Commodifying Trust: Trusted Commerce Policy Intersecting Blockchain and Internet of Things

Blockchain or distributed ledger technology is the key innovation inside Bitcoin, the virtual currency, or distributed database commodity. Regulators in different states and nations have viewed and now regulate Bitcoin variously. For example, Bitcoin is property (IRS), a virtual currency (New York State Department of Financial Services and its BitLicense), and an unregulated technology (California, Texas). This regulatory divergence has not prevented the emergence of an $18 billion Bitcoin global market. It has however led some of its early enthusiasts to prison for crossing