes in a network—individual computer systems or specialized
hardware that communicate with each other and store and process information. This system hardware that communicate with each other and store and process information. This system
enables tamper-resistant recordkeeping without a centralized authority or intermediary. All enables tamper-resistant recordkeeping without a centralized authority or intermediary. All
blockchains share common characteristics, including a level of decentralization (i.e., no blockchains share common characteristics, including a level of decentralization (i.e., no
centralized authority), immutability (i.e., the blockchain records are unalterable), and centralized authority), immutability (i.e., the blockchain records are unalterable), and
pseudonymity (i.e., how users’ real-world identities are handled). pseudonymity (i.e., how users’ real-world identities are handled).
Since its creation in 2008, blockchain has been most commonly associated with Since its creation in 2008, blockchain has been most commonly associated with
cryptocurrencies—digital currencies that users exchange through decentralized computer cryptocurrencies—digital currencies that users exchange through decentralized computer
networks. networks. ~~However, proponents~~Proponents of blockchain technologies have identified applications that help of blockchain technologies have identified applications that help
establish the provenance of physical and digital items. Provenance is the ability to know the establish the provenance of physical and digital items. Provenance is the ability to know the
origin and history of a physical or digital item. Blockchain technologies may enable establishing origin and history of a physical or digital item. Blockchain technologies may enable establishing
the provenance of goods and tracking their progression through a supply chain; identity-the provenance of goods and tracking their progression through a supply chain; identity-
management with digital credentials; recording the ownership of digital and physical objects; and management with digital credentials; recording the ownership of digital and physical objects; and
the transfer of property, rights, or goods without a third-party intermediary. the transfer of property, rights, or goods without a third-party intermediary.
Congress may Congress may ~~wish to~~ consider the appropriate role, if any, the U.S. government may play in the consider the appropriate role, if any, the U.S. government may play in the
development or regulation of blockchain technologies and applications. Congress development or regulation of blockchain technologies and applications. Congress ~~may choose to~~
~~fund~~could consider funding research into blockchain technologies, research into blockchain technologies, ~~support~~supporting standards development, or standards development, or ~~direct~~ directing federal federal
agencies to create guidance on certain blockchain applications, among other options. Congress agencies to create guidance on certain blockchain applications, among other options. Congress
may also consider the roles of the public and private sectors in addressing the potential risks may also consider the roles of the public and private sectors in addressing the potential risks
associated with blockchain technologies generally, as well as within specific sectors and associated with blockchain technologies generally, as well as within specific sectors and
applications. applications.
This report focuses on blockchain provenance applications in supply chain management, identity This report focuses on blockchain provenance applications in supply chain management, identity
management, and registry and asset tracking. It provides an overview of blockchain technologies management, and registry and asset tracking. It provides an overview of blockchain technologies
and recent technical developments. This report discusses examples of international and domestic and recent technical developments. This report discusses examples of international and domestic
regulatory frameworks and congressional considerations for blockchain technologies. For more regulatory frameworks and congressional considerations for blockchain technologies. For more
information on cryptocurrencies and other blockchain applications, see the following list of information on cryptocurrencies and other blockchain applications, see the following list of
existing CRS products. existing CRS products.

CRS Products on Blockchain Technologies and Applications
Blockchain Technologies
CRS Report R45116, CRS Report R45116, Blockchain: Background and Policy Issues, by Chris Jaikaran. , by Chris Jaikaran.
CRS Testimony TE10025, CRS Testimony TE10025, Beyond Bitcoin: Emerging Applications for Blockchain Technology, by Chris Jaikaran. , by Chris Jaikaran.
CRS Video WVB00200, CRS Video WVB00200, Understanding Blockchain Technology and Its Policy Implications, by Chris Jaikaran. , by Chris Jaikaran.
Non-Financial Blockchain Applications
CRS Report R45863, CRS Report R45863, Bitcoin, Blockchain, and the Energy Sector, by Corrie E. Clark and Heather L. Greenley. , by Corrie E. Clark and Heather L. Greenley.
CRS In Focus IF11829, CRS In Focus IF11829, Blockchain Technology and Agriculture, by Genevieve K. Croft. , by Genevieve K. Croft.
CRS In Focus IF10810, CRS In Focus IF10810, Blockchain and International Trade, by Rachel F. Fefer. , by Rachel F. Fefer.
Financial Blockchain Applications
CRS Report R46208, CRS Report R46208, Digital Assets and SEC Regulation, by Eva Su. , by Eva Su.
CRS Report R45427, CRS Report R45427, Cryptocurrency: The Economics of Money and Selected Policy Issues, by David W. Perkins. , by David W. Perkins.
CRS Report R45440, CRS Report R45440, International Approaches to Digital Currencies, by Rebecca M. Nelson. , by Rebecca M. Nelson.
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CRS Report R46486, CRS Report R46486, Telegraphs, Steamships, and Virtual Currency: An Analysis of Money Transmitter Regulation, by , by
Andrew P. Scott. Andrew P. Scott.
CRS Report R45664, CRS Report R45664, Virtual Currencies and Money Laundering: Legal Background, Enforcement Actions, and Legislative
Proposals, by Jay B. Sykes and Nicole Vanatko. , by Jay B. Sykes and Nicole Vanatko.
CRS Report R46843, CRS Report R46843, International Financial Messaging Systems, by Liana Wong and Rebecca M. Nelson. , by Liana Wong and Rebecca M. Nelson.
CRS Report R43339, CRS Report R43339, Bitcoin: Questions, Answers, and Analysis of Legal Issues, by Edward V. Murphy and M. Maureen , by Edward V. Murphy and M. Maureen
Murphy.Murphy.
CRS In Focus IF10824, CRS In Focus IF10824, Financial Innovation: “Cryptocurrencies”, by David W. Perkins. , by David W. Perkins.
CRS In Focus IF10825, CRS In Focus IF10825, Digital Currencies: Sanctions Evasion Risks, by Rebecca M. Nelson and Liana W. Rosen. , by Rebecca M. Nelson and Liana W. Rosen.
CRS In Focus IF11004, CRS In Focus IF11004, Financial Innovation: Digital Assets and Initial Coin Offerings, by Eva Su. , by Eva Su.
CRS In Focus IF11910, CRS In Focus IF11910, Cryptocurrency Transfers and Data Collection, by Mark P. Keightley and Andrew P. Scott. , by Mark P. Keightley and Andrew P. Scott.
CRS In Focus IF11471, CRS In Focus IF11471, Financial Innovation: Central Bank Digital Currencies, by Marc Labonte, Rebecca M. Nelson, , by Marc Labonte, Rebecca M. Nelson,
and David W. Perkins. and David W. Perkins.
CRS In Focus IF10513, CRS In Focus IF10513, Financial Innovation: “Fintech”, by David W. Perkins. , by David W. Perkins.
CRS In Focus IF11195, CRS In Focus IF11195, Financial Innovation: Reducing Fintech Regulatory Uncertainty, by David W. Perkins, Cheryl R. , by David W. Perkins, Cheryl R.
Cooper, and Eva Su. Cooper, and Eva Su.
CRS Insight IN11709, CRS Insight IN11709, Decentralized Finance (DeFi) and Financial Services Disintermediation: Policy Challenges, by Eva Su. , by Eva Su.
CRS Insight IN11632, CRS Insight IN11632, Pandemics, Payments, and (Digital) Property, by Andrew P. Scott. , by Andrew P. Scott.
CRS Insight IN11183, CRS Insight IN11183, Libra: A Facebook-led Cryptocurrency Initiative, by Rebecca M. Nelson and David W. Perkins. , by Rebecca M. Nelson and David W. Perkins.
CRS Legal Sidebar WSLG1856, CRS Legal Sidebar WSLG1856, For First Time, FinCEN Imposes Penalty on Foreign-Based Virtual Currency Exchange for
Violations of Anti-Money Laundering Laws, by M. Maureen Murphy. , by M. Maureen Murphy.
CRS Legal Sidebar LSB10227, CRS Legal Sidebar LSB10227, CFTC and Virtual Currencies: New Court Rulings and Implications for Congress, by Nicole , by Nicole
Vanatko. Vanatko.
Overview of Blockchain
Blocks of Data
Blockchain is a system to keep track of information and store data.1 In many cases, blockchains Blockchain is a system to keep track of information and store data.1 In many cases, blockchains
record transactional data (e.g., assets sent and received between parties). Transactions occurring record transactional data (e.g., assets sent and received between parties). Transactions occurring
at around the same time on a network are grouped together and recorded as blocks of data on the at around the same time on a network are grouped together and recorded as blocks of data on the
blockchain. A typical block on the blockchain might include thousands of transactions, each with blockchain. A typical block on the blockchain might include thousands of transactions, each with
its own transaction data, list of senders and recipients, and timestamp.2 However, the exact type its own transaction data, list of senders and recipients, and timestamp.2 However, the exact type
of information stored in a block depends on the specific case, such as the exchange of digital of information stored in a block depends on the specific case, such as the exchange of digital
currency, sale and transfer of land titles, records of intellectual property rights, or identity currency, sale and transfer of land titles, records of intellectual property rights, or identity
information. information.
For this report, the term “blockchain” refers to the digital ledger (i.e., record) of transactions. A For this report, the term “blockchain” refers to the digital ledger (i.e., record) of transactions. A
“blockchain network” refers to the collection of nodes (i.e., computer or hardware systems) “blockchain network” refers to the collection of nodes (i.e., computer or hardware systems)
within a distributed network, for a specific blockchain. Each network has its own blockchain within a distributed network, for a specific blockchain. Each network has its own blockchain
ledger. A “blockchain platform” is a technical infrastructure that supports blockchain operations ledger. A “blockchain platform” is a technical infrastructure that supports blockchain operations
and development, such as Ethereum or Solana, on which other features or blockchain-based and development, such as Ethereum or Solana, on which other features or blockchain-based
applications can be built. Finally, “blockchain technologies” refers to the many different applications can be built. Finally, “blockchain technologies” refers to the many different

1 For an overview of blockchain, see CRS Report R45116, 1 For an overview of blockchain, see CRS Report R45116, Blockchain: Background and Policy Issues, by Chris , by Chris
Jaikaran. Jaikaran.
2 For an in-depth technical explanation of blockchain, see Dylan J. Yaga, Peter M. Mell, and Nik Roby, et al., 2 For an in-depth technical explanation of blockchain, see Dylan J. Yaga, Peter M. Mell, and Nik Roby, et al.,
Blockchain Technology Overview, National Institute of Standards and Technology, NIST Interagency/Internal Report , National Institute of Standards and Technology, NIST Interagency/Internal Report
(NISTIR) 8202, Gaithersburg, MD, October 3, 2018, https://doi.org/10.6028/NIST.IR.8202. (NISTIR) 8202, Gaithersburg, MD, October 3, 2018, https://doi.org/10.6028/NIST.IR.8202.
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implementations and applications of blockchains, such as decentralized apps (DApps), implementations and applications of blockchains, such as decentralized apps (DApps),
decentralized autonomous organizations (DAO), non-fungible tokens (NFT), and smart contracts, decentralized autonomous organizations (DAO), non-fungible tokens (NFT), and smart contracts,
which are explored in the “DApps, DAOs, and NFTs” section of this report. which are explored in the “DApps, DAOs, and NFTs” section of this report.
Chaining Blocks
In a blockchain, the blocks of data are cryptographically chained together through a hash In a blockchain, the blocks of data are cryptographically chained together through a hash
function,3 which refers to how each block contains unique data from the previous block. A hash function,3 which refers to how each block contains unique data from the previous block. A hash
function produces a string of characters as an output given some data as input. This is a one-way function produces a string of characters as an output given some data as input. This is a one-way
function, meaning a hash value may be created from an input, but the input cannot be recreated function, meaning a hash value may be created from an input, but the input cannot be recreated
from the hash.4 A number of blockchain transactions are grouped together to make a single block, from the hash.4 A number of blockchain transactions are grouped together to make a single block,
which is then hashed. Any changes to one block would change the hash and immediately show in which is then hashed. Any changes to one block would change the hash and immediately show in
the subsequent block, thereby creating an immutable and tamper-resistant record of transactions.5 the subsequent block, thereby creating an immutable and tamper-resistant record of transactions.5
As shown iAs shown in Figure 1, each block contains a hash of the previous block’s data and the main ach block contains a hash of the previous block’s data and the main
transaction data. The constant addition of new blocks is critical to maintaining a blockchain’s transaction data. The constant addition of new blocks is critical to maintaining a blockchain’s
security.6 security.6
Figure 1. Diagram of Blockchain and Cryptographic Linking

Source: CRS, adapted from Dylan J. Yaga, Peter M. Mell, and Nik Roby, et al., CRS, adapted from Dylan J. Yaga, Peter M. Mell, and Nik Roby, et al., Blockchain Technology Overview, ,
National Institute of Standards and Technology, NIST Interagency/Internal Report (NISTIR) 8202, Gaithersburg, National Institute of Standards and Technology, NIST Interagency/Internal Report (NISTIR) 8202, Gaithersburg,
MD, October 3, 2018, https://doi.org/10.6028/NIST.IR.8202. MD, October 3, 2018, https://doi.org/10.6028/NIST.IR.8202.
Notes: Starting from the leftmost block in the diagram, the main block data (such as a transaction list, etc.) is Starting from the leftmost block in the diagram, the main block data (such as a transaction list, etc.) is
hashed and stored in the current block header (along with other data such as a timestamp) (Block 1). The entire hashed and stored in the current block header (along with other data such as a timestamp) (Block 1). The entire
block header is hashed and stored in the next block’s header (Block 2). The process repeats for each block block header is hashed and stored in the next block’s header (Block 2). The process repeats for each block
(Block 3). Thus, each block wil contain a hash from the previous block, which creates a chain of blocks that (Block 3). Thus, each block wil contain a hash from the previous block, which creates a chain of blocks that
“reference” or “point” to one another. If a block’s data was retroactively altered, it would automatically result in “reference” or “point” to one another. If a block’s data was retroactively altered, it would automatically result in
a different hash. a different hash.

3 There are various kinds of hash functions, such as SHA-256, Scrypt, and X11. Each hashing function has its own 3 There are various kinds of hash functions, such as SHA-256, Scrypt, and X11. Each hashing function has its own
advantages and disadvantages for the blockchain’s speed, energy-efficiency, and throughput. advantages and disadvantages for the blockchain’s speed, energy-efficiency, and throughput.
4 For more information on hash functions, see CRS Report R45116, 4 For more information on hash functions, see CRS Report R45116, Blockchain: Background and Policy Issues, by , by
Chris Jaikaran. Chris Jaikaran.
5 If any data in a previous block is changed, it will result in a different hash, which alerts the blockchain network. This 5 If any data in a previous block is changed, it will result in a different hash, which alerts the blockchain network. This
makes the blockchain immutable and tamper-resistant. makes the blockchain immutable and tamper-resistant.
6 In order to change the data in a particular block, the user must also change all subsequent blocks. In a “51% attack,” a 6 In order to change the data in a particular block, the user must also change all subsequent blocks. In a “51% attack,” a
bad actor attempts to gain 51% of the computing power needed to generate blocks in a public, permissionless network. bad actor attempts to gain 51% of the computing power needed to generate blocks in a public, permissionless network.
This type of attack is very difficult because the attacker must outpace the block creation rate of the rest of the network This type of attack is very difficult because the attacker must outpace the block creation rate of the rest of the network
while new blocks are being continuously added. while new blocks are being continuously added.
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Distributed Networks
The chained blocks of transaction data form a digital ledger that is stored and maintained by The chained blocks of transaction data form a digital ledger that is stored and maintained by
multiple parties in a distributed, peer-to-peer computer network (i.e., without centralized multiple parties in a distributed, peer-to-peer computer network (i.e., without centralized
administration or use of an intermediary’s repository).7 The term ledger refers to a record or administration or use of an intermediary’s repository).7 The term ledger refers to a record or
collection of transactions, which track the movement of money or goods from one entity to collection of transactions, which track the movement of money or goods from one entity to
another. Conventionally, most records are digital and stored on servers maintained by a single another. Conventionally, most records are digital and stored on servers maintained by a single
entity or organization. Blockchain, however, creates multiple identical ledgers on individual entity or organization. Blockchain, however, creates multiple identical ledgers on individual
computer systems or specialized hardware called nodes.8 Through combining pre-existing computer systems or specialized hardware called nodes.8 Through combining pre-existing
technologies,9 blockchain technologies enable peer-to-peer transactions and recordkeeping by technologies,9 blockchain technologies enable peer-to-peer transactions and recordkeeping by
sharing each update with participating nodes in the network as a record of activity for sharing each update with participating nodes in the network as a record of activity for
verification. The “safety in numbers” approach reduces the likelihood of fraud. Blockchain is one verification. The “safety in numbers” approach reduces the likelihood of fraud. Blockchain is one
example of the larger category of distributed ledger technologies (DLTs).10example of the larger category of distributed ledger technologies (DLTs).10 Figure 2 demonstrates demonstrates
the differences between centralized and distributed ledgers. the differences between centralized and distributed ledgers.
Figure 2. Centralized vs. Distributed Ledger Systems

Source: CRS, adapted from U.S. Government Accountability Office, CRS, adapted from U.S. Government Accountability Office, Blockchain & Distributed Ledger Technologies, ,
GAO-19-704SP, September 16, 2019, https://www.gao.gov/products/gao-19-704sp. GAO-19-704SP, September 16, 2019, https://www.gao.gov/products/gao-19-704sp.
By publishing all blockchain transactions to all participating nodes, which node operators By publishing all blockchain transactions to all participating nodes, which node operators
maintain and can constantly verify, proponents believe blockchain may enable more secure and maintain and can constantly verify, proponents believe blockchain may enable more secure and
transparent recordkeeping compared to traditional data management systems that use centralized transparent recordkeeping compared to traditional data management systems that use centralized

