Building Blocks for Cybersecurity

Colorado legislature considers bill to research distributed ledger technology

The Colorado legislature is considering a bill intended to spur research on the distributed ledger technology for state government records. / LAW WEEK FILE

With a new bill, Colorado legislators hope to demonstrate the usefulness of blockchain technology for cybersecurity.

Senate Bill 86 would require certain state government officials to protect the security of sensitive state records. In addition to assessing vulnerabilities and risks, the officials also have to weigh the costs and benefits of adopting encryption and distributed ledger technology, such as blockchain.

Democratic Sen. Angela Williams, one of the bill’s sponsors, said she has gotten questions from her constituents about how to protect personal information and voting data. 

“I believe that this bill will help us protect the information,” she said. “It will bring transparency and security, and I think better trust between the state of Colorado and its citizens.” 

The bill has a hearing in the Business, Labor and Technology Committee scheduled for Wednesday, and Williams said the bill might yet be amended to include a more specific definition of “distributed ledger.” Blockchain technology is considered to be highly secure because of its  ability to create a decentralized ledger through a peer-to-peer network rather than using a single storage location for information. The blockchain structure eliminates the need for a middleman, such as a bank to verify financial transactions, and its decentralization means organizations could store sensitive consumer or client information without having one lucrative target for hackers.

“The Internet 1.0 as it exists today has not done a good job of being able to share digital assets,” said Snell & Wilmer partner Eric Kintner, whose practice deals in blockchain and cybersecurity. He explained that the need for a middleman creates efficiency bottlenecks, and that centralized databases of information are also “honeypots” for hackers. He added that because each person connected to a blockchain must have a digital “key” to access it, any unauthorized access could quickly be discovered. 

“Blockchain technology’s security potential could extend to a wide range of organizations that have large amounts of sensitive information, including law firms. If a client transfers proprietary information to us, they know that we are receiving it, and that no one else is accessing it,” Kintner said.

Kintner said he believes government systems based on blockchain technology, including the proposals in Senate bill 86, could have valuable implications for government services. It could allow for activities such as secure electronic voting and more efficient operations in services like Medicare and Medicaid by putting payers, providers and patients on a single blockchain system.

“I’m a big proponent of government adopting and looking at and supporting blockchain technology,” Kintner said, “Not only to protect state records but to provide better government services for its citizens and to invest into a very large growing community of blockchain companies in Colorado.”

Only a handful of other states, including New York and Nevada, have considered bills related to the use of blockchain.

Williams said she hopes Colorado’s adoption of the technology would inform other legislatures, should Senate Bill 86 pass.

Kintner compared the current usage of blockchain technology to the earliest days of AOL’s chat rooms. Companies still tend to be wary of adopting it in part because of uncertain returns on investment and security. While blockchain technology can provide more security than centralized databases, it isn’t necessarily impenetrable to hacks.

“When companies tend to want to roll out this stuff, they generally don’t want to be the first one to adopt it,” he said. “You want to see it get some traction in the market before you’re willing to go all-in on it.”

Williams said she believes it will likely be addressed whether the use of blockchain technology has the capability for faster notification in case a breach does happen.

“As a government, we have steps in place in the event that our records are compromised,” she said. “We just want to make it harder for our records to be compromised.”

Other current challenges to widespread use of blockchain technology are user-friendliness of interfaces and scalability, Kintner said, because current blockchain infrastructures can take weeks to process transactions if there are backlogs.

Although Senate Bill 86 doesn’t place requirements on private businesses for using distributed ledger technology, Williams said she hopes they would still look to Colorado’s government as an example of the possibilities for the technology.

“This is a giant step forward in protecting sensitive information and creating a model that I would hope would be looked at not just in government, but in the private sector.”

—Julia Cardi

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