7 Blockchain was created by an individual or group of people operating under the pseudonym “Satoshi Nakamoto.” 7 Blockchain was created by an individual or group of people operating under the pseudonym “Satoshi Nakamoto.”
Satoshi Nakamoto published a white paper outlining a peer-to-peer digital payments system, which was the foundation Satoshi Nakamoto published a white paper outlining a peer-to-peer digital payments system, which was the foundation
for Bitcoin, the first application of blockchain. Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System,” for Bitcoin, the first application of blockchain. Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System,”
White Paper, 2008, http://satoshinakamoto.me/bitcoin.pdf. White Paper, 2008, http://satoshinakamoto.me/bitcoin.pdf.
8 A “full” node stores the full blockchain data and verifies blocks; a “light” node only stores some of the blockchain 8 A “full” node stores the full blockchain data and verifies blocks; a “light” node only stores some of the blockchain
data; a “publishing node” is a full node that also publishes new blocks. data; a “publishing node” is a full node that also publishes new blocks.
9 Blockchains combine many pre-existing technologies, including asymmetric key encryption, hash values, Merkle 9 Blockchains combine many pre-existing technologies, including asymmetric key encryption, hash values, Merkle
trees, and peer-to-peer networks. For more information on the technologies underlying blockchain, see CRS Report trees, and peer-to-peer networks. For more information on the technologies underlying blockchain, see CRS Report
R45116, R45116, Blockchain: Background and Policy Issues, by Chris Jaikaran. , by Chris Jaikaran.
10 Although definitions may differ, distributed ledger technologies (DLT) are often referred to as “a multi-party system 10 Although definitions may differ, distributed ledger technologies (DLT) are often referred to as “a multi-party system
in which participants reach agreement over a set of shared data and its validity, in the absence of a central coordinator. in which participants reach agreement over a set of shared data and its validity, in the absence of a central coordinator.
What separates DLT systems from traditional distributed databases are features rooted in designs capable of supporting What separates DLT systems from traditional distributed databases are features rooted in designs capable of supporting
data and maintaining data integrity in an adversarial environment.” Michel Rauchs, Andrew Glidden, and Brian data and maintaining data integrity in an adversarial environment.” Michel Rauchs, Andrew Glidden, and Brian
Gordon, et al., Gordon, et al., Distributed Ledger Technology Systems: A Conceptual Framework, University of Cambridge Centre for , University of Cambridge Centre for
Alternative Finance, August 2018, pp. 19-20, https://www.jbs.cam.ac.uk/wp-content/uploads/2020/08/2018-10-26-Alternative Finance, August 2018, pp. 19-20, https://www.jbs.cam.ac.uk/wp-content/uploads/2020/08/2018-10-26-
conceptualising-dlt-systems.pdf. conceptualising-dlt-systems.pdf.
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databases maintained by a single organization. A fundamental idea behind blockchain is that an databases maintained by a single organization. A fundamental idea behind blockchain is that an
individual can trust the system as a whole without necessarily trusting any of the participants individual can trust the system as a whole without necessarily trusting any of the participants
since there is a shared record of all transactions. since there is a shared record of all transactions.
Types of Blockchains
There are many different types of blockchains, each with unique characteristics and applications. There are many different types of blockchains, each with unique characteristics and applications.
The four major types of blockchains—public, private, hybrid, and consortium blockchains—are The four major types of blockchains—public, private, hybrid, and consortium blockchains—are
shown in Table 1. However, all blockchain types share common characteristics, including However, all blockchain types share common characteristics, including
immutability and a level of decentralization and pseudonymity. These characteristics are not immutability and a level of decentralization and pseudonymity. These characteristics are not
prerequisites for a blockchain, but varying features. The balance among these characteristics may prerequisites for a blockchain, but varying features. The balance among these characteristics may
vary depending on the type of blockchain and specific implementation. vary depending on the type of blockchain and specific implementation.
Public, Private, Hybrid, and Consortium Blockchains
Public blockchains allow anyone with an internet connection to access and “read” the blockchain Public blockchains allow anyone with an internet connection to access and “read” the blockchain
ledger. Public blockchains feature a degree of pseudonymity by allowing participants to use ledger. Public blockchains feature a degree of pseudonymity by allowing participants to use
verifiable aliases through public-private key cryptography.11 Participants can use a public key to verifiable aliases through public-private key cryptography.11 Participants can use a public key to
encrypt data, and a private key to decrypt the data.12 Participants can also sign a transaction with encrypt data, and a private key to decrypt the data.12 Participants can also sign a transaction with
their private key, and the recipient can verify the signature with the public key.13 In such systems, their private key, and the recipient can verify the signature with the public key.13 In such systems,
linking identities to pseudonyms is computationally and data intensive. Access to private linking identities to pseudonyms is computationally and data intensive. Access to private
blockchains, typically run by a company for the benefit of that company or clients, is generally blockchains, typically run by a company for the benefit of that company or clients, is generally
controlled. Unlike public blockchains, private blockchains require some level of identity controlled. Unlike public blockchains, private blockchains require some level of identity
verification before access is authorized. Private blockchains run by a group of entities are called verification before access is authorized. Private blockchains run by a group of entities are called
consortium blockchains. consortium blockchains.
Hybrid blockchains combine elements of both public and private networks. Hybrid blockchains, blockchains combine elements of both public and private networks. Hybrid blockchains,
or or side chains, are controlled-access blockchains attached to a larger, public blockchain. Side , are controlled-access blockchains attached to a larger, public blockchain. Side
chains may enable specific, authorized users to exchange sensitive information off the main chains may enable specific, authorized users to exchange sensitive information off the main
blockchain. For example, the popular blockchain platform Ethereum enables developers to build blockchain. For example, the popular blockchain platform Ethereum enables developers to build
private side chains. private side chains.
Permissionless vs. Permissioned
Blockchain networks are either Blockchain networks are either permissionless or or permissioned, which is independent of whether , which is independent of whether
the blockchain is the blockchain is public or or private. .
On On permissionless blockchains, all nodes have equal rights, with any node able to view the full blockchains, all nodes have equal rights, with any node able to view the full
blockchain and potentially add additional blocks. blockchain and potentially add additional blocks. Permissioned blockchains allow only blockchains allow only
authorized nodes to view the blockchain and validate blocks. Permissions may also be variable, authorized nodes to view the blockchain and validate blocks. Permissions may also be variable,
with some nodes only able to view a portion of the blockchain, others able to view the whole with some nodes only able to view a portion of the blockchain, others able to view the whole

11 Each key is a generated through a cryptographic algorithm. For more information on public-private key cryptography 11 Each key is a generated through a cryptographic algorithm. For more information on public-private key cryptography
and blockchain, see CRS Report R45116, and blockchain, see CRS Report R45116, Blockchain: Background and Policy Issues, by Chris Jaikaran. , by Chris Jaikaran.
12 “Public key encryption, or public key cryptography, is a method of encrypting data with two different keys and 12 “Public key encryption, or public key cryptography, is a method of encrypting data with two different keys and
making one of the keys, the public key, available for anyone to use. The other key is known as the private key. Data making one of the keys, the public key, available for anyone to use. The other key is known as the private key. Data
encrypted with the public key can only be decrypted with the private key, and data encrypted with the private key can encrypted with the public key can only be decrypted with the private key, and data encrypted with the private key can
only be decrypted with the public key.” Cloudflare, only be decrypted with the public key.” Cloudflare, How Does Public Key Encryption Work? Public Jey Cryptography
and SSL, https://www.cloudflare.com/learning/ssl/how-does-public-key-encryption-work/. Whitfield Diffie and Martin , https://www.cloudflare.com/learning/ssl/how-does-public-key-encryption-work/. Whitfield Diffie and Martin
Hellman, “New Directions in Cryptography,” Hellman, “New Directions in Cryptography,” IEEE Transactions on Information Theory, vol. 22, no. 6 (1976), pp. 644-, vol. 22, no. 6 (1976), pp. 644-
654, https://ieeexplore.ieee.org/iel5/18/22693/01055638.pdf. 654, https://ieeexplore.ieee.org/iel5/18/22693/01055638.pdf.
13 For more information on public and private keys, as well as encryption, see CRS Report R44642, 13 For more information on public and private keys, as well as encryption, see CRS Report R44642, Encryption:
Frequently Asked Questions, by Chris Jaikaran. , by Chris Jaikaran.
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blockchain, and still others able to add and validate blocks. In a permissioned system, blockchain, and still others able to add and validate blocks. In a permissioned system,
administrators control the rights of nodes on the blockchain, how many nodes are needed to administrators control the rights of nodes on the blockchain, how many nodes are needed to
validate a new block, and by what consensus mechanism. Different types of blockchains may validate a new block, and by what consensus mechanism. Different types of blockchains may
offer varying levels of anonymity, speed, and efficiency. offer varying levels of anonymity, speed, and efficiency.
Table 1. Types of Blockchains

Ability to Validate Transactions
Ability to Read and
Submit Transactions
Permissioned
Permissionless
Public Blockchain Public Blockchain
All nodes can read and submit All nodes can read and submit
All nodes can read, submit, and validate All nodes can read, submit, and validate

transactions. Only authorized nodes transactions. Only authorized nodes
transactions. No central entity manages transactions. No central entity manages
can validate transactions. can validate transactions.
blockchain membership. blockchain membership.
Examples: Sovrin Examples: Sovrin
Examples: Ethereum, Bitcoin Examples: Ethereum, Bitcoin
Private Blockchain Private Blockchain
Only authorized nodes can read, Only authorized nodes can read,
NA (all private blockchains are NA (all private blockchains are

submit, and validate transactions. submit, and validate transactions.
permissioned by definition) permissioned by definition)
Hybrid Blockchain Hybrid Blockchain
Only authorized nodes can access the private chain, but all nodes can read, submit, Only authorized nodes can access the private chain, but all nodes can read, submit,
and validate transactions on the public chain. All hybrid blockchains are in and validate transactions on the public chain. All hybrid blockchains are in
permissioned and permissionless categories. permissioned and permissionless categories.
Consortium Blockchain Consortium Blockchain
Only nodes authorized by the Only nodes authorized by the
NA (all consortium blockchains are NA (all consortium blockchains are
consortium can access the chain, and consortium can access the chain, and
permissioned by definition) permissioned by definition)
submit and validate transactions. submit and validate transactions.
Examples: Hyperledger Fabric Examples: Hyperledger Fabric
Source: CRS, adapted from Roman Beck, Christoph Mül er-Bloch, and John Leslie King, “Governance in the CRS, adapted from Roman Beck, Christoph Mül er-Bloch, and John Leslie King, “Governance in the
Blockchain Economy: A Framework and Research Agenda,” Blockchain Economy: A Framework and Research Agenda,” Journal of the Association for Information Systems, vol. , vol.
19, no. 10 (2018). 19, no. 10 (2018).
Blockchain technologies are often described as decentralized because of the use of distributed Blockchain technologies are often described as decentralized because of the use of distributed
ledgers and lack of centralized servers. Decentralization, however, is not a condition of ledgers and lack of centralized servers. Decentralization, however, is not a condition of
blockchain, but a varying feature, dependent on the type of blockchain and implementation. Many blockchain, but a varying feature, dependent on the type of blockchain and implementation. Many
cloud service providers (CSP), such as Oracle and Amazon Web Services (AWS), offer cloud cloud service providers (CSP), such as Oracle and Amazon Web Services (AWS), offer cloud
services for blockchain platforms.14 Currently, AWS reports that 25% of all Ethereum nodes run services for blockchain platforms.14 Currently, AWS reports that 25% of all Ethereum nodes run
on their services.15 While a CSP might not act as a central validating authority, it becomes a third on their services.15 While a CSP might not act as a central validating authority, it becomes a third
party to transactions on hosted blockchains.16 However, in other services, a CSP may become a party to transactions on hosted blockchains.16 However, in other services, a CSP may become a
kind of central authority. For example, various companies have hired IBM, a CSP, to build their kind of central authority. For example, various companies have hired IBM, a CSP, to build their
blockchains and host them in the IBM Cloud, rather than each individual company developing the blockchains and host them in the IBM Cloud, rather than each individual company developing the
necessary blockchain infrastructure internally.17 necessary blockchain infrastructure internally.17
Different blockchain permission frameworks prioritize and balance factors such as transparency, Different blockchain permission frameworks prioritize and balance factors such as transparency,
speed, and security. For example, many cryptocurrencies, NFTs, and decentralized finance speed, and security. For example, many cryptocurrencies, NFTs, and decentralized finance
applications use public, permissionless, or hybrid blockchain networks. However, companies that applications use public, permissionless, or hybrid blockchain networks. However, companies that
adopt blockchain for their internal services typically use private or consortium blockchain adopt blockchain for their internal services typically use private or consortium blockchain

14 For more information on Oracle’s blockchain services, see “Oracle Blockchain,” https://www.oracle.com/14 For more information on Oracle’s blockchain services, see “Oracle Blockchain,” https://www.oracle.com/
blockchain/. blockchain/.
15 For more information on Amazon’s blockchain services, see “Blockchain on AWS,” https://aws.amazon.com/ 15 For more information on Amazon’s blockchain services, see “Blockchain on AWS,” https://aws.amazon.com/
blockchain/. blockchain/.
16 For information on peer-to-peer networks and CSPs, see CRS Report R45116, 16 For information on peer-to-peer networks and CSPs, see CRS Report R45116, Blockchain: Background and Policy
Issues, by Chris Jaikaran. , by Chris Jaikaran.
17 For more information on IBM’s blockchain services, see IBM, “IBM Blockchain Platform,” https://www.ibm.com/ 17 For more information on IBM’s blockchain services, see IBM, “IBM Blockchain Platform,” https://www.ibm.com/
cloud/blockchain-platform. cloud/blockchain-platform.
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networks due to their increased efficiency. The various types of blockchain technologies may be networks due to their increased efficiency. The various types of blockchain technologies may be
of interest to Congress due to their varying levels of decentralization, security, and anonymity. of interest to Congress due to their varying levels of decentralization, security, and anonymity.
For example, H.R. 6607 For example, H.R. 6607 ~~directs~~would have directed the Department of Health and Human Services to create a the Department of Health and Human Services to create a
National Emergency Biodefense Network that tracks emergency health security supplies on a National Emergency Biodefense Network that tracks emergency health security supplies on a
private blockchain. On the other hand, H.R. 2858 private blockchain. On the other hand, H.R. 2858 would have directed the National Institutes of Health to directed the National Institutes of Health to
create a public, unalterable blockchain pilot project for endemic fungal disease research, most create a public, unalterable blockchain pilot project for endemic fungal disease research, most
likely through using a public blockchain. likely through using a public blockchain.
Consensus Mechanisms
In order for a block of data to be added to the blockchain, participating nodes must reach a In order for a block of data to be added to the blockchain, participating nodes must reach a
consensus and agree to validate and verify the legitimacy of the block (i.e.consensus and agree to validate and verify the legitimacy of the block (i.e., verify that transactions verify that transactions
follow the rules of a specific blockchain and properly reference the previous block).18 There are follow the rules of a specific blockchain and properly reference the previous block).18 There are
various methods to validate blockchain transactions, known as a blockchain’s consensus various methods to validate blockchain transactions, known as a blockchain’s consensus
mechanism or consensus algorithm. Depending on the consensus mechanism, there are also mechanism or consensus algorithm. Depending on the consensus mechanism, there are also
different terms for the validation of a block, such as “mining,” “forging,” “minting,” “earning,” different terms for the validation of a block, such as “mining,” “forging,” “minting,” “earning,”
“harvesting,” “staking,” “creating,” or “manufacturing.”19 “harvesting,” “staking,” “creating,” or “manufacturing.”19
Blockchains use different consensus mechanisms depending on whether the blockchain is on a Blockchains use different consensus mechanisms depending on whether the blockchain is on a
public or private and permissioned or permissionless network. Each type of consensus public or private and permissioned or permissionless network. Each type of consensus
mechanism has implications for the security, sustainability, and concentrated ownership of the mechanism has implications for the security, sustainability, and concentrated ownership of the
overall blockchain network. overall blockchain network.
The most common consensus mechanism for public blockchains is called Proof of Work (PoW), The most common consensus mechanism for public blockchains is called Proof of Work (PoW),
used by large networks such as Bitcoin and Ethereum. In a PoW blockchain network, miners used by large networks such as Bitcoin and Ethereum. In a PoW blockchain network, miners
compete against each other to solve the same task—a complex computational math problem.20 compete against each other to solve the same task—a complex computational math problem.20
The first miner to solve the problem validates the new block, adds it to the blockchain, and The first miner to solve the problem validates the new block, adds it to the blockchain, and
announces the addition to other nodes using peer-to-peer networking.21 Other nodes operators announces the addition to other nodes using peer-to-peer networking.21 Other nodes operators
verify the miner’s solution and express their acceptance by using the hash of the newly-added verify the miner’s solution and express their acceptance by using the hash of the newly-added
block when validating the next block. Blockchain platforms, such as Bitcoin or Ethereum, block when validating the next block. Blockchain platforms, such as Bitcoin or Ethereum,
typically award the successful miner a predetermined amount of cryptocurrency. typically award the successful miner a predetermined amount of cryptocurrency.

18 For example, a Bitcoin transaction would need to follow the Bitcoin network protocol. For more information on the 18 For example, a Bitcoin transaction would need to follow the Bitcoin network protocol. For more information on the
Bitcoin transaction validation process and requirements under the Bitcoin protocol, see “How Do Bitcoin Transactions Bitcoin transaction validation process and requirements under the Bitcoin protocol, see “How Do Bitcoin Transactions
Work?” https://www.bitcoin.com/get-started/how-bitcoin-transactions-work/. Work?” https://www.bitcoin.com/get-started/how-bitcoin-transactions-work/.
19 In 2014, the Financial Crimes Enforcement Network (FinCEN) issued guidance on the regulation of cryptocurrency 19 In 2014, the Financial Crimes Enforcement Network (FinCEN) issued guidance on the regulation of cryptocurrency
mining and other forms of transaction validation. Department of the Treasury Financial Crimes Enforcement Network, mining and other forms of transaction validation. Department of the Treasury Financial Crimes Enforcement Network,
Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies, FIN-2019-, FIN-2019-
G001, May 9, 2019, https://www.fincen.gov/sites/default/files/2019-05/G001, May 9, 2019, https://www.fincen.gov/sites/default/files/2019-05/
FinCEN%20Guidance%20CVC%20FINAL%20508.pdf; Jamal El-Hindi, FinCEN%20Guidance%20CVC%20FINAL%20508.pdf; Jamal El-Hindi, Application of FinCEN’s Regulations to
Virtual Currency Mining, Department of the Treasury Financial Crimes Enforcement Network, FIN-2014-R001, , Department of the Treasury Financial Crimes Enforcement Network, FIN-2014-R001,
January 30, 2014, https://www.fincen.gov/sites/default/files/shared/FIN-2014-R001.pdf. January 30, 2014, https://www.fincen.gov/sites/default/files/shared/FIN-2014-R001.pdf.
20 For most PoW blockchains, miners compete in a “hashing race” to find a nonce (an arbitrary random number) that 20 For most PoW blockchains, miners compete in a “hashing race” to find a nonce (an arbitrary random number) that
will produce a certain hash value once put through a hashing function. The miners increment through nonce values will produce a certain hash value once put through a hashing function. The miners increment through nonce values
until finding a hash value that meets the target criteria, which may change depending on the difficulty level. For more until finding a hash value that meets the target criteria, which may change depending on the difficulty level. For more
information on hashing and nonces, see Dylan Yaga, Peter Mell, Nik Roby, and Karen Scarfone, “Blockchain information on hashing and nonces, see Dylan Yaga, Peter Mell, Nik Roby, and Karen Scarfone, “Blockchain
Technology Overview,” NISTIR 8202, October 2018; and CRS Report R45863, Technology Overview,” NISTIR 8202, October 2018; and CRS Report R45863, Bitcoin, Blockchain, and the Energy
Sector, by Corrie E. Clark and Heather L. Greenley. , by Corrie E. Clark and Heather L. Greenley.
21 The first miner is determined by whoever first broadcasts the “solved” block and proof-of-work solution. If two 21 The first miner is determined by whoever first broadcasts the “solved” block and proof-of-work solution. If two
miners broadcast the block at the same time, nodes will work on both broadcasted blocks (creating two “branches” of miners broadcast the block at the same time, nodes will work on both broadcasted blocks (creating two “branches” of
the blockchain) until the next proof-of-work solution is found and one “branch” of the chain becomes longer. the blockchain) until the next proof-of-work solution is found and one “branch” of the chain becomes longer.
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The mining process is computationally intensive, by design, to deter bad actors. It is also energy The mining process is computationally intensive, by design, to deter bad actors. It is also energy
intensive, since all competing miners simultaneously operate devices to solve the same math intensive, since all competing miners simultaneously operate devices to solve the same math
problem.22 PoW networks automatically adjust problem difficulty in relationship to the average problem.22 PoW networks automatically adjust problem difficulty in relationship to the average
amount of time it takes to mine a new block.23 Early miners on most public blockchain networks amount of time it takes to mine a new block.23 Early miners on most public blockchain networks
were able to use a desktop computer, but the increase in computational complexity and were able to use a desktop computer, but the increase in computational complexity and
commensurate energy requirements needed to validate new blocks has shifted operations to commensurate energy requirements needed to validate new blocks has shifted operations to
computers with special mining hardware called application-specific integrated circuits. Some computers with special mining hardware called application-specific integrated circuits. Some
PoW miners have also joined “mining pools” to combine processing power with other miners and PoW miners have also joined “mining pools” to combine processing power with other miners and
split rewards. As of January 2022, Bitcoin—the largest blockchain network in the world—split rewards. As of January 2022, Bitcoin—the largest blockchain network in the world—
consumes roughly the same amount of energy annually as nations such as Argentina, Sweden, and consumes roughly the same amount of energy annually as nations such as Argentina, Sweden, and
the United Arab Emirates.24 the United Arab Emirates.24
Some public blockchain networks have adopted alternative consensus mechanisms, such as Proof Some public blockchain networks have adopted alternative consensus mechanisms, such as Proof
of Stake (PoS).25 On a blockchain using a PoS consensus mechanism, users with a certain stake in of Stake (PoS).25 On a blockchain using a PoS consensus mechanism, users with a certain stake in
the network can validate and add blocks in proportion to their stake.26 For example, if a user owns the network can validate and add blocks in proportion to their stake.26 For example, if a user owns
10% of a cryptocurrency blockchain network’s total cryptocurrency, the user will be able to 10% of a cryptocurrency blockchain network’s total cryptocurrency, the user will be able to
validate 10% of new blocks and receive the commensurate reward. This reduces the energy validate 10% of new blocks and receive the commensurate reward. This reduces the energy
consumption relative to a PoW network. The second largest public blockchain network, consumption relative to a PoW network. The second largest public blockchain network,
Ethereum, announced in 2018 that it planned to transition from a PoW to a PoS consensus Ethereum, announced in 2018 that it planned to transition from a PoW to a PoS consensus
mechanism in order to improve transaction speed, network scalability,27 and environmental mechanism in order to improve transaction speed, network scalability,27 and environmental
sustainability. However, Ethereum has delayed its full move for years due to technical obstacles.28 sustainability. However, Ethereum has delayed its full move for years due to technical obstacles.28
Although blockchain is commonly associated with decentralization, a small number of major Although blockchain is commonly associated with decentralization, a small number of major
players or network operators dominate consensus mechanisms on most existing networks.29 players or network operators dominate consensus mechanisms on most existing networks.29
Seven mining pools account for nearly 80% of computing power on the Bitcoin network.30 A Seven mining pools account for nearly 80% of computing power on the Bitcoin network.30 A

22 For more information on the mining process and energy consumption of Proof of Work and cryptocurrency mining, 22 For more information on the mining process and energy consumption of Proof of Work and cryptocurrency mining,
see CRS Report R45863, see CRS Report R45863, Bitcoin, Blockchain, and the Energy Sector, by Corrie E. Clark and Heather L. Greenley. , by Corrie E. Clark and Heather L. Greenley.
23 According to Satoshi Nakamoto, the creator of Bitcoin, “To compensate for increasing hardware speed and varying 23 According to Satoshi Nakamoto, the creator of Bitcoin, “To compensate for increasing hardware speed and varying
interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an
average number of blocks per hour. If they’re generated too fast, the difficulty increases.” See Satoshi Nakamoto, average number of blocks per hour. If they’re generated too fast, the difficulty increases.” See Satoshi Nakamoto,
“Bitcoin: A Peer-to-Peer Electronic Cash System,” paper, October 2008, https://bitcoin.org/bitcoin.pdf. Each block “Bitcoin: A Peer-to-Peer Electronic Cash System,” paper, October 2008, https://bitcoin.org/bitcoin.pdf. Each block
network has a different block time. Bitcoin’s block time is 10 minutes, while Ethereum’s block time is 12-14 seconds. network has a different block time. Bitcoin’s block time is 10 minutes, while Ethereum’s block time is 12-14 seconds.
24 “University of Cambridge Bitcoin Electricity Consumption Index,” https://ccaf.io/cbeci/index. 24 “University of Cambridge Bitcoin Electricity Consumption Index,” https://ccaf.io/cbeci/index.
25 Paolo Tasca and Claudio J. Tessone, “A Taxonomy of Blockchain Technologies: Principles of Identification and 25 Paolo Tasca and Claudio J. Tessone, “A Taxonomy of Blockchain Technologies: Principles of Identification and
Classification,” Classification,” Ledger, vol. 4 (2019), pp. 1-39. For more information on specific consensus mechanisms, see Du , vol. 4 (2019), pp. 1-39. For more information on specific consensus mechanisms, see Du
Mingxiao, Ma Xiaofeng, and Zhang Zhe, et al., “A Review on Consensus Algorithm of Blockchain,” Mingxiao, Ma Xiaofeng, and Zhang Zhe, et al., “A Review on Consensus Algorithm of Blockchain,” 2017 IEEE
International Conference on Systems, Man, and Cybernetics (SMC), October 2017, https://doi.org/10.1109/, October 2017, https://doi.org/10.1109/
SMC.2017.8123011. SMC.2017.8123011.
26 For example, after Ethereum moves to PoS, users must stake 32 ETH to become a validator. Similar to PoW mining 26 For example, after Ethereum moves to PoS, users must stake 32 ETH to become a validator. Similar to PoW mining
pools, validators can combine their individual ownership stakes to form a “staking pool.” pools, validators can combine their individual ownership stakes to form a “staking pool.”
27 Scalability refers to a blockchain network’s ability to accommodate growth such as increased number of transactions, 27 Scalability refers to a blockchain network’s ability to accommodate growth such as increased number of transactions,
number of users, and number of validating users. Paolo Tasca and Claudio J. Tessone, “A Taxonomy of Blockchain number of users, and number of validating users. Paolo Tasca and Claudio J. Tessone, “A Taxonomy of Blockchain
Technologies: Principles of Identification and Classification,” Technologies: Principles of Identification and Classification,” Ledger, vol. 4 (2019), pp. 1-39, https://doi.org/10.5195/, vol. 4 (2019), pp. 1-39, https://doi.org/10.5195/
ledger.2019.140. ledger.2019.140.
28 Chris Morris, “Ethereum Update Defuses ‘Difficulty Bomb’ That Could Have Stopped Ether Crypto Mining,” 28 Chris Morris, “Ethereum Update Defuses ‘Difficulty Bomb’ That Could Have Stopped Ether Crypto Mining,”
Fortune, December 8, 2021; Carl Beekhuizen, , December 8, 2021; Carl Beekhuizen, Ethereum’s Energy Usage Will Soon Decrease by ~99.95%, Ethereum , Ethereum
Foundation Blog, May 18, 2021, https://blog.ethereum.org/2021/05/18/country-power-no-more/. Foundation Blog, May 18, 2021, https://blog.ethereum.org/2021/05/18/country-power-no-more/.
29 U.K. Office for Product Safety and Standards and Department for Business, Energy, & Industrial Strategy, 29 U.K. Office for Product Safety and Standards and Department for Business, Energy, & Industrial Strategy, The Use
of Distributed Ledgers to Verify the Provenance of Goods, BEIS Research Paper Number 2020/036, September 2020, , BEIS Research Paper Number 2020/036, September 2020,
https://www.gov.uk/government/publications/use-of-distributed-ledger-technologies-to-verify-the-provenance-of-https://www.gov.uk/government/publications/use-of-distributed-ledger-technologies-to-verify-the-provenance-of-
goods. goods.
30 See the pool distribution of Bitcoin and other large cryptocurrency networks, https://btc.com/stats/pool. 30 See the pool distribution of Bitcoin and other large cryptocurrency networks, https://btc.com/stats/pool.
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National Bureau of Economic Research study found that the top 50% of Bitcoin miners control National Bureau of Economic Research study found that the top 50% of Bitcoin miners control
nearly all Bitcoin mining capacity, the top 10% control 90%, and the top-most 0.1% of miners nearly all Bitcoin mining capacity, the top 10% control 90%, and the top-most 0.1% of miners
control close to 50% of Bitcoin mining.31 If mining pools collaborate to own the majority of control close to 50% of Bitcoin mining.31 If mining pools collaborate to own the majority of
nodes on a public blockchain network, members could implement their own preferred rules or nodes on a public blockchain network, members could implement their own preferred rules or
protocols. Hypothetically, these mining pools could forbid specific transactions. protocols. Hypothetically, these mining pools could forbid specific transactions.
Private and permissioned blockchain networks typically use less computationally and energy Private and permissioned blockchain networks typically use less computationally and energy
intensive consensus mechanisms than public blockchain networks.32 Since only authorized users intensive consensus mechanisms than public blockchain networks.32 Since only authorized users
can see or add blocks to private, permissioned blockchains, there is an established level of trust can see or add blocks to private, permissioned blockchains, there is an established level of trust
between participants. between participants.
Governance and Protocols
Blockchain governance refers to the development and maintenance of a blockchain and its Blockchain governance refers to the development and maintenance of a blockchain and its
protocols, which govern the operation of a blockchain network. Protocols may specify how to protocols, which govern the operation of a blockchain network. Protocols may specify how to
execute transactions, how quickly new blocks of data may be added, and block size.33 Node execute transactions, how quickly new blocks of data may be added, and block size.33 Node
operators coordinate public blockchain network operations and the implementation of protocols. operators coordinate public blockchain network operations and the implementation of protocols.
Assigned administrators oversee private blockchain operations and protocol implementation. Assigned administrators oversee private blockchain operations and protocol implementation.
Some solutions to improve a blockchain’s privacy, security, scalability, or other issues require Some solutions to improve a blockchain’s privacy, security, scalability, or other issues require
protocol changes. In public blockchain networks, nodes can amend or change a blockchain’s protocol changes. In public blockchain networks, nodes can amend or change a blockchain’s
underlying protocol embedded in a blockchain’s source code. These changes are called forks; underlying protocol embedded in a blockchain’s source code. These changes are called forks;
categorized into categorized into hard or or soft forks.34 A forks.34 A hard fork refers to a change in the underlying blockchain fork refers to a change in the underlying blockchain
protocol that requires all participating nodes to accept it, forcing network members to choose protocol that requires all participating nodes to accept it, forcing network members to choose
whether to follow the new or old protocol, thereby splitting the network. A whether to follow the new or old protocol, thereby splitting the network. A soft fork changes a fork changes a
protocol by adding conditions to it and is backward compatible, since all of the features of the protocol by adding conditions to it and is backward compatible, since all of the features of the
previous protocol remain in place. While nodes using the old protocol will recognize blocks using previous protocol remain in place. While nodes using the old protocol will recognize blocks using
the new protocol, the reverse is not true. Soft forks do not split the blockchain and typically only the new protocol, the reverse is not true. Soft forks do not split the blockchain and typically only
require a majority of network members to accept the new protocol. require a majority of network members to accept the new protocol.
Many public blockchain networks have had to address governance issues. For example, following Many public blockchain networks have had to address governance issues. For example, following
a $50 million hack, Ethereum underwent a hard fork after members of its community disagreed a $50 million hack, Ethereum underwent a hard fork after members of its community disagreed
on the restoration of the stolen funds.35 Ultimately, the core developers of Ethereum and the on the restoration of the stolen funds.35 Ultimately, the core developers of Ethereum and the
majority of participants agreed to implement a protocol change by forking the blockchain, fixing majority of participants agreed to implement a protocol change by forking the blockchain, fixing
a bug in the source code, and moving funds back to the hacked account. Some blockchain a bug in the source code, and moving funds back to the hacked account. Some blockchain
applications, such as decentralized finance services, have introduced “governance tokens” to applications, such as decentralized finance services, have introduced “governance tokens” to

31 Igor Makarov and Antoinette Schoar, “Blockchain Analysis of the Bitcoin Market,” 31 Igor Makarov and Antoinette Schoar, “Blockchain Analysis of the Bitcoin Market,” National Bureau of Economic
Research Working Paper Series, October 2021, http://www.nber.org/papers/w29396. , October 2021, http://www.nber.org/papers/w29396.
32 Some private, permissioned blockchains use alternative consensus mechanisms, which are typically faster and less 32 Some private, permissioned blockchains use alternative consensus mechanisms, which are typically faster and less
computationally intensive. Julien Polge, Jeremy Robert, and Yves Le Traon, “Permissioned Blockchain Frameworks in computationally intensive. Julien Polge, Jeremy Robert, and Yves Le Traon, “Permissioned Blockchain Frameworks in
the Industry: A Comparison,” the Industry: A Comparison,” ICT Express, vol. 7, no. 2 (June 2021), pp. 229-233, https://doi.org/10.1016/, vol. 7, no. 2 (June 2021), pp. 229-233, https://doi.org/10.1016/
j.icte.2020.09.002; Wenbo Wang, Dinh Thai Hoang, and Peizhao Hu, et al., “A Survey on Consensus Mechanisms and j.icte.2020.09.002; Wenbo Wang, Dinh Thai Hoang, and Peizhao Hu, et al., “A Survey on Consensus Mechanisms and
Mining Strategy Management in Blockchain Networks,” Mining Strategy Management in Blockchain Networks,” IEEE Access, vol. 7, January 30, 2019, https://doi.org/, vol. 7, January 30, 2019, https://doi.org/
10.1109/ACCESS.2019.2896108. 10.1109/ACCESS.2019.2896108.
33 Rowan van Pelt, Slinger Jansen, and Djuri Baars, et al., “Defining Blockchain Governance: A Framework for 33 Rowan van Pelt, Slinger Jansen, and Djuri Baars, et al., “Defining Blockchain Governance: A Framework for
Analysis and Comparison,” Analysis and Comparison,” Information Systems Management, vol. 38, no. 1 (2021), pp. 21-41, https://doi.org/10.1080/, vol. 38, no. 1 (2021), pp. 21-41, https://doi.org/10.1080/
10580530.2020.1720046. 10580530.2020.1720046.
34 Dylan J. Yaga, Peter M. Mell, and Nik Roby, et al., 34 Dylan J. Yaga, Peter M. Mell, and Nik Roby, et al., Blockchain Technology Overview, National Institute of Standards , National Institute of Standards
and Technology, NIST Interagency/Internal Report (NISTIR) 8202, Gaithersburg, MD, October 3, 2018, and Technology, NIST Interagency/Internal Report (NISTIR) 8202, Gaithersburg, MD, October 3, 2018,
https://doi.org/10.6028/NIST.IR.8202. https://doi.org/10.6028/NIST.IR.8202.
35 “What Was the DAO?” Cryptopedia, https://www.gemini.com/cryptopedia/the-dao-hack-makerdao. 35 “What Was the DAO?” Cryptopedia, https://www.gemini.com/cryptopedia/the-dao-hack-makerdao.
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address governance issues and vote on decisions that guide and maintain the blockchain.36 Users address governance issues and vote on decisions that guide and maintain the blockchain.36 Users
can buy governance tokens, which provide the holder with the right to vote on how the can buy governance tokens, which provide the holder with the right to vote on how the
blockchain is maintained, upgraded, and managed. blockchain is maintained, upgraded, and managed.
Smart Contracts
Smart contracts on blockchain networks are collections of code that are automatically executed Smart contracts on blockchain networks are collections of code that are automatically executed
by network nodes if a specific set of conditions are met37—similar to “if A then B” statements in by network nodes if a specific set of conditions are met37—similar to “if A then B” statements in
computer programming. The results of executing each contract provision are recorded as a computer programming. The results of executing each contract provision are recorded as a
transaction on the blockchain. For example, when certain criteria are met, a smart contract could transaction on the blockchain. For example, when certain criteria are met, a smart contract could
transfer the ownership of an asset from one party’s account—often referred to as a wallet—to transfer the ownership of an asset from one party’s account—often referred to as a wallet—to
another account for a set transaction cost. Often the more complex a smart contract’s criteria, the another account for a set transaction cost. Often the more complex a smart contract’s criteria, the
higher the transaction costs for execution. higher the transaction costs for execution.
Although governments enforce contractual obligations and property rights, proponents argue Although governments enforce contractual obligations and property rights, proponents argue
smart contracts could complement or replace the services of some intermediaries, such as smart contracts could complement or replace the services of some intermediaries, such as
bankers, accountants, and lawyers.38 However, disintermediation through smart contracts may bankers, accountants, and lawyers.38 However, disintermediation through smart contracts may
face technical and legal obstacles, such as enforceability, among other issues.39 Individual states face technical and legal obstacles, such as enforceability, among other issues.39 Individual states
such as Arizona, Nevada, and Tennessee have amended their state versions of the Uniform such as Arizona, Nevada, and Tennessee have amended their state versions of the Uniform
Electronic Transactions Act (UETA), which establishes the legal equivalence of electronic records Electronic Transactions Act (UETA), which establishes the legal equivalence of electronic records
to paper documents and signatures, to incorporate blockchains and smart contracts.40 to paper documents and signatures, to incorporate blockchains and smart contracts.40
NFTs, dApps, and DAOs
Smart contracts have enabled new blockchain applications. Some public blockchains that support Smart contracts have enabled new blockchain applications. Some public blockchains that support
smart contracts, such as Ethereum, enable developers to build and deploy smart contracts, such as Ethereum, enable developers to build and deploy ~~non-fungible tokens~~
~~(NFTs), Decentralized Applications (dApps)~~NFTs, dApps, and Decentralized Autonomous Organizations and Decentralized Autonomous Organizations
~~(DAOs). Non-Fungible Tokens (NFTs)~~(DAOs). NFTs have become popular as unique and non-interchangeable have become popular as unique and non-interchangeable
units of data (known as tokens), which can be used to represent the ownership of any unique item. units of data (known as tokens), which can be used to represent the ownership of any unique item.
NFTs are commonly used to represent the sole ownership of digital works, verify authenticity, NFTs are commonly used to represent the sole ownership of digital works, verify authenticity,
and record ownership history.41 dApps allow developers to build software applications that reside and record ownership history.41 dApps allow developers to build software applications that reside
and operate on a blockchain network rather than the servers of a company that provides a web and operate on a blockchain network rather than the servers of a company that provides a web
application. Open Sea, the largest NFT marketplace, is an example of a dApp built on the application. Open Sea, the largest NFT marketplace, is an example of a dApp built on the
Ethereum blockchain. dApps can use smart contracts to enable transactions between anonymous Ethereum blockchain. dApps can use smart contracts to enable transactions between anonymous
parties without exchanging personal information. DAOs are parties without exchanging personal information. DAOs are ~~groups whose rules are encoded and~~

36 Jake Ryan, “Who Writes the Rules of a Blockchain?” 36 Jake Ryan, “Who Writes the Rules of a Blockchain?” Harvard Business Review, July 23, 2021, https://hbr.org/2021/, July 23, 2021, https://hbr.org/2021/
07/who-writes-the-rules-of-a-blockchain; Patrick Murck, “Who Controls the Blockchain?” 07/who-writes-the-rules-of-a-blockchain; Patrick Murck, “Who Controls the Blockchain?” Harvard Business Review, ,
April 19, 2017, https://hbr.org/2017/04/who-controls-the-blockchain. April 19, 2017, https://hbr.org/2017/04/who-controls-the-blockchain.
37 Dylan Yaga, Peter Mell, and Nik Roby, et al., “Blockchain Technology Overview,” NISTIR 8202, October 2018. 37 Dylan Yaga, Peter Mell, and Nik Roby, et al., “Blockchain Technology Overview,” NISTIR 8202, October 2018.
38 “Could Blockchain-Based Smart Contracts Eventually Replace Lawyers?” Monash University Blockchain 38 “Could Blockchain-Based Smart Contracts Eventually Replace Lawyers?” Monash University Blockchain
Technology Centre, https://www.monash.edu/blockchain/news/could-blockchain-based-smart-contracts-eventually-Technology Centre, https://www.monash.edu/blockchain/news/could-blockchain-based-smart-contracts-eventually-
replace-lawyers. replace-lawyers.
39 Eliza Mik, “Smart Contracts: Terminology, Technical Limitations,” 39 Eliza Mik, “Smart Contracts: Terminology, Technical Limitations,” Law, Innovation and Technology, vol. 9, no. 2 , vol. 9, no. 2
(2017), pp. 269-300, https://doi.org/10.1080/17579961.2017.1378468. (2017), pp. 269-300, https://doi.org/10.1080/17579961.2017.1378468.
40 A.J. Bosco, “Blockchain and the Uniform Electronic Transactions Act,” 40 A.J. Bosco, “Blockchain and the Uniform Electronic Transactions Act,” The Business Lawyer, vol. 74 (Winter 2018-, vol. 74 (Winter 2018-
2019), pp. 243-251, https://www.americanbar.org/content/dam/aba/publications/business_lawyer/2019/74_1/survey-2019), pp. 243-251, https://www.americanbar.org/content/dam/aba/publications/business_lawyer/2019/74_1/survey-
cyberspace-blockchain-201902.pdf. cyberspace-blockchain-201902.pdf.
41 For more information on the financial regulation and oversight of NFTs, see pages 19-20 of CRS Report R46208, 41 For more information on the financial regulation and oversight of NFTs, see pages 19-20 of CRS Report R46208,
Digital Assets and SEC Regulation, by Eva Su. , by Eva Su.
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groups whose rules are encoded and transactions are executed using smart contracts, eliminating intermediaries. DAOs require transactions are executed using smart contracts, eliminating intermediaries. DAOs require
member voting to make organizational changes. member voting to make organizational changes.
Blockchain in Provenance Applications
Proponents assert that blockchain technologies can be used to ensure the provenance of physical Proponents assert that blockchain technologies can be used to ensure the provenance of physical
and digital items without the need for a centralized authority or intermediary. For example, and digital items without the need for a centralized authority or intermediary. For example,
knowing the provenance of an item can prove its history, thereby ensuring the item’s safety or knowing the provenance of an item can prove its history, thereby ensuring the item’s safety or
legitimacy. Since transactions must be approved through a consensus mechanism and blocks are legitimacy. Since transactions must be approved through a consensus mechanism and blocks are
subsequently hashed, attempts to alter provenance records for digital or physical goods will leave subsequently hashed, attempts to alter provenance records for digital or physical goods will leave
an auditable trail, thereby alerting users to potential tampering. Blockchain provenance an auditable trail, thereby alerting users to potential tampering. Blockchain provenance
applications are likely to be most relevant for applications are likely to be most relevant for
1. transactions where there is not complete trust between parties; 1. transactions where there is not complete trust between parties;
2. markets characterized by error, delay, or fraud; or 2. markets characterized by error, delay, or fraud; or
3. contexts with existing digital infrastructure.42 3. contexts with existing digital infrastructure.42
Supply Chain Provenance
Supply chain traceability is important for highly-regulated industries with product contamination Supply chain traceability is important for highly-regulated industries with product contamination
and counterfeit risks, such as the food and pharmaceutical industries. Some academics and and counterfeit risks, such as the food and pharmaceutical industries. Some academics and
companies have proposed using blockchain technologies to ensure product and process integrity companies have proposed using blockchain technologies to ensure product and process integrity
and for tracking items—such as food products, vaccines, and prescription drugs—throughout and for tracking items—such as food products, vaccines, and prescription drugs—throughout
their respective supply chains.43 their respective supply chains.43
The The ~~FDA~~Food and Drug Administration (FDA) New Era of Smarter Food initiative builds upon the FDA’s work to implement P.L. 111- New Era of Smarter Food initiative builds upon the FDA’s work to implement P.L. 111-
353, also known as the FDA Food Safety Modernization Act (FSMA).44 The initiative aims to 353, also known as the FDA Food Safety Modernization Act (FSMA).44 The initiative aims to
prevent foodborne outbreaks by implementing digital traceability in food supply chains enabled prevent foodborne outbreaks by implementing digital traceability in food supply chains enabled
by blockchain, artificial intelligence, and other emerging technologies.45 by blockchain, artificial intelligence, and other emerging technologies.45

42 Paul Nelson, 42 Paul Nelson, Primer on Blockchain: How to Assess the Relevance of Distributed Ledger, United States Agency for , United States Agency for
International Development, April 27, 2018, https://www.usaid.gov/sites/default/files/documents/15396/USAID-Primer-International Development, April 27, 2018, https://www.usaid.gov/sites/default/files/documents/15396/USAID-Primer-
Blockchain.pdf. Blockchain.pdf.
43 Vishal Gaur and Abhinav Gaiha, “Building a Transparent Supply Chain,” 43 Vishal Gaur and Abhinav Gaiha, “Building a Transparent Supply Chain,” Harvard Business Review Magazine, May-, May-
June 2020, https://hbr.org/2020/05/building-a-transparent-supply-chain; “Continuous Interconnected Supply Chain: June 2020, https://hbr.org/2020/05/building-a-transparent-supply-chain; “Continuous Interconnected Supply Chain:
Using Blockchain & Internet-of-Things in Supply Chain Traceability,” Deloitte, 2017, https://www2.deloitte.com/Using Blockchain & Internet-of-Things in Supply Chain Traceability,” Deloitte, 2017, https://www2.deloitte.com/
content/dam/Deloitte/lu/Documents/technology/lu-blockchain-internet-things-supply-chain-traceability.pdf. content/dam/Deloitte/lu/Documents/technology/lu-blockchain-internet-things-supply-chain-traceability.pdf.
44 For more information on the FDA Food Safety Modernization Act, see CRS Report R43724, 44 For more information on the FDA Food Safety Modernization Act, see CRS Report R43724, Implementation of the
FDA Food Safety Modernization Act (FSMA, P.L. 111-353), by Renée Johnson. , by Renée Johnson.
45 U.S. Food and Drug Administration, 45 U.S. Food and Drug Administration, New Era of Smarter Food Safety: FDA’s Blueprint for the Future, July 2020, , July 2020,
https://www.fda.gov/food/new-era-smarter-food-safety/new-era-smarter-food-safety-blueprint. Suman Bhattacharyya, https://www.fda.gov/food/new-era-smarter-food-safety/new-era-smarter-food-safety-blueprint. Suman Bhattacharyya,
“FDA Official Says New Rule Could Boost Blockchain-Based Food Tracking,” “FDA Official Says New Rule Could Boost Blockchain-Based Food Tracking,” Wall Street Journal, February 1, 2022, , February 1, 2022,
https://www.wsj.com/articles/fda-official-says-new-rule-could-boost-blockchain-based-food-tracking-11643711402. https://www.wsj.com/articles/fda-official-says-new-rule-could-boost-blockchain-based-food-tracking-11643711402.
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In 2018, IBM launched the IBM Food Trust Program to provide companies a permissioned In 2018, IBM launched the IBM Food Trust Program to provide companies a permissioned
blockchain that records food system data.46 Walmart’s Food Traceability Initiative47 uses the blockchain that records food system data.46 Walmart’s Food Traceability Initiative47 uses the
program to track over 500 food items.48 In 2020, Walmart assisted the program to track over 500 food items.48 In 2020, Walmart assisted the ~~Food and Drug~~
~~Administration (FDA)~~FDA with six investigations into food safety and provided investigators with with six investigations into food safety and provided investigators with
detailed information on the original source of a potential contamination within an hour using detailed information on the original source of a potential contamination within an hour using
blockchain ledgers, a task which previously took up to seven days.49 In 2021, Walmart also blockchain ledgers, a task which previously took up to seven days.49 In 2021, Walmart also
worked with U.S. Customs and Border Protection to pilot a program to track imported foods.50 worked with U.S. Customs and Border Protection to pilot a program to track imported foods.50
Pfizer, McKesson, and other pharmaceutical companies are testing the use of blockchain Pfizer, McKesson, and other pharmaceutical companies are testing the use of blockchain
technologies to trace medicine from the factory to the patient, technologies to trace medicine from the factory to the patient, ~~ensuring~~to help ensure authenticity and safety.51 authenticity and safety.51
The Drug Supply Chain Security Act (DSCSA) established requirements to facilitate the tracing The Drug Supply Chain Security Act (DSCSA) established requirements to facilitate the tracing
and verification of certain prescription drug products through the U.S. pharmaceutical distribution and verification of certain prescription drug products through the U.S. pharmaceutical distribution
supply chain.52 The FDA created a DSCA Pilot Project Program to assist drug supply chain supply chain.52 The FDA created a DSCA Pilot Project Program to assist drug supply chain
stakeholders in developing an interoperable, electronic tracing system. IBM, KPMG, Merck, and stakeholders in developing an interoperable, electronic tracing system. IBM, KPMG, Merck, and
Walmart were some of the selected program participants. Under the project title “DSCSA Walmart were some of the selected program participants. Under the project title “DSCSA
Blockchain Interoperability Pilot,” the companies developed a shared, permissioned blockchain Blockchain Interoperability Pilot,” the companies developed a shared, permissioned blockchain
network to allow for real-time monitoring of drugs.53 Based on similar models for global food network to allow for real-time monitoring of drugs.53 Based on similar models for global food
supply chains, the DSCSA program uses new technologies like blockchain to trace prescription supply chains, the DSCSA program uses new technologies like blockchain to trace prescription
drugs and improve the security of drug supply chains.54 drugs and improve the security of drug supply chains.54

46 IBM, “IBM Food Trust Expands Blockchain Network to Foster a Safer, More Transparent and Efficient Global Food 46 IBM, “IBM Food Trust Expands Blockchain Network to Foster a Safer, More Transparent and Efficient Global Food
System,” press release, October 8, 2018, https://newsroom.ibm.com/2018-10-08-IBM-Food-Trust-Expands-System,” press release, October 8, 2018, https://newsroom.ibm.com/2018-10-08-IBM-Food-Trust-Expands-
Blockchain-Network-to-Foster-a-Safer-More-Transparent-and-Efficient-Global-Food-System-1. Aaron Stanley, Blockchain-Network-to-Foster-a-Safer-More-Transparent-and-Efficient-Global-Food-System-1. Aaron Stanley,
“Ready to Rumble: “Ready to Rumble: ~~Ibm~~IBM Launches Food Trust Blockchain for Commercial Use,” Launches Food Trust Blockchain for Commercial Use,” Forbes, October 8, 2018, , October 8, 2018,
https://www.forbes.com/sites/astanley/2018/10/08/ready-to-rumble-ibm-launches-food-trust-blockchain-for-https://www.forbes.com/sites/astanley/2018/10/08/ready-to-rumble-ibm-launches-food-trust-blockchain-for-
commercial-use. commercial-use.
47 Walmart, “Food Traceability Initiative: Fresh Leafy Greens,” press release, September 24, 2018, 47 Walmart, “Food Traceability Initiative: Fresh Leafy Greens,” press release, September 24, 2018,
https://corporate.walmart.com/media-library/document/blockchain-supplier-letter-september-2018/_proxyDocument?https://corporate.walmart.com/media-library/document/blockchain-supplier-letter-september-2018/_proxyDocument?
id=00000166-088d-dc77-a7ff-4dff689f0001. id=00000166-088d-dc77-a7ff-4dff689f0001.
48 For more information on the Walmart Food Traceability Initiative, see CRS In Focus IF11829, 48 For more information on the Walmart Food Traceability Initiative, see CRS In Focus IF11829, Blockchain
Technology and Agriculture, by Genevieve K. Croft; Michael del Castillo, “Blockchain 50 2021,” , by Genevieve K. Croft; Michael del Castillo, “Blockchain 50 2021,” Forbes, February , February
2021, https://www.forbes.com/sites/michaeldelcastillo/2021/02/02/blockchain-50/. 2021, https://www.forbes.com/sites/michaeldelcastillo/2021/02/02/blockchain-50/.
49 Joanne Molinaro, Nathan Beaver, Kathleen Wegrzyn, Gary Solomon, and Eugenia Wang, “The Fast Track: Using 49 Joanne Molinaro, Nathan Beaver, Kathleen Wegrzyn, Gary Solomon, and Eugenia Wang, “The Fast Track: Using
Blockchain to Trace Products Through the Supply Chain,” Foley & Lardner LLP, September 9, 2021. Blockchain to Trace Products Through the Supply Chain,” Foley & Lardner LLP, September 9, 2021.
50 Michael del Castillo, “Blockchain 50 2021,” 50 Michael del Castillo, “Blockchain 50 2021,” Forbes, February 2021. , February 2021.
51 Lucas Mearian, “How Pharma Will Soon Use Blockchain to Track Your Drugs,” 51 Lucas Mearian, “How Pharma Will Soon Use Blockchain to Track Your Drugs,” ComputerWorld, September 23, , September 23,
2019, https://www.computerworld.com/article/3439843/how-pharma-will-soon-use-blockchain-to-track-your-2019, https://www.computerworld.com/article/3439843/how-pharma-will-soon-use-blockchain-to-track-your-
drugs.html; Alison, McCauley, “Why Big Pharma Is Betting on Blockchain,” drugs.html; Alison, McCauley, “Why Big Pharma Is Betting on Blockchain,” Harvard Business Review, May 29, 2020, , May 29, 2020,
https://store.hbr.org/product/why-big-pharma-is-betting-on-blockchain/H05NDT. https://store.hbr.org/product/why-big-pharma-is-betting-on-blockchain/H05NDT.
52 Food and Drug Administration, “Verification Systems Under the Drug Supply Chain Security Act for Certain 52 Food and Drug Administration, “Verification Systems Under the Drug Supply Chain Security Act for Certain
Prescription Drugs; Draft Guidance for Industry; Availability,” 87Prescription Drugs; Draft Guidance for Industry; Availability,” 87 Federal Register 47, March 10, 2022, 47, March 10, 2022,
https://www.fda.gov/media/117950/download. https://www.fda.gov/media/117950/download.
53 For more information on the Drug Supply Chain Security Act Pilot Project Program (DSCSA Pilot Project), see 53 For more information on the Drug Supply Chain Security Act Pilot Project Program (DSCSA Pilot Project), see
program details, https://www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/dscsa-pilot-project-program. “FDA program details, https://www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/dscsa-pilot-project-program. “FDA
DSCSA: Blockchain Interoperability Pilot Project Report,” IBM, KPMG, Merck, Walmart, February 2020, DSCSA: Blockchain Interoperability Pilot Project Report,” IBM, KPMG, Merck, Walmart, February 2020,
https://institutes.kpmg.us/content/dam/institutes/en/healthcare-life-sciences/pdfs/2020/blockchain-interoperability-https://institutes.kpmg.us/content/dam/institutes/en/healthcare-life-sciences/pdfs/2020/blockchain-interoperability-
pilot-project-report.pdf. pilot-project-report.pdf.
54 U.S. Food and Drug Administration, “FDA Takes New Steps to Adopt More Modern Technologies for Improving 54 U.S. Food and Drug Administration, “FDA Takes New Steps to Adopt More Modern Technologies for Improving
the Security of the Drug Supply Chain Through Innovations That Improve Tracking and Tracing of Medicines,” press the Security of the Drug Supply Chain Through Innovations That Improve Tracking and Tracing of Medicines,” press
release, February 7, 2019, https://www.fda.gov/news-events/press-announcements/fda-takes-new-steps-adopt-more-release, February 7, 2019, https://www.fda.gov/news-events/press-announcements/fda-takes-new-steps-adopt-more-
modern-technologies-improving-security-drug-supply-chain-through. modern-technologies-improving-security-drug-supply-chain-through.
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Some companies and organizations have used blockchain technologies to collect and verify Some companies and organizations have used blockchain technologies to collect and verify
environmental, social, and corporate governance (ESG) data, including tracking product environmental, social, and corporate governance (ESG) data, including tracking product
provenance and source materials to identify labor, human rights, and environmental violations. provenance and source materials to identify labor, human rights, and environmental violations.
For example, in 2018, the State Department launched its first blockchain project with Coca-Cola For example, in 2018, the State Department launched its first blockchain project with Coca-Cola
to create a secure registry for workers to to create a secure registry for workers to help prevent the use of forced labor, child labor, and other prevent the use of forced labor, child labor, and other
exploitative practices in countries where they procure sugarcane.55 Other groups, such as the exploitative practices in countries where they procure sugarcane.55 Other groups, such as the
World Wildlife Fund56 and Everledger,57 use blockchain to track the provenance of products to World Wildlife Fund56 and Everledger,57 use blockchain to track the provenance of products to
help ensure they are not sourced from vulnerable ecosystems. ensure they are not sourced from vulnerable ecosystems.
~~However, the~~The use of blockchain technologies in supply chain management requires the necessary use of blockchain technologies in supply chain management requires the necessary
technical infrastructure to capture, verify, and upload data, which may be difficult for smaller-technical infrastructure to capture, verify, and upload data, which may be difficult for smaller-
scale producers,58 and would require standardization and coordination between actors throughout scale producers,58 and would require standardization and coordination between actors throughout
a a particular supply chain. Additionally, the use of blockchain technologies does not ensure the particular supply chain. Additionally, the use of blockchain technologies does not ensure the
accuracy of collected data. Producers could upload false data about their products or practices to accuracy of collected data. Producers could upload false data about their products or practices to
circumvent or abuse traceability systems. Blockchain technologies can also add unnecessary circumvent or abuse traceability systems. Blockchain technologies can also add unnecessary
complexity compared with using conventional databases or other alternatives. complexity compared with using conventional databases or other alternatives.
Identity and Credential Provenance
Blockchain technologies have also been used for identity-management and credentialing systems, Blockchain technologies have also been used for identity-management and credentialing systems,
often using “digital wallet” technology to store digital credentials.59 A digital wallet refers to often using “digital wallet” technology to store digital credentials.59 A digital wallet refers to
software designed to store a user’s private keys corresponding to anything from cryptocurrency to software designed to store a user’s private keys corresponding to anything from cryptocurrency to
identifiers and credentials. There are generally two kinds of blockchain identity-management identifiers and credentials. There are generally two kinds of blockchain identity-management
systems: top-down and self-sovereign.60 In a top-down identity management system, a central systems: top-down and self-sovereign.60 In a top-down identity management system, a central
authority still issues or has control over the origination of the credential or identifier, which a user authority still issues or has control over the origination of the credential or identifier, which a user
may store in a digital wallet. For example, IBM created a blockchain-based “Digital Health Pass” may store in a digital wallet. For example, IBM created a blockchain-based “Digital Health Pass”
to let organizations verify an individual’s accurate health credentials such as vaccine records, to let organizations verify an individual’s accurate health credentials such as vaccine records,
COVID-19 test results, and temperature checks.61 In 2021, New York launched its platform for COVID-19 test results, and temperature checks.61 In 2021, New York launched its platform for
COVID-19 test results and proof of vaccination on IBM’s Digital Health Pass.62 COVID-19 test results and proof of vaccination on IBM’s Digital Health Pass.62

55 Gertrude Chavez-Dreyfuss, “Coca-Cola, U.S. State Dept to Use Blockchain to Combat Forced Labor,” 55 Gertrude Chavez-Dreyfuss, “Coca-Cola, U.S. State Dept to Use Blockchain to Combat Forced Labor,” Reuters, ,
March 16, 2018, https://www.reuters.com/article/us-blockchain-coca-cola-labor/coca-cola-u-s-state-dept-to-use-March 16, 2018, https://www.reuters.com/article/us-blockchain-coca-cola-labor/coca-cola-u-s-state-dept-to-use-
blockchain-to-combat-forced-labor-idUSKCN1GS2PY. blockchain-to-combat-forced-labor-idUSKCN1GS2PY.
56 Kate Whiting, “Blockchain Could Police the Fishing Industry—Here’s How,” World Economic Forum, February 12, 56 Kate Whiting, “Blockchain Could Police the Fishing Industry—Here’s How,” World Economic Forum, February 12,
2020, https://www.weforum.org/agenda/2020/02/blockchain-tuna-sustainability-fisheries-food-security/. 2020, https://www.weforum.org/agenda/2020/02/blockchain-tuna-sustainability-fisheries-food-security/.
57 CRS In Focus IF10810, 57 CRS In Focus IF10810, Blockchain and International Trade, by Rachel F. Fefer. , by Rachel F. Fefer.
58 William Crumpler, Marti Flacks, and Amith Mandavilli, 58 William Crumpler, Marti Flacks, and Amith Mandavilli, The Human Rights Risks and Opportunities in Blockchain, ,
Center for Strategic and International Studies (CSIS), December 2021, https://csis-website-prod.s3.amazonaws.com/Center for Strategic and International Studies (CSIS), December 2021, https://csis-website-prod.s3.amazonaws.com/
s3fs-public/publication/211214_Crumpler_HumanRights_Blockchain.pdf. s3fs-public/publication/211214_Crumpler_HumanRights_Blockchain.pdf.
59 Wallets may take various forms, such as dedicated hardware wallets, mobile applications, or even paper wallets (i.e., 59 Wallets may take various forms, such as dedicated hardware wallets, mobile applications, or even paper wallets (i.e.,
private keys that are private and kept in a safe location). Wallet services called custodial wallets can also be provided private keys that are private and kept in a safe location). Wallet services called custodial wallets can also be provided
by a third-party holder that controls a user’s private keys. by a third-party holder that controls a user’s private keys.
60 Loïc Lesavre, Priam Varin, and Peter Mell, et al., 60 Loïc Lesavre, Priam Varin, and Peter Mell, et al., A Taxonomic Approach to Understanding, National Institute of , National Institute of
Standards and Technology, NIST Cybersecurity White Paper, January 14, 2020, https://doi.org/10.6028/Standards and Technology, NIST Cybersecurity White Paper, January 14, 2020, https://doi.org/10.6028/
NIST.CSWP.01142020. NIST.CSWP.01142020.
61 For more information on the IBM Digital Health Pass, see https://www.ibm.com/products/digital-health-pass. 61 For more information on the IBM Digital Health Pass, see https://www.ibm.com/products/digital-health-pass.
62 New York State Governor’s Press Office, “Governor Cuomo Announces Launch of Excelsior Pass to Help Fast-62 New York State Governor’s Press Office, “Governor Cuomo Announces Launch of Excelsior Pass to Help Fast-
Track Reopening of Businesses and Entertainment Venues Statewide,” press release, March 26, 2021, Track Reopening of Businesses and Entertainment Venues Statewide,” press release, March 26, 2021,
https://www.governor.ny.gov/news/governor-cuomo-announces-launch-excelsior-pass-help-fast-track-reopening-https://www.governor.ny.gov/news/governor-cuomo-announces-launch-excelsior-pass-help-fast-track-reopening-
businesses-and. businesses-and.
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In a self-sovereign identity system, there are no central authorities with control over identifiers or In a self-sovereign identity system, there are no central authorities with control over identifiers or
credential issuance.63 Users may manage their own identifiers by storing them locally on their credential issuance.63 Users may manage their own identifiers by storing them locally on their
own devices or on a distributed network, and then grant selected parties access to their own devices or on a distributed network, and then grant selected parties access to their
information.64 A self-sovereign identity system typically uses a decentralized identifier (DID), information.64 A self-sovereign identity system typically uses a decentralized identifier (DID),
which contains a uniform resource locator (URL) or uniform resource identifier (URI) that points which contains a uniform resource locator (URL) or uniform resource identifier (URI) that points
to publicly identifying information about the user. The rules of the identity management system to publicly identifying information about the user. The rules of the identity management system
are often implemented through smart contracts. are often implemented through smart contracts.
Blockchain-based identity systems may be a core component of Web3, a proposed blockchain- Blockchain-based identity systems may be a core component of Web3, a proposed blockchain-
based internet,65 or be used for proving identity on the existing web. However, the storage of based internet,65 or be used for proving identity on the existing web. However, the storage of
personally identifiable information, biometric data, or other information on blockchains could personally identifiable information, biometric data, or other information on blockchains could
introduce new privacy and security risks. Additionally, users need access to a reliable internet introduce new privacy and security risks. Additionally, users need access to a reliable internet
connection and a smartphone or computer to download and use an identity management system’s connection and a smartphone or computer to download and use an identity management system’s
wallet application, which may exclude significant parts of the population. wallet application, which may exclude significant parts of the population.
Registries and Asset Provenance
Blockchain technologies could enable the transfer of rights to digital and physical assets, such as Blockchain technologies could enable the transfer of rights to digital and physical assets, such as
equipment, land titles, and intellectual property, and help maintain the timeliness and accuracy of equipment, land titles, and intellectual property, and help maintain the timeliness and accuracy of
public records. However, there are possible legal ramifications and security issues for asset public records. However, there are possible legal ramifications and security issues for asset
transfers built on blockchains and smart contracts. transfers built on blockchains and smart contracts.
The Department of The Department of the Treasury’s Bureau of the Fiscal Service’s Office of Financial Innovation and Treasury’s Bureau of the Fiscal Service’s Office of Financial Innovation and
Transformation (FIT) has begun to experiment with using blockchain technology in their Transformation (FIT) has begun to experiment with using blockchain technology in their
services.66 In 2017, FIT launched a pilot blockchain prototype to track and manage physical services.66 In 2017, FIT launched a pilot blockchain prototype to track and manage physical
assets such as government-issued computers and cell phones. The pilot project tested whether the assets such as government-issued computers and cell phones. The pilot project tested whether the
inventory of an agency’s physical assets could be continuously monitored and reconciled in real inventory of an agency’s physical assets could be continuously monitored and reconciled in real
time as the assets were transferred among employees. The pilot expanded to track software time as the assets were transferred among employees. The pilot expanded to track software
licenses, and as of 2020, the pilot was on its third iteration.67 In collaboration with the National licenses, and as of 2020, the pilot was on its third iteration.67 In collaboration with the National
Science Foundation (NSF), FIT also conducted two proof-of-concept68 tests using blockchain to Science Foundation (NSF), FIT also conducted two proof-of-concept68 tests using blockchain to
facilitate federal grant payments. FIT identified benefits in using blockchain, but also legal, facilitate federal grant payments. FIT identified benefits in using blockchain, but also legal,
technical, and governance challenges to overcome in the next phase of the project.69 technical, and governance challenges to overcome in the next phase of the project.69
Transferring land titles or deeds can be time-consuming and expensive since multiple authorities Transferring land titles or deeds can be time-consuming and expensive since multiple authorities
may hold the information required to complete a transaction. Proponents argue using blockchain may hold the information required to complete a transaction. Proponents argue using blockchain
technologies makes recording and transferring titles easier and more efficient and records tamper-technologies makes recording and transferring titles easier and more efficient and records tamper-

63 Ibid, p. 15. 63 Ibid, p. 15.
64 Fennie Wang and Primavera De Filippi, “Self-Sovereign Identity in a Globalized World: Credentials-Based Identity 64 Fennie Wang and Primavera De Filippi, “Self-Sovereign Identity in a Globalized World: Credentials-Based Identity
Systems as a Driver for Economic Inclusion,” Systems as a Driver for Economic Inclusion,” Frontiers in Blockchain, vol. 2 (January 23, 2020), https://doi.org/, vol. 2 (January 23, 2020), https://doi.org/
10.3389/fbloc.2019.00028. 10.3389/fbloc.2019.00028.
65 CRS In Focus IF12075, 65 CRS In Focus IF12075, Web3: A Proposed Blockchain-Based, Decentralized Web, by Kristen E. Busch. , by Kristen E. Busch.
66 Public-Private Analytic Exchange Program, 66 Public-Private Analytic Exchange Program, Blockchain and Suitability for Government, U.S. Department of , U.S. Department of
Homeland Security, 2018, https://www.hsdl.org/?abstract&did=825735; “Bureau of the Fiscal Service Launches Two Homeland Security, 2018, https://www.hsdl.org/?abstract&did=825735; “Bureau of the Fiscal Service Launches Two
Innovative Pilot Projects,” Bureau of the Fiscal Service Financial Innovation & Transformation Blog, October 2, 2017, Innovative Pilot Projects,” Bureau of the Fiscal Service Financial Innovation & Transformation Blog, October 2, 2017,
https://www.fiscal.treasury.gov/fit/blog/innovative-pilot-projects.html. https://www.fiscal.treasury.gov/fit/blog/innovative-pilot-projects.html.
67 Amelia Brust, “Bureau of Fiscal Service Sees Potential for Blockchain, AI in New Pilot Programs,” 67 Amelia Brust, “Bureau of Fiscal Service Sees Potential for Blockchain, AI in New Pilot Programs,” Federal News
Network, February 11, 2020, https://federalnewsnetwork.com/automation/2020/02/bureau-of-fiscal-service-sees-, February 11, 2020, https://federalnewsnetwork.com/automation/2020/02/bureau-of-fiscal-service-sees-
potential-for-blockchain-ai-in-new-pilot-programs/. potential-for-blockchain-ai-in-new-pilot-programs/.
68 A proof of concept is typically an early-stage prototype or pilot project. 68 A proof of concept is typically an early-stage prototype or pilot project.
69 “Another Link in the Chain,” Bureau of the Fiscal Service Financial Innovation & Transformation Blog, May 17, 69 “Another Link in the Chain,” Bureau of the Fiscal Service Financial Innovation & Transformation Blog, May 17,
2021, https://www.fiscal.treasury.gov/fit/blog/another-link-in-the-chain.html. 2021, https://www.fiscal.treasury.gov/fit/blog/another-link-in-the-chain.html.
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resistant and more easily auditable.70 For example, smart contracts may enable the transfer of resistant and more easily auditable.70 For example, smart contracts may enable the transfer of
assets without the need for intermediaries or escrow services. assets without the need for intermediaries or escrow services.
In 2016, Cook County, the largest county in Illinois, piloted putting its real estate title registration In 2016, Cook County, the largest county in Illinois, piloted putting its real estate title registration
and land records on a blockchain, in part to decrease the number of steps where information had and land records on a blockchain, in part to decrease the number of steps where information had
to be transferred from one party to another.71 The pilot intended for all parties to record to be transferred from one party to another.71 The pilot intended for all parties to record
information on the blockchain, creating a single place to share and access data. At the end of the information on the blockchain, creating a single place to share and access data. At the end of the
pilot, the Cook County Recorder of Deeds did not undertake large-scale conversions to pilot, the Cook County Recorder of Deeds did not undertake large-scale conversions to
blockchain due to office consolidations. Other countries such as Sweden and Georgia also use blockchain due to office consolidations. Other countries such as Sweden and Georgia also use
blockchain-based land titling systems to facilitate various services and blockchain-based land titling systems to facilitate various services and help prevent against fraud and prevent against fraud and
manipulation of property deeds.72 Sweden’s Lantmäteriet, the land mapping and registration manipulation of property deeds.72 Sweden’s Lantmäteriet, the land mapping and registration
authority, has also tested blockchain technology and smart contracts (requiring human approval) authority, has also tested blockchain technology and smart contracts (requiring human approval)
for recording property sales and managing land conveyance. The pilot, started in 2016, used for recording property sales and managing land conveyance. The pilot, started in 2016, used
smart contracts to require the buyer’s bank to sign-off using a private key. The land registry also smart contracts to require the buyer’s bank to sign-off using a private key. The land registry also
had to sign approval. The project decreased the numbers of steps in the process from 34 to 13 and had to sign approval. The project decreased the numbers of steps in the process from 34 to 13 and
significantly increased speed.73 significantly increased speed.73
Content creators and companies may use blockchain technologies to represent ownership of Content creators and companies may use blockchain technologies to represent ownership of
intellectual property, including digital items or the representation of goods in the physical world, intellectual property, including digital items or the representation of goods in the physical world,
enabling proof of ownership.74 Some companies have filed trademark applications for their NFTs. enabling proof of ownership.74 Some companies have filed trademark applications for their NFTs.
For example, Nike filed a trademark application to sell NFTs of its sneakers and other goods. For example, Nike filed a trademark application to sell NFTs of its sneakers and other goods.
Most NFTs are automatically deployed and transferred between owners using smart contracts. Most NFTs are automatically deployed and transferred between owners using smart contracts.
Although smart contracts may be able to automate the transfer of assets when specific conditions Although smart contracts may be able to automate the transfer of assets when specific conditions
are met, they also pose new risks to legacy systems. Contract law is determined at the state level, are met, they also pose new risks to legacy systems. Contract law is determined at the state level,
but many states have not recognized the legal status or enforceability of smart contracts.75 but many states have not recognized the legal status or enforceability of smart contracts.75
Additionally, bugs in smart contract code or errors in instructions may expose users to significant Additionally, bugs in smart contract code or errors in instructions may expose users to significant
risk or mistaken loss of assets if an automated transfer executes automatically. Although smart risk or mistaken loss of assets if an automated transfer executes automatically. Although smart
contracts may be open source, meaning anyone can examine the code for potential weaknesses, contracts may be open source, meaning anyone can examine the code for potential weaknesses,
many users may lack the technical knowledge necessary for inspection. many users may lack the technical knowledge necessary for inspection.

70 “Blockchain in Commercial Real Estate: The future Is Here,” Deloittee Center for Financial Services, December 1, 70 “Blockchain in Commercial Real Estate: The future Is Here,” Deloittee Center for Financial Services, December 1,
2016, https://www2.deloitte.com/us/en/pages/financial-services/articles/blockchain-in-commercial-real-estate.html. 2016, https://www2.deloitte.com/us/en/pages/financial-services/articles/blockchain-in-commercial-real-estate.html.
71 Adrianne Jeffries, “Governments Explore Using Blockchains to Improve Service,” 71 Adrianne Jeffries, “Governments Explore Using Blockchains to Improve Service,” New York Times, June 27, 2018, June 27, 2018,
https://www.nytimes.com/2018/06/27/business/dealbook/governments-blockchains-services.html. Joanne Cleaver, https://www.nytimes.com/2018/06/27/business/dealbook/governments-blockchains-services.html. Joanne Cleaver,
“Could Blockchain Technology Transform Homebuying in Cook County—and Beyond?” “Could Blockchain Technology Transform Homebuying in Cook County—and Beyond?” Chicago Tribune, July 9, July 9,
2018, https://www.chicagotribune.com/real-estate/ct-re-0715-blockchain-homebuying-20180628-story.html. 2018, https://www.chicagotribune.com/real-estate/ct-re-0715-blockchain-homebuying-20180628-story.html.
72 Georg Eder, “Digital Transformation: Blockchain and Land Titles,” OECD Global Anti-Corruption & Integrity 72 Georg Eder, “Digital Transformation: Blockchain and Land Titles,” OECD Global Anti-Corruption & Integrity
Forum, March 2019; Qiuyun Shang and Allison Price, “A Blockchain-Based Land Titling Project in The Republic of Forum, March 2019; Qiuyun Shang and Allison Price, “A Blockchain-Based Land Titling Project in The Republic of
Georgia,” Georgia,” Innovations Technology Governance Globalization, vol. 12, no. 3-4 (January 2019), pp. 72-78, , vol. 12, no. 3-4 (January 2019), pp. 72-78,
https://doi.org/10.1162/inov_a_00276. https://doi.org/10.1162/inov_a_00276.
73 Shefali Anand, “A Pioneer in Real Estate Blockchain Emerges in Europe,” 73 Shefali Anand, “A Pioneer in Real Estate Blockchain Emerges in Europe,” Wall Street Journal, March 6, 2018, at , March 6, 2018, at
https://www.wsj.com/articles/a-pioneer-in-real-estate-blockchain-emerges-in-europe-1520337601. William Crumpler, https://www.wsj.com/articles/a-pioneer-in-real-estate-blockchain-emerges-in-europe-1520337601. William Crumpler,
Marti Flacks, and Amith Mandavilli, Marti Flacks, and Amith Mandavilli, The Human Rights Risks and Opportunities in Blockchain, CSIS, p. 47. , CSIS, p. 47.
74 Massimo Franceschet, Giovanni Colavizza, and T’ai Smith, et al., “Crypto Art: A Decentralized View,” 74 Massimo Franceschet, Giovanni Colavizza, and T’ai Smith, et al., “Crypto Art: A Decentralized View,” Leonardo, ,
vol. 54, no. 4 (September 9, 2021), pp. 402-405, https://doi.org/10.1162/leon_a_02003. vol. 54, no. 4 (September 9, 2021), pp. 402-405, https://doi.org/10.1162/leon_a_02003.
75 Stuart D. Levi and Alex B. Lipton, 75 Stuart D. Levi and Alex B. Lipton, An Introduction to Smart Contracts and Their Potential and Inherent Limitations, ,
Harvard Law School Forum on Corporate Governance, May 26, 2018, https://corpgov.law.harvard.edu/2018/05/26/an-Harvard Law School Forum on Corporate Governance, May 26, 2018, https://corpgov.law.harvard.edu/2018/05/26/an-
introduction-to-smart-contracts-and-their-potential-and-inherent-limitations/. introduction-to-smart-contracts-and-their-potential-and-inherent-limitations/.
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Other Blockchain Applications
As blockchain technologies continue to mature, experts predict they will find application in a As blockchain technologies continue to mature, experts predict they will find application in a
variety of sectors and fields. For example, some have proposed blockchain technologies as a variety of sectors and fields. For example, some have proposed blockchain technologies as a
solution for electronic voting systems,76 integration with the Internet of Things (IoT),77 smart solution for electronic voting systems,76 integration with the Internet of Things (IoT),77 smart
grids,78 distribution of social welfare benefits,79 and peer-to-peer carbon-credit trading and carbon grids,78 distribution of social welfare benefits,79 and peer-to-peer carbon-credit trading and carbon
tracking.80 These applications may introduce new benefits and risks in each sector. tracking.80 These applications may introduce new benefits and risks in each sector.
Domestic and International Initiatives and
Regulatory Frameworks
This section discusses the state and international regulatory frameworks and other initiatives This section discusses the state and international regulatory frameworks and other initiatives
around blockchain technologies. Some states and countries have taken vastly different approaches around blockchain technologies. Some states and countries have taken vastly different approaches
to blockchain, so the regulations that do exist vary widely. to blockchain, so the regulations that do exist vary widely.
State Regulatory Frameworks
Individual states have passed legislation or established initiatives to develop, incentivize, and Individual states have passed legislation or established initiatives to develop, incentivize, and
regulate blockchain technologies. For example, in 2021, Wyoming passed legislation allowing the regulate blockchain technologies. For example, in 2021, Wyoming passed legislation allowing the
state to recognize state to recognize ~~decentralized autonomous organizations (DAOs)~~DAOs as limited liability companies, as limited liability companies,
in addition to creating sales and property tax exemptions for cryptocurrency transactions.81 This in addition to creating sales and property tax exemptions for cryptocurrency transactions.81 This
has been part of a larger effort by many
76 In 2019, the United States Postal Service built a blockchain-based mobile voting system, but encountered multiple 76 In 2019, the United States Postal Service built a blockchain-based mobile voting system, but encountered multiple
security and privacy issues. Joseph Marks and Aaron Schaffer, “The Postal Service Secretly Built a Risky Mobile security and privacy issues. Joseph Marks and Aaron Schaffer, “The Postal Service Secretly Built a Risky Mobile
Voting System,” Voting System,” Washington Post, December 14, 2021; Joseph Marks and Jacob Bogage, “USPS Built and Secretly , December 14, 2021; Joseph Marks and Jacob Bogage, “USPS Built and Secretly
Tested a Mobile Voting System Before 2020,” Tested a Mobile Voting System Before 2020,” Washington Post, December 13, 2021. In the 2018 primary and general , December 13, 2021. In the 2018 primary and general
elections, West Virginia piloted a mobile voting application powered by blockchain for absentee ballots. Alaska has elections, West Virginia piloted a mobile voting application powered by blockchain for absentee ballots. Alaska has
also introduced legislation to adopt blockchain technology statewide in its voting security system. However, some also introduced legislation to adopt blockchain technology statewide in its voting security system. However, some
scholars have questioned the cybersecurity risks of blockchain-based voting. Sunoo Park, Michael Specter, et al., scholars have questioned the cybersecurity risks of blockchain-based voting. Sunoo Park, Michael Specter, et al.,
“Going from Bad to Worse: From Internet Voting to Blockchain Voting,” “Going from Bad to Worse: From Internet Voting to Blockchain Voting,” Journal of Cybersecurity, vol. 7, no. 1, , vol. 7, no. 1,
(Feburary 16, 2021), pp. 1-15. (Feburary 16, 2021), pp. 1-15.
77 IoT is a system of interrelated devices connected to a network and/or to one another, exchanging data without 77 IoT is a system of interrelated devices connected to a network and/or to one another, exchanging data without
necessarily requiring human-to-machine interaction. In other words, IoT is a collection of electronic devices that can necessarily requiring human-to-machine interaction. In other words, IoT is a collection of electronic devices that can
share information among themselves. For more information on the integration of IoT and blockchain, see T. M. share information among themselves. For more information on the integration of IoT and blockchain, see T. M.
Fernández-Caramés and P. Fraga-Lamas, “A Review on the Use of Blockchain for the Internet of Things,” in IEEE Fernández-Caramés and P. Fraga-Lamas, “A Review on the Use of Blockchain for the Internet of Things,” in IEEE
Access, vol. 6, (2018), pp. 32979-33001. For more information on IoT itself, see CRS Report R44227, Access, vol. 6, (2018), pp. 32979-33001. For more information on IoT itself, see CRS Report R44227, The Internet of
Things: Frequently Asked Questions, by Patricia Moloney Figliola; and CRS In Focus IF11239, , by Patricia Moloney Figliola; and CRS In Focus IF11239, The Internet of Things
(IoT): An Overview, by Patricia Moloney Figliola. , by Patricia Moloney Figliola.
78 For information on the integration of blockchain and smart grids, see Shen Wang, Ahmad F. Taha, and Jianhui 78 For information on the integration of blockchain and smart grids, see Shen Wang, Ahmad F. Taha, and Jianhui
Wang, et al., “Energy Crowdsourcing and Peer-to-Peer Energy Trading in Blockchain-Enabled Smart Grids,” Wang, et al., “Energy Crowdsourcing and Peer-to-Peer Energy Trading in Blockchain-Enabled Smart Grids,” IEEE
Transactions on Systems, Man, and Cybernetics: Systems, vol. 49, no. 8 (August 2019), pp. 1612-1623. , vol. 49, no. 8 (August 2019), pp. 1612-1623.
79 Blockchain may enable the distribution of government benefits. For example, the U.N. World Food Programme 79 Blockchain may enable the distribution of government benefits. For example, the U.N. World Food Programme
provided blockchain-based cash transfers to Syrian refugees in Jordan, which avoided complications with banking fees, provided blockchain-based cash transfers to Syrian refugees in Jordan, which avoided complications with banking fees,
physical cash, vouchers, or electric cards. “How Blockchain Technology Is Helping Refugees Grocery Shop in Conflict physical cash, vouchers, or electric cards. “How Blockchain Technology Is Helping Refugees Grocery Shop in Conflict
Zones,” World Food Program USA, December 23, 2020, at https://www.wfpusa.org/articles/blockchain-tech-helps-Zones,” World Food Program USA, December 23, 2020, at https://www.wfpusa.org/articles/blockchain-tech-helps-
refugees-grocery-shop-in-conflict-zones/. refugees-grocery-shop-in-conflict-zones/.
80 Peter Howson, “Tackling Climate Change with Blockchain,” 80 Peter Howson, “Tackling Climate Change with Blockchain,” Nature Climate Change, vol. 9 (August 19, 2019), p. , vol. 9 (August 19, 2019), p.
644–645. “The Good, the Bad and the Blockchain,” United Nations Framework Convention on Climate Change 644–645. “The Good, the Bad and the Blockchain,” United Nations Framework Convention on Climate Change
(UNFCCC), May 17, 2021. (UNFCCC), May 17, 2021.
81 Wyoming CH0162, https://www.wyoleg.gov/Legislation/2021/SF0038; Elena Botella, “Wyoming Wants to Be the 81 Wyoming CH0162, https://www.wyoleg.gov/Legislation/2021/SF0038; Elena Botella, “Wyoming Wants to Be the
Crypto Capital of the U.S.” Crypto Capital of the U.S.” Slate, June 28, 2021, https://slate.com/technology/2021/06/wyoming-cryptocurrency-, June 28, 2021, https://slate.com/technology/2021/06/wyoming-cryptocurrency-
laws.html. laws.html.
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~~has been part of a larger effort by many~~ state governments to foster blockchain and state governments to foster blockchain and
cryptocurrency development, and attract companies to relocate to their states.cryptocurrency development, and attract companies to relocate to their states. Similarly, Texas has Similarly, Texas has
amended its Uniform Commercial Code to include a definition of virtual currency and clarify that amended its Uniform Commercial Code to include a definition of virtual currency and clarify that
certain business laws apply to cryptocurrencies.82 Many states have amended their money service certain business laws apply to cryptocurrencies.82 Many states have amended their money service
business (MSB) or money transmitter regulations to include cryptocurrency transactions.83 Some business (MSB) or money transmitter regulations to include cryptocurrency transactions.83 Some
state legislatures have introduced legislation to tax cryptocurrencies, prohibit cryptocurrency state legislatures have introduced legislation to tax cryptocurrencies, prohibit cryptocurrency
mining, study the environmental impacts of cryptocurrency, and investigate state government use mining, study the environmental impacts of cryptocurrency, and investigate state government use
of blockchain technologies.84 Potential federal regulation of blockchain provenance applications of blockchain technologies.84 Potential federal regulation of blockchain provenance applications
may complement or interact with state-level blockchain regulations. may complement or interact with state-level blockchain regulations.
In 2016, Illinois established the Illinois Blockchain Initiative, which includes a consortium of In 2016, Illinois established the Illinois Blockchain Initiative, which includes a consortium of
state and county agencies, to collaborate on the integration of blockchain technologies into the state and county agencies, to collaborate on the integration of blockchain technologies into the
delivery of state services.85 The Cook County Recorder of Deeds, which piloted the delivery of state services.85 The Cook County Recorder of Deeds, which piloted the
aforementioned real estate blockchain project, also provided recommendations to the Illinois aforementioned real estate blockchain project, also provided recommendations to the Illinois
Blockchain Initiative. In 2016, the Delaware state government launched the Delaware Blockchain Blockchain Initiative. In 2016, the Delaware state government launched the Delaware Blockchain
Initiative to provide a regulatory and legal environment for blockchain development, as well as Initiative to provide a regulatory and legal environment for blockchain development, as well as
testing blockchain within government services.86 California created a Blockchain Working Group testing blockchain within government services.86 California created a Blockchain Working Group
in 2019, which published policy recommendations to define blockchain, evaluate the legal in 2019, which published policy recommendations to define blockchain, evaluate the legal
implications of distributed ledger technologies, and recommend amendments to statutes that may implications of distributed ledger technologies, and recommend amendments to statutes that may
be impacted by the application of blockchain technologies.87 However, many state blockchain be impacted by the application of blockchain technologies.87 However, many state blockchain
initiatives have struggled to implement the technology.88 The Illinois Blockchain Initiative initiatives have struggled to implement the technology.88 The Illinois Blockchain Initiative
identified various limitations to government adoption, such as issues with scalability and smart identified various limitations to government adoption, such as issues with scalability and smart
contract security, and Delaware’s project never launched due to potential cost concerns.89 These contract security, and Delaware’s project never launched due to potential cost concerns.89 These
state-level initiatives may present opportunities for Congress to consider the role of the federal state-level initiatives may present opportunities for Congress to consider the role of the federal
government in blockchain development or regulation, as well as identify best practices and government in blockchain development or regulation, as well as identify best practices and
potential risks. potential risks.

82 Texas CH739, https://legiscan.com/TX/bill/HB4474/2021. 82 Texas CH739, https://legiscan.com/TX/bill/HB4474/2021.
83 CRS Report R46486, 83 CRS Report R46486, Telegraphs, Steamships, and Virtual Currency: An Analysis of Money Transmitter Regulation, ,
by Andrew P. Scott. by Andrew P. Scott.
84 See “Blockchain 2021 Legislation” and “Cryptocurrency 2021 Legislation,” maintained by the National Conference 84 See “Blockchain 2021 Legislation” and “Cryptocurrency 2021 Legislation,” maintained by the National Conference
of State Legislatures (NCSL), https://www.ncsl.org/research/financial-services-and-commerce/blockchain-2021-of State Legislatures (NCSL), https://www.ncsl.org/research/financial-services-and-commerce/blockchain-2021-
legislation.aspx. legislation.aspx.
85 For more information on the Illinois Blockchain Initiative, see the Illinois Blockchain Task Force Final Report and 85 For more information on the Illinois Blockchain Initiative, see the Illinois Blockchain Task Force Final Report and
general background, https://www2.illinois.gov/sites/doit/Pages/BlockChainInitiative.aspx. general background, https://www2.illinois.gov/sites/doit/Pages/BlockChainInitiative.aspx.
86 Delaware Office of the Governor, “Governor Markell Launches Delaware Blockchain Initiative,” press release, April 86 Delaware Office of the Governor, “Governor Markell Launches Delaware Blockchain Initiative,” press release, April
2, 2016, https://www.prnewswire.com/news-releases/governor-markell-launches-delaware-blockchain-initiative-2, 2016, https://www.prnewswire.com/news-releases/governor-markell-launches-delaware-blockchain-initiative-
300260672.html; Andrea Tinianow and Caitlin Long, “Delaware Blockchain Initiative: Transforming the Foundational 300260672.html; Andrea Tinianow and Caitlin Long, “Delaware Blockchain Initiative: Transforming the Foundational
Infrastructure of Corporate Finance,” Infrastructure of Corporate Finance,” Harvard Law School Forum on Corporate Governance, March 16, 2017, , March 16, 2017,
https://corpgov.law.harvard.edu/2017/03/16/delaware-blockchain-initiative-transforming-the-foundational-https://corpgov.law.harvard.edu/2017/03/16/delaware-blockchain-initiative-transforming-the-foundational-
infrastructure-of-corporate-finance/. infrastructure-of-corporate-finance/.
87 See the California Blockchain Working Group webpage, https://www.govops.ca.gov/blockchain/. 87 See the California Blockchain Working Group webpage, https://www.govops.ca.gov/blockchain/.
88 Colin Wood, “What Happened with Blockchain in State Government?” 88 Colin Wood, “What Happened with Blockchain in State Government?” StateScoop, November 23, 2021, , November 23, 2021,
https://statescoop.com/what-happened-with-blockchain-in-state-government/. https://statescoop.com/what-happened-with-blockchain-in-state-government/.
89 Karl Baker, “Delaware Eases off Early Blockchain Zeal After Concerns over Disruption to Business,” 89 Karl Baker, “Delaware Eases off Early Blockchain Zeal After Concerns over Disruption to Business,” Delaware
Online, February 1, 2018, https://www.delawareonline.com/story/news/2018/02/02/delaware-eases-off-early-, February 1, 2018, https://www.delawareonline.com/story/news/2018/02/02/delaware-eases-off-early-
blockchain-zeal-after-concerns-over-disruption-business/1082536001/. blockchain-zeal-after-concerns-over-disruption-business/1082536001/.
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International Regulatory Frameworks
This section highlights the regulatory frameworks for blockchain technologies and their This section highlights the regulatory frameworks for blockchain technologies and their
applications developed by China and the European Union. applications developed by China and the European Union.
China
China has supported the adoption of blockchain technologies90 and leads the world in blockchain China has supported the adoption of blockchain technologies90 and leads the world in blockchain
patent applications.91 The Chinese government has facilitated the development of blockchain patent applications.91 The Chinese government has facilitated the development of blockchain
technologies through the Blockchain-based Service Network (BSN), which provides Chinese technologies through the Blockchain-based Service Network (BSN), which provides Chinese
businesses a “global infrastructure network used to deploy and operate all types of blockchain businesses a “global infrastructure network used to deploy and operate all types of blockchain
applications.”92 In 2019, the Cyberspace Administration of China issued the “Administrative applications.”92 In 2019, the Cyberspace Administration of China issued the “Administrative
Provisions on Blockchain Information Services,” a set of rules governing blockchain-based Provisions on Blockchain Information Services,” a set of rules governing blockchain-based
information services that required authentication of users’ real identities.93 In 2020, China also information services that required authentication of users’ real identities.93 In 2020, China also
launched the National Blockchain and Distributed Accounting Technology Standardization launched the National Blockchain and Distributed Accounting Technology Standardization
Technical Committee to create national standards for the industry.94 Technical Committee to create national standards for the industry.94
While simultaneously supporting blockchain development, China has also banned While simultaneously supporting blockchain development, China has also banned
cryptocurrencies in order to protect the dominance of its government-run digital currency, cryptocurrencies in order to protect the dominance of its government-run digital currency,
officially called the Digital Currency Electronic Payment (DCEP).95 The DCEP is referred to as officially called the Digital Currency Electronic Payment (DCEP).95 The DCEP is referred to as
the digital renminbi (digital RMB) or digital yuan (e-CNY), but does not use blockchain. The the digital renminbi (digital RMB) or digital yuan (e-CNY), but does not use blockchain. The
DCEP is one of the most developed examples of a Central Bank Digital Currency (CBDC). Many DCEP is one of the most developed examples of a Central Bank Digital Currency (CBDC). Many
other countries and central banks are exploring the option of CBDCs, which has raised issues other countries and central banks are exploring the option of CBDCs, which has raised issues
about competition with the about competition with the USU.S. dollar, efficacy of monetary policy, and privacy concerns.96 dollar, efficacy of monetary policy, and privacy concerns.96
In September 2021, China officially banned all cryptocurrency transactions and cryptocurrency In September 2021, China officially banned all cryptocurrency transactions and cryptocurrency
mining.97 These actions caused a global drop in the total amount of cryptocurrency mining and mining.97 These actions caused a global drop in the total amount of cryptocurrency mining and

90 Alice Ekman, 90 Alice Ekman, China’s Blockchain and Cryptocurrency Ambitions: The First-Mover Advantage, European Union , European Union
Institute for Security Studies, July 13, 2021, https://www.iss.europa.eu/sites/default/files/EUISSFiles/Institute for Security Studies, July 13, 2021, https://www.iss.europa.eu/sites/default/files/EUISSFiles/
Brief_15_2021.pdf. Brief_15_2021.pdf.
91 See Francis Gurry, “China Becomes Top Filer of International Patents in 2019 amid Robust Growth for WIPO’s IP 91 See Francis Gurry, “China Becomes Top Filer of International Patents in 2019 amid Robust Growth for WIPO’s IP
Services, Treaties and Finances,” World Intellectual Property Organization, April 7, 2020, https://www.wipo.int/Services, Treaties and Finances,” World Intellectual Property Organization, April 7, 2020, https://www.wipo.int/
pressroom/en/articles/2020/article_0005.html. pressroom/en/articles/2020/article_0005.html.
92 For more information on the Blockchain-based Service Network (BSN), see the BSN’s “Introductory White Paper,” 92 For more information on the Blockchain-based Service Network (BSN), see the BSN’s “Introductory White Paper,”
https://bsnbase.io/static/tmpFile/BSNIntroductionWhitepaper.pdf. https://bsnbase.io/static/tmpFile/BSNIntroductionWhitepaper.pdf.
93 Laney Zhang, “China: Rules on Blockchain-Based Information Services Issued Requiring Authentication of Users’ 93 Laney Zhang, “China: Rules on Blockchain-Based Information Services Issued Requiring Authentication of Users’
Real Identities,” The Law Library of Congress, February 12, 2019, https://www.loc.gov/law/foreign-news/article/china-Real Identities,” The Law Library of Congress, February 12, 2019, https://www.loc.gov/law/foreign-news/article/china-
rules-on-blockchain-based-information-services-issued-requiring-authentication-of-users-real-identities/. rules-on-blockchain-based-information-services-issued-requiring-authentication-of-users-real-identities/.
94 Arjun Kharpal, “Chinese Giants Huawei and Tencent Join National Group on Blockchain After Xi’s Backing for the 94 Arjun Kharpal, “Chinese Giants Huawei and Tencent Join National Group on Blockchain After Xi’s Backing for the
Tech,” Tech,” CNBC, April 15, 2020, https://www.cnbc.com/2020/04/15/huawei-tencent-on-china-blockchain-national-, April 15, 2020, https://www.cnbc.com/2020/04/15/huawei-tencent-on-china-blockchain-national-
committee.html. committee.html.
95 Ryan Browne, “Central Bank Digital Currencies Are a Long Way from Becoming Reality—Unless You’re in 95 Ryan Browne, “Central Bank Digital Currencies Are a Long Way from Becoming Reality—Unless You’re in
China,” China,” CNBC, November 12, 2021, https://www.cnbc.com/2021/11/12/central-bank-digital-currencies-are-moving-, November 12, 2021, https://www.cnbc.com/2021/11/12/central-bank-digital-currencies-are-moving-
slowly-but-not-in-china.html; Arjun Kharpal, “China Has Given Away Millions in Its Digital Yuan Trials. This Is How slowly-but-not-in-china.html; Arjun Kharpal, “China Has Given Away Millions in Its Digital Yuan Trials. This Is How
It Works,” It Works,” CNBC, March 4, 2021, https://www.cnbc.com/2021/03/05/chinas-digital-yuan-what-is-it-and-how-does-it-, March 4, 2021, https://www.cnbc.com/2021/03/05/chinas-digital-yuan-what-is-it-and-how-does-it-
work.html. work.html.
96 For more information on CBDCs and China’s digital currency efforts, see CRS Report R46850, 96 For more information on CBDCs and China’s digital currency efforts, see CRS Report R46850, Central Bank Digital
Currencies: Policy Issues, by Marc Labonte and Rebecca M. Nelson. , by Marc Labonte and Rebecca M. Nelson.
97 Alun John, Samuel Shen, and Tom Wilson, “China’s Top Regulators Ban Crypto Trading and Mining, Sending 97 Alun John, Samuel Shen, and Tom Wilson, “China’s Top Regulators Ban Crypto Trading and Mining, Sending
Bitcoin Tumbling,” Bitcoin Tumbling,” Reuters, September 24, 2021, https://www.reuters.com/world/china/china-central-bank-vows-, September 24, 2021, https://www.reuters.com/world/china/china-central-bank-vows-
crackdown-cryptocurrency-trading-2021-09-24/. crackdown-cryptocurrency-trading-2021-09-24/.
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mining difficulty since 70-80% of mining previously occurred in China.98 Since the ban, many mining difficulty since 70-80% of mining previously occurred in China.98 Since the ban, many
Chinese companies have moved their mining equipment and operations to the United States and Chinese companies have moved their mining equipment and operations to the United States and
other countries, where cryptocurrencies are currently unregulated for the most part.99 It remains to other countries, where cryptocurrencies are currently unregulated for the most part.99 It remains to
be seen how these policy changes will impact the distribution and growth of blockchain be seen how these policy changes will impact the distribution and growth of blockchain
technologies across the world, and particularly in the United States. technologies across the world, and particularly in the United States.
European Union
In 2018, EU member states launched the European Blockchain Partnership (EBP), which stresses In 2018, EU member states launched the European Blockchain Partnership (EBP), which stresses
the potential of blockchain-based services for the benefit of citizens, society, and the economy.100 the potential of blockchain-based services for the benefit of citizens, society, and the economy.100
The EBP currently includes all 27 EU member states, plus non-EU members Norway and The EBP currently includes all 27 EU member states, plus non-EU members Norway and
Liechtenstein. As part of this commitment, the EBP is building a European Blockchain Services Liechtenstein. As part of this commitment, the EBP is building a European Blockchain Services
Infrastructure (EBSI), which will deliver public services (e.g., notarization, managing educational Infrastructure (EBSI), which will deliver public services (e.g., notarization, managing educational
or identity credentials, data sharing among EU authorities) using blockchain technology.101 In or identity credentials, data sharing among EU authorities) using blockchain technology.101 In
2020, EBSI deployed a network of distributed blockchain nodes across Europe to support 2020, EBSI deployed a network of distributed blockchain nodes across Europe to support
applications focused on selected use-cases, including digital credentials and identity management applications focused on selected use-cases, including digital credentials and identity management
systems. Similar to a digital wallet for storing cryptocurrencies, the EBSI wallet could store a systems. Similar to a digital wallet for storing cryptocurrencies, the EBSI wallet could store a
user’s credentials and documentation, such as diplomas or verifiable IDs. user’s credentials and documentation, such as diplomas or verifiable IDs.
Due to the immutability of blockchain ledgers, there have been concerns in the EU about how to Due to the immutability of blockchain ledgers, there have been concerns in the EU about how to
treat blockchain technologies within existing legal frameworks, particularly the EU’s General treat blockchain technologies within existing legal frameworks, particularly the EU’s General
Data Protection Regulation, which establishes rules for the protection of personal data and Data Protection Regulation, which establishes rules for the protection of personal data and
outlines individual rights, including a “right to be forgotten.”102 A 2018 European Parliament outlines individual rights, including a “right to be forgotten.”102 A 2018 European Parliament
resolution underlined that the European Data Protection Supervisor (EDPS), the EU’s resolution underlined that the European Data Protection Supervisor (EDPS), the EU’s
independent data protection authority, should provide further clarification on how blockchain independent data protection authority, should provide further clarification on how blockchain
technologies may affect EU legislation on data protection.103 technologies may affect EU legislation on data protection.103
Considerations for Congress
There are a range of options, if Congress determines there is an appropriate role for the U.S. There are a range of options, if Congress determines there is an appropriate role for the U.S.
government, to support and incentivize the development of blockchain or regulate risks and government, to support and incentivize the development of blockchain or regulate risks and
potential adverse outcomes. potential adverse outcomes.
Regulatory Authority and Federal Agencies
Some federal entities, such as the Treasury Department, Securities and Exchange Commission Some federal entities, such as the Treasury Department, Securities and Exchange Commission (SEC), ,
Commodity Futures Trading Commission and others, have applied existing regulatory Commodity Futures Trading Commission and others, have applied existing regulatory ~~authorities~~

98 Michel Rauchs, “Geographic Shift,” 98 Michel Rauchs, “Geographic Shift,” University of Cambridge Judge Business School, October 13 2021, , October 13 2021,
https://www.jbs.cam.ac.uk/insight/2021/geographic-shift/. https://www.jbs.cam.ac.uk/insight/2021/geographic-shift/.
99 Martha Muir, “China’s Exiled Crypto Machines Fuel Global Mining Boom,” 99 Martha Muir, “China’s Exiled Crypto Machines Fuel Global Mining Boom,” Financial Times, November 22, 2021, , November 22, 2021,
https://www.ft.com/content/0dbe4f9f-a433-4288-858e-c4b852f4c340. https://www.ft.com/content/0dbe4f9f-a433-4288-858e-c4b852f4c340.
100 “European Countries Join Blockchain Partnership,” April 10, 2018, https://digital-strategy.ec.europa.eu/en/news/ 100 “European Countries Join Blockchain Partnership,” April 10, 2018, https://digital-strategy.ec.europa.eu/en/news/
european-countries-join-blockchain-partnership. european-countries-join-blockchain-partnership.
101 For more information on the EBSI, see https://ec.europa.eu/cefdigital/wiki/display/CEFDIGITAL/EBSI. 101 For more information on the EBSI, see https://ec.europa.eu/cefdigital/wiki/display/CEFDIGITAL/EBSI.
102 CRS In Focus IF10896, 102 CRS In Focus IF10896, EU Data Protection Rules and U.S. Implications, by Rachel F. Fefer and Kristin Archick. , by Rachel F. Fefer and Kristin Archick.
103 For more information on EDPS and blockchain, see https://edps.europa.eu/data-protection/our-work/subjects/103 For more information on EDPS and blockchain, see https://edps.europa.eu/data-protection/our-work/subjects/
technologies/blockchain_en. “Blockchain and the General Data Protection Regulation,” Panel for the Future of Science technologies/blockchain_en. “Blockchain and the General Data Protection Regulation,” Panel for the Future of Science
and Technology, European Parliamentary Research Service, July 2019, https://www.europarl.europa.eu/RegData/and Technology, European Parliamentary Research Service, July 2019, https://www.europarl.europa.eu/RegData/
etudes/STUD/2019/634445/EPRS_STU(2019)634445_EN.pdf. etudes/STUD/2019/634445/EPRS_STU(2019)634445_EN.pdf.
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authorities to the use of blockchain technologies and released guidance addressing specific financial to the use of blockchain technologies and released guidance addressing specific financial
applications, such as cryptocurrencies and initial coin offerings (ICOs).104 applications, such as cryptocurrencies and initial coin offerings (ICOs).104
The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and
the Federal Reserve have established a Digital Assets Sprint Initiative to support agency the Federal Reserve have established a Digital Assets Sprint Initiative to support agency
collaboration on digital asset policies.105 The Initiative intends to develop a common taxonomy collaboration on digital asset policies.105 The Initiative intends to develop a common taxonomy
for digital assets and a set of agreed upon definitions of basic terms. In 2021, the Department of for digital assets and a set of agreed upon definitions of basic terms. In 2021, the Department of
Justice and Treasury Department jointly created a National Cryptocurrency Enforcement Team to Justice and Treasury Department jointly created a National Cryptocurrency Enforcement Team to
conduct investigations and prosecutions of criminal misuses of cryptocurrency, including crimes conduct investigations and prosecutions of criminal misuses of cryptocurrency, including crimes
committed by virtual currency exchanges and the use of cryptocurrencies and blockchain-based committed by virtual currency exchanges and the use of cryptocurrencies and blockchain-based
digital assets in money laundering.106 digital assets in money laundering.106
Similar collaborative initiatives in sectors such as healthcare, agriculture, transportation, and Similar collaborative initiatives in sectors such as healthcare, agriculture, transportation, and
supply chain management, could be considered as the use of non-financial blockchain supply chain management, could be considered as the use of non-financial blockchain
applications expands. Similar to the guidance released on cryptocurrencies and ICOs, Congress applications expands. Similar to the guidance released on cryptocurrencies and ICOs, Congress
could direct federal agencies to create guidance on non-financial blockchain applications, such as could direct federal agencies to create guidance on non-financial blockchain applications, such as
the provenance uses discussed earlier in this report. the provenance uses discussed earlier in this report.
Policy Considerations and Risks
Blockchain technologies may be useful in certain applications but also may present new risks. For Blockchain technologies may be useful in certain applications but also may present new risks. For
example, data recorded on a blockchain may have ramifications for user privacy and security. example, data recorded on a blockchain may have ramifications for user privacy and security.
Any data added to a public, permissionless blockchain will be viewable by all participating nodes Any data added to a public, permissionless blockchain will be viewable by all participating nodes
indefinitely. Because blockchain records are immutable, any error in a record associated with an indefinitely. Because blockchain records are immutable, any error in a record associated with an
individual may persist despite efforts to correct it,107 with potential ramifications for individual may persist despite efforts to correct it,107 with potential ramifications for
authenticating identity or completing transactions. In order to comply with the EU’s GDPR authenticating identity or completing transactions. In order to comply with the EU’s GDPR
regulations and other privacy requirements, such as the right to be “forgotten,” NIST has explored regulations and other privacy requirements, such as the right to be “forgotten,” NIST has explored
the possibility of an “editable blockchain.”108 NIST’s proposed system could allow for the the possibility of an “editable blockchain.”108 NIST’s proposed system could allow for the

104 Strategic Hub for Innovation and Financial Technology, 104 Strategic Hub for Innovation and Financial Technology, Framework for “Investment Contract” Analysis of Digital
Assets, U.S. Securities and Exchange , U.S. Securities and Exchange ~~Comission~~Commission, https://www.sec.gov/corpfin/framework-investment-contract-, https://www.sec.gov/corpfin/framework-investment-contract-
analysis-digital-assets#_edn1. Commodity Futures Trading Commission, “Retail Commodity Transactions Involving analysis-digital-assets#_edn1. Commodity Futures Trading Commission, “Retail Commodity Transactions Involving
Certain Digital Assets,” 85Certain Digital Assets,” 85 Federal Register 37734-37744, June 24, 2020. U.S. Treasury Financial Crimes 37734-37744, June 24, 2020. U.S. Treasury Financial Crimes
Enforcement Network, Enforcement Network, Application of FinCEN’s Regulations to Certain Business Models, FIN-2019-G001, May 9, , FIN-2019-G001, May 9,
2019, https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-certain-business-2019, https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-certain-business-
models. U.S. Department of the Treasury’s Office of Foreign Assets Control, models. U.S. Department of the Treasury’s Office of Foreign Assets Control, Updated Advisory on Potential Sanctions
Risks for Facilitating Ransomware Payments, September 21, 2021, https://home.treasury.gov/system/files/126/, September 21, 2021, https://home.treasury.gov/system/files/126/
ofac_ransomware_advisory.pdf. Jonathan V. Gould, ofac_ransomware_advisory.pdf. Jonathan V. Gould, Authority of a National Bank to Provide Cryptocurrency Custody
Services for Customers, Office of the Comptroller of the Currency, Interpretive Letter #1170, July 22, 2020, , Office of the Comptroller of the Currency, Interpretive Letter #1170, July 22, 2020,
https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2020/int1170.pdf. 26 C.F.R. §§ 1.61-1. https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2020/int1170.pdf. 26 C.F.R. §§ 1.61-1.
105 Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the 105 Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the
Comptroller of the Currency, “Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps,” press release, Comptroller of the Currency, “Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps,” press release,
November 23, 2021, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20211123a1.pdf. November 23, 2021, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20211123a1.pdf.
106 Department of Justice, “Deputy Attorney General Lisa O. Monaco Announces National Cryptocurrency 106 Department of Justice, “Deputy Attorney General Lisa O. Monaco Announces National Cryptocurrency
Enforcement Team,” press release, October 6, 2021, https://www.justice.gov/opa/pr/deputy-attorney-general-lisa-o-Enforcement Team,” press release, October 6, 2021, https://www.justice.gov/opa/pr/deputy-attorney-general-lisa-o-
monaco-announces-national-cryptocurrency-enforcement-team. monaco-announces-national-cryptocurrency-enforcement-team.
107 Victoria L. Lemieux, “Blockchain and Distributed Ledgers as Trusted Recordkeeping Systems: An Archival 107 Victoria L. Lemieux, “Blockchain and Distributed Ledgers as Trusted Recordkeeping Systems: An Archival
Theoretic Evaluation Framework,” Theoretic Evaluation Framework,” Future Technologies Conference (FTC) 2017, 2017, https://www.researchgate.net/, 2017, https://www.researchgate.net/
publication/317433591_Blockchain_and_Distributed_Ledgers_as_Trusted_Recordkeeping_Systems_An_Archival_publication/317433591_Blockchain_and_Distributed_Ledgers_as_Trusted_Recordkeeping_Systems_An_Archival_
Theoretic_Evaluation_Framework. Theoretic_Evaluation_Framework.
108 “Enhanced Distributed Ledger Technology,” NIST, https://csrc.nist.gov/Projects/enhanced-distributed-ledger- 108 “Enhanced Distributed Ledger Technology,” NIST, https://csrc.nist.gov/Projects/enhanced-distributed-ledger-
technology. technology.
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modification or deletion of specified records, which also removes the need for energy-intensive modification or deletion of specified records, which also removes the need for energy-intensive
consensus mechanisms. consensus mechanisms.
Additionally, if personal information is stored on a public blockchain, confidentiality for that data Additionally, if personal information is stored on a public blockchain, confidentiality for that data
may be lost if the encryption algorithm is cracked.109 For this reason, some organizations have may be lost if the encryption algorithm is cracked.109 For this reason, some organizations have
argued personal information and biometric data should never be recorded on a blockchain.110 argued personal information and biometric data should never be recorded on a blockchain.110
Additionally, as more personal information is recorded and shared with a blockchain network’s Additionally, as more personal information is recorded and shared with a blockchain network’s
nodes and credential issuers, it may increase the possibility that it may be correlated with other nodes and credential issuers, it may increase the possibility that it may be correlated with other
data and on-chain activity to identify specific users and their behaviors.111 Congress might data and on-chain activity to identify specific users and their behaviors.111 Congress might
consider whether existing privacy regulations are adequate to address potential concerns arising consider whether existing privacy regulations are adequate to address potential concerns arising
from the use of blockchain technologies and blockchain-enabled provenance applications. from the use of blockchain technologies and blockchain-enabled provenance applications.
Currently, the NSF America’s Seed Fund, a congressionally mandated Small Business Innovation Currently, the NSF America’s Seed Fund, a congressionally mandated Small Business Innovation
Research and Small Business Technology Transfer program, provides research and development Research and Small Business Technology Transfer program, provides research and development
funding to startups and small businesses in the United States.112 The program has funded various funding to startups and small businesses in the United States.112 The program has funded various
distributed ledger companies.113 Congress may consider options to address some of the potential distributed ledger companies.113 Congress may consider options to address some of the potential
risks associated with blockchain technologies. Congress could direct NIST to expand existing risks associated with blockchain technologies. Congress could direct NIST to expand existing
research on blockchain or direct the research on blockchain or direct the ~~National Science Foundation (NSF)~~NSF to fund blockchain to fund blockchain
research as well as research that examines blockchain risks and failure modes and the social, research as well as research that examines blockchain risks and failure modes and the social,
ethical, legal, and environmental implications of blockchain technologies. ethical, legal, and environmental implications of blockchain technologies.
In P.L. 117-58, Congress extended In P.L. 117-58, Congress extended ~~IRS~~Internal Revenue Service reporting requirements to cryptocurrency brokers, such as reporting requirements to cryptocurrency brokers, such as
cryptocurrency exchanges.114 Congress might consider a similar approach to extend regulation to cryptocurrency exchanges.114 Congress might consider a similar approach to extend regulation to
cover blockchain platforms and network operators, depending on the particular application and cover blockchain platforms and network operators, depending on the particular application and
intent of oversight. Alternatively, outside academics have proposed requiring all blockchain-based intent of oversight. Alternatively, outside academics have proposed requiring all blockchain-based
applications and associated smart contracts be required to register in a searchable database, which applications and associated smart contracts be required to register in a searchable database, which
would create more transparency, but may face logistical obstacles.115 would create more transparency, but may face logistical obstacles.115
Standards Development
The International Organization for Standardization (ISO) has begun issuing some standards for The International Organization for Standardization (ISO) has begun issuing some standards for
blockchains.116 Congress may consider similar approaches to develop standards for blockchain blockchains.116 Congress may consider similar approaches to develop standards for blockchain
technologies or provide resources to agencies to be involved in similar international standard-technologies or provide resources to agencies to be involved in similar international standard-
setting bodies. setting bodies.
The National Institute of Standards and Technology (NIST) is a non-regulatory federal agency The National Institute of Standards and Technology (NIST) is a non-regulatory federal agency
within the Department of Commerce. Among its key roles, NIST promotes coordination between within the Department of Commerce. Among its key roles, NIST promotes coordination between
the public and private sectors in the development of standards and in conformity assessment the public and private sectors in the development of standards and in conformity assessment
~~activities, encouraging and coordinating federal agency use of voluntary consensus standards in~~

109 Loïc Lesavre, Priam Varin, and Peter Mell, 109 Loïc Lesavre, Priam Varin, and Peter Mell, A Taxonomic Approach to Understanding Emerging Blockchain Identity
Management Systems, NIST, pp. 35. , NIST, pp. 35.
110 William Crumpler, Marti Flacks, and Amith Mandavilli, 110 William Crumpler, Marti Flacks, and Amith Mandavilli, The Human Rights Risks and Opportunities in Blockchain, ,
CSIS, p. 57. CSIS, p. 57.
111 See Section 5 for “Metadata Tracing” in Loïc Lesavre, Priam Varin, and Peter Mell, 111 See Section 5 for “Metadata Tracing” in Loïc Lesavre, Priam Varin, and Peter Mell, A Taxonomic Approach to
Understanding Emerging Blockchain Identity Management Systems, NIST, pp. 32. , NIST, pp. 32.
112 “Portfolio,” National Science Foundation (NSF), https://seedfund.nsf.gov/portfolio/. 112 “Portfolio,” National Science Foundation (NSF), https://seedfund.nsf.gov/portfolio/.
113 “Distributed Ledger (DL),” NSF, https://seedfund.nsf.gov/topics/distributed-ledger/. 113 “Distributed Ledger (DL),” NSF, https://seedfund.nsf.gov/topics/distributed-ledger/.
114 CRS In Focus IF11910, 114 CRS In Focus IF11910, Cryptocurrency Transfers and Data Collection, by Mark P. Keightley and Andrew P. Scott. , by Mark P. Keightley and Andrew P. Scott.
115 Aaron Wright and Primavera De Filippi, 115 Aaron Wright and Primavera De Filippi, Blockchain and the Law: The Rule of Code, April 2018. , April 2018.
116 See ISO Technical Committee ISO/TC 307 or IEEE SA for information on developing blockchain standards. 116 See ISO Technical Committee ISO/TC 307 or IEEE SA for information on developing blockchain standards.
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activities, encouraging and coordinating federal agency use of voluntary consensus standards in lieu of government-unique standards, and coordinating federal agency participation in the lieu of government-unique standards, and coordinating federal agency participation in the
development of relevant standards.117 Congress has previously directed NIST to advance development of relevant standards.117 Congress has previously directed NIST to advance
collaborative frameworks, standards, and guidelines for artificial intelligence.118 Executive orders collaborative frameworks, standards, and guidelines for artificial intelligence.118 Executive orders
have also required NIST to lead a public-private effort to develop a framework of cybersecurity have also required NIST to lead a public-private effort to develop a framework of cybersecurity
standards and best practices for protecting critical infrastructure.119 Congress might consider a standards and best practices for protecting critical infrastructure.119 Congress might consider a
similar approach for the development of frameworks and standards for blockchain technologies or similar approach for the development of frameworks and standards for blockchain technologies or
particular blockchain applications. particular blockchain applications.
Some scholars assert that a multi-stakeholder approach to standards development for blockchain Some scholars assert that a multi-stakeholder approach to standards development for blockchain
technologies would be beneficial to address interoperability challenges, among others.120 Many technologies would be beneficial to address interoperability challenges, among others.120 Many
blockchain networks remain unable to communicate with each other directly. For example, blockchain networks remain unable to communicate with each other directly. For example,
thousands of blockchain-based cryptocurrencies exist in the financial sector, but SEC authorities thousands of blockchain-based cryptocurrencies exist in the financial sector, but SEC authorities
have noted the potential lack of long-term viability for so many different private forms of money have noted the potential lack of long-term viability for so many different private forms of money
that are not interchangeable.121 Standardization and interoperability could enable the movement that are not interchangeable.121 Standardization and interoperability could enable the movement
of funds, NFTs, or other assets from one blockchain to another preferred blockchain. Consumers of funds, NFTs, or other assets from one blockchain to another preferred blockchain. Consumers
could have more choice in their ability to move tokens and other data to quicker, cheaper, and could have more choice in their ability to move tokens and other data to quicker, cheaper, and
less-energy alternatives. For example, standards such as BIP-32 and ERC-20 facilitated the less-energy alternatives. For example, standards such as BIP-32 and ERC-20 facilitated the
emergence of interoperable wallets for cryptocurrencies.122 emergence of interoperable wallets for cryptocurrencies.122
Conclusion
Blockchain technologies are in a phase of rapid development and expanded application and Blockchain technologies are in a phase of rapid development and expanded application and
adoption in a number of industries and economic sectors. New blockchain applications, such as adoption in a number of industries and economic sectors. New blockchain applications, such as
smart contracts, non-fungible tokens, and decentralization autonomous organizations, may smart contracts, non-fungible tokens, and decentralization autonomous organizations, may
automate processes or replace intermediaries in a variety of fields. Public and private sector automate processes or replace intermediaries in a variety of fields. Public and private sector
actors are using, or have proposed using, novel blockchain applications in fields such as supply actors are using, or have proposed using, novel blockchain applications in fields such as supply
chain management, identity management, and asset registration. These applications may prove chain management, identity management, and asset registration. These applications may prove
beneficial, but may also be accompanied by privacy, security, and environmental risks. Congress beneficial, but may also be accompanied by privacy, security, and environmental risks. Congress
may consider balancing support for the further technical development of blockchain technologies may consider balancing support for the further technical development of blockchain technologies
and accompanying standards with oversight, privacy and security risk mitigation measures, and and accompanying standards with oversight, privacy and security risk mitigation measures, and
further consideration of the social, ethical, legal, and environmental impacts of expanded further consideration of the social, ethical, legal, and environmental impacts of expanded
blockchain use. blockchain use.

117 CRS Report R46586, 117 CRS Report R46586, Federal Law Enforcement Use of Facial Recognition Technology, coordinated by Kristin , coordinated by Kristin
Finklea. Finklea.
118 CRS Report R42114, 118 CRS Report R42114, Federal Laws Relating to Cybersecurity: Overview of Major Issues, Current Laws, and
Proposed Legislation, by Eric A. Fischer. , by Eric A. Fischer.
119 For more information on Executive Order 13636 or the White House’s legislative proposal to Congress, see CRS 119 For more information on Executive Order 13636 or the White House’s legislative proposal to Congress, see CRS
Report R42114, Report R42114, Federal Laws Relating to Cybersecurity: Overview of Major Issues, Current Laws, and Proposed
Legislation, by Eric A. Fischer. , by Eric A. Fischer.
120 Ibid. 120 Ibid.
121 Paul Kiernan, “SEC’s Gensler Doesn’t See Cryptocurrencies Lasting Long,” 121 Paul Kiernan, “SEC’s Gensler Doesn’t See Cryptocurrencies Lasting Long,” Wall Street Journal, September 21, , September 21,
2021, https://www.wsj.com/articles/secs-gensler-doesnt-see-cryptocurrencies-lasting-long-11632246355. 2021, https://www.wsj.com/articles/secs-gensler-doesnt-see-cryptocurrencies-lasting-long-11632246355.
122 Loïc Lesavre, Priam Varin, and Peter Mell, 122 Loïc Lesavre, Priam Varin, and Peter Mell, A Taxonomic Approach to Understanding Emerging Blockchain Identity
Management Systems, NIST, p. 39. , NIST, p. 39.
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Appendix A. Selected Legislation and Hearings
This section provides a brief summary of legislative activities in the 115th, 116th, and117th This section provides a brief summary of legislative activities in the 115th, 116th, and117th
Congresses, including descriptions of laws, selected bills, and hearings that focus on blockchain Congresses, including descriptions of laws, selected bills, and hearings that focus on blockchain
technologies. technologies.
Members of Congress have introduced legislation that could affect blockchain platforms. Some Members of Congress have introduced legislation that could affect blockchain platforms. Some
bills aim to provide regulatory clarity, while others bills and legislation focus on specific bills aim to provide regulatory clarity, while others bills and legislation focus on specific
applications of blockchain, such as anti-money laundering enforcement or climate solutions.123 applications of blockchain, such as anti-money laundering enforcement or climate solutions.123
During the 114th Congress, Members established a bipartisan blockchain caucus in the House of During the 114th Congress, Members established a bipartisan blockchain caucus in the House of
Representatives.124 Representatives.124
Table A-1. Selected Blockchain Legislation Introduced in the 115th-117th Congresses
Legislation
Congress
Title
Section on Blockchain
H.R. 3612 H.R. 3612
117th Congress 117th Congress
Blockchain Promotion Act of Blockchain Promotion Act of
Would direct the Secretary of Commerce Would direct the Secretary of Commerce
2021 2021
to establish a working group to to establish a working group to
recommend to Congress a definition of recommend to Congress a definition of
blockchain technology and other purposes. blockchain technology and other purposes.
H.R. 3543 H.R. 3543
117th Congress 117th Congress
Blockchain Technology Blockchain Technology
Would establish a National Blockchain Would establish a National Blockchain
Coordination Act of 2021 Coordination Act of 2021
Technology Coordination Office within the Technology Coordination Office within the
Department of Commerce. Department of Commerce.
H.R. 5045 H.R. 5045
117th Congress 117th Congress
Blockchain Regulatory Blockchain Regulatory
Would exempt certain non-control ing Would exempt certain non-control ing
Certainty Act Certainty Act
blockchain developers and providers of blockchain developers and providers of
blockchain services from licensing and blockchain services from licensing and
registration. registration.
H.R. 3639 H.R. 3639
117th Congress 117th Congress
Blockchain Innovation Act Blockchain Innovation Act
Would require the Department of Would require the Department of
Commerce to consult with the Federal Commerce to consult with the Federal
Trade Commission and other relevant Trade Commission and other relevant
agencies to study potential applications of agencies to study potential applications of
blockchain technology (i.e., the technology blockchain technology (i.e., the technology
that supports digital currencies such as that supports digital currencies such as
Bitcoin), including the use of such Bitcoin), including the use of such
technology to address fraud and other technology to address fraud and other
unfair or deceptive practices. unfair or deceptive practices.
~~H.R. 6607~~
~~116th Congress~~
~~Strategic National Stockpile~~
~~Would require the Department of Health~~
~~Enhancement and~~
~~and Human Services (HHS) to establish,~~
~~Transparency Act~~
~~and award grants to states for the~~
~~implementation of, the National Emergency~~
~~Biodefense Network. The network would~~
~~consist of state entities responsible for~~
~~tracking and maintaining adequate supplies~~
~~of drugs, medical devices, and other items~~
~~necessary for the emergency health~~
~~security of the United States. The network~~
~~would be developed and implemented~~
~~using a private blockchain.~~

123 P.L. 117-58 directs the Department of Energy to submit a Digital Climate Solutions report that assesses using 123 P.L. 117-58 directs the Department of Energy to submit a Digital Climate Solutions report that assesses using
technologies, like blockchain and artificial intelligence, as climate solutions. H.R. 3639 directs the Secretary of technologies, like blockchain and artificial intelligence, as climate solutions. H.R. 3639 directs the Secretary of
Commerce and Federal Trade Commission to study the benefits of blockchain for limiting fraud and unfair or deceptive Commerce and Federal Trade Commission to study the benefits of blockchain for limiting fraud and unfair or deceptive
practices. practices.
124 The Congressional Blockchain Caucus was founded during the 114th Congress, see 124 The Congressional Blockchain Caucus was founded during the 114th Congress, see
https://congressionalblockchaincaucus-schweikert.house.gov/. https://congressionalblockchaincaucus-schweikert.house.gov/.
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Legislation
Congress
Title
Section on Blockchain
H.R H.R. 6607 116th Congress Strategic National Stockpile Would have required the Department of Enhancement and Health and Human Services (HHS) to Transparency Act establish, and award grants to states for the implementation of, the National Emergency Biodefense Network. The network would have consisted of state entities responsible for tracking and maintaining adequate supplies of drugs, medical devices, and other items necessary for the emergency health security of the United States. The network would have been developed and implemented using a private blockchain. H.R. 6938 116th Congress Advancing Blockchain Act Would have required~~. 6938~~
~~116th Congress~~
~~Advancing Blockchain Act~~
~~Would require~~ the Department of the Department of
Commerce to study and report on the Commerce to study and report on the
impact of blockchain technology on U.S. impact of blockchain technology on U.S.
businesses conducting interstate businesses conducting interstate
commerce. commerce. Would have required Commerce to~~Commerce must~~ report to report to
Congress the results of such study and any Congress the results of such study and any
recommendations to promote the recommendations to promote the
adoption of blockchain technology. adoption of blockchain technology.
H.R. 2858 H.R. 2858
116th Congress 116th Congress
FORWARD Act of 2019 FORWARD Act of 2019
Would Would ~~require~~have required the National Institutes of the National Institutes of
Health to develop a publicly-accessible Health to develop a publicly-accessible
server using blockchain technology to server using blockchain technology to
securely facilitate the sharing of fungal securely facilitate the sharing of fungal
disease clinical research data. disease clinical research data.
H.R. 7002 H.R. 7002
115th Congress 115th Congress
Blockchain Records and Blockchain Records and
Would Would ~~specify~~have specified how provisions how provisions ~~related to~~
Transactions Act of 2018 Transactions Act of 2018
related to the preemption of federal laws regarding the preemption of federal laws regarding
electronic signatures apply to electronic electronic signatures apply to electronic
signatures created or stored by blockchain signatures created or stored by blockchain
technology. technology.
Source: CRS, using Congress.gov. CRS, using Congress.gov.
Various committees in both the House of Representatives and the Senate held hearings on Various committees in both the House of Representatives and the Senate held hearings on
blockchain issues during the 115th, 116th, and 117th Congresses, with some focused on specific blockchain issues during the 115th, 116th, and 117th Congresses, with some focused on specific
blockchain applications, such as identity verification, supply chain management, and domestic blockchain applications, such as identity verification, supply chain management, and domestic
agriculture supply chains.125 agriculture supply chains.125

125 U.S. Congress, House Committee on Agriculture, 125 U.S. Congress, House Committee on Agriculture, 21st Century Food Systems: Controlled Environment Agriculture’s
Role in Protecting Domestic Food Supply Chains and Infrastructure, 117th Cong., 1st sess., July 29, 2021. U.S. , 117th Cong., 1st sess., July 29, 2021. U.S.
Congress, House Committee on Financial Services, Task Force on Artificial Intelligence, Congress, House Committee on Financial Services, Task Force on Artificial Intelligence, I Am Who I Say I Am:
Verifying Identity while Preserving Privacy in the Digital Age, 117th Cong., 1st sess., July 16, 2021. U.S. Congress, , 117th Cong., 1st sess., July 16, 2021. U.S. Congress,
House Committee on Science, Space, and Technology, Subcommittee on Oversight and Subcommittee on Research House Committee on Science, Space, and Technology, Subcommittee on Oversight and Subcommittee on Research
and Technology, and Technology, Leveraging Blockchain Technology to Improve Supply Chain Management and Combat Counterfeit
Goods, 115th Cong., 2nd sess., May 8, 2018. , 115th Cong., 2nd sess., May 8, 2018.
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Appendix B. Glossary
Term
Definition
Application-Specific
Technology designed to accomplish a specific computational purpose. For Technology designed to accomplish a specific computational purpose. For
Integrated Circuit (ASIC):
blockchain, ASICs are used to mine cryptocurrency in a Proof of Work blockchain, ASICs are used to mine cryptocurrency in a Proof of Work
consensus mechanism (ex. Bitcoin, Ethereum). consensus mechanism (ex. Bitcoin, Ethereum).
Blockchain:
A distributed digital ledger of cryptographically signed transactions that are A distributed digital ledger of cryptographically signed transactions that are
grouped into blocks. Each block is linked to the previous block after validation. grouped into blocks. Each block is linked to the previous block after validation.
As new blocks are added, older blocks become more difficult to modify. New As new blocks are added, older blocks become more difficult to modify. New
blocks are replicated across copies of the ledger within the network. blocks are replicated across copies of the ledger within the network.
Consensus Mechanism:
A process to achieve agreement within a distributed system on the current A process to achieve agreement within a distributed system on the current
state of the blockchain. Also called a consensus method or consensus state of the blockchain. Also called a consensus method or consensus
algorithm. algorithm.
Decentralized Autonomous
Groups whose rules are encoded and transactions are executed using smart Groups whose rules are encoded and transactions are executed using smart
Organization (DAO):
contracts, eliminating intermediaries. DAOs require member voting to make contracts, eliminating intermediaries. DAOs require member voting to make
organizational changes. organizational changes.
Decentralized Finance
Generally refers to the use of digital assets and blockchain technology to Generally refers to the use of digital assets and blockchain technology to
(DeFi):
replicate and replace conventional delivery of financial services—such as loans, replicate and replace conventional delivery of financial services—such as loans,
asset trading, insurance, and other services—through central financial asset trading, insurance, and other services—through central financial
intermediaries such as brokerages, exchanges, or banks. intermediaries such as brokerages, exchanges, or banks.
Distributed Ledger:
A database shared across many nodes that is constantly shared, replicated, and A database shared across many nodes that is constantly shared, replicated, and
synchronized. synchronized.
Distributed Ledger
Blockchains are part of a larger family of distributed ledger technologies Blockchains are part of a larger family of distributed ledger technologies
Technology:
(DLTs), which refers to technologies based on distributed ledgers where the (DLTs), which refers to technologies based on distributed ledgers where the
storage of data is not based on chains of blocks. In addition to blockchain, storage of data is not based on chains of blocks. In addition to blockchain,
Directed Acyclic Graphs (DAGs) are another example of a DLT. Directed Acyclic Graphs (DAGs) are another example of a DLT.
Fork:
A change to blockchain network’s software. The changes may be backwards A change to blockchain network’s software. The changes may be backwards
compatible (soft fork), or the changes may not be backwards compatible (hard compatible (soft fork), or the changes may not be backwards compatible (hard
fork). fork).
Hash:
Digital equivalent of a fingerprint; unique and useful for detecting change in a Digital equivalent of a fingerprint; unique and useful for detecting change in a
file. A function that takes an input string, which can be of any length, and file. A function that takes an input string, which can be of any length, and
generates an output of fixed length. The output, or hash, is used to generates an output of fixed length. The output, or hash, is used to
authenticate information. The values returned by a hash function are called authenticate information. The values returned by a hash function are called
hash values, hash codes, digests, or simply hashes. hash values, hash codes, digests, or simply hashes.
Hashrate:
The number of calculations (or hash functions) performed on the network per The number of calculations (or hash functions) performed on the network per
second. Devices have different hashrates and therefore different power second. Devices have different hashrates and therefore different power
requirements. The network hashrate refers to the total computing power of requirements. The network hashrate refers to the total computing power of
the blockchain network. the blockchain network.
Miners:
Participants who validate and add a block to the blockchain in exchange for a Participants who validate and add a block to the blockchain in exchange for a
reward such as cryptocurrency or a transaction fee. reward such as cryptocurrency or a transaction fee.
Mining Pool:
A group of miners who pool their computational resources via a shared server A group of miners who pool their computational resources via a shared server
to mine cryptocurrency and validate transactions more efficiently. A pool to mine cryptocurrency and validate transactions more efficiently. A pool
operator distributes rewards between miners in the mining pool. operator distributes rewards between miners in the mining pool.
Non-Fungible Tokens
Unique and non-interchangeable units of data (tokens), which can be used to Unique and non-interchangeable units of data (tokens), which can be used to
(NFTs):
represent the sole ownership of any unique item. NFTs are commonly used to represent the sole ownership of any unique item. NFTs are commonly used to
verify the authenticity of a digital item and record its ownership history. verify the authenticity of a digital item and record its ownership history.
Node:
Individual participant or computer system on the blockchain network. Some Individual participant or computer system on the blockchain network. Some
nodes can only view the blockchain ledger, while others can read and edit the nodes can only view the blockchain ledger, while others can read and edit the
ledger. ledger.
Private Key:
The secret complement to a public key used to conduct encrypted The secret complement to a public key used to conduct encrypted
transactions. transactions.
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Proof of Authority (PoA):
A participant is chosen to validate the next block based on their reputation. A participant is chosen to validate the next block based on their reputation.
PoA uses identity and reputation to prevent bad actors. PoA uses identity and reputation to prevent bad actors.
Proof of Stake (PoS):
A participant is chosen to validate the next block based on the individual’s A participant is chosen to validate the next block based on the individual’s
proportion of staked coins or ownership of the blockchain network. proportion of staked coins or ownership of the blockchain network.
Proof of Work (PoW):
Under PoW, miners—those seeking to add a block to a blockchain—are Under PoW, miners—those seeking to add a block to a blockchain—are
presented a difficult computational problem. Once the problem is solved, presented a difficult computational problem. Once the problem is solved,
other users validate the solution and confirm the block, adding the next block other users validate the solution and confirm the block, adding the next block
to the chain. to the chain.
Public Key:
Publicly viewable complement to the private key. Sometimes tied to a public Publicly viewable complement to the private key. Sometimes tied to a public
address on a ledger. The public address is a short, alphanumeric string derived address on a ledger. The public address is a short, alphanumeric string derived
from a user’s public key using a hash function, with additional data to detect from a user’s public key using a hash function, with additional data to detect
errors. Addresses are used to send and receive digital assets. errors. Addresses are used to send and receive digital assets.
Smart Contract:
Self-executing code that executes a contract with commands on a blockchain. Self-executing code that executes a contract with commands on a blockchain.

Author Information

Kristen E. Busch Kristen E. Busch

Analyst in Science and Technology Policy Analyst in Science and Technology Policy

Disclaimer
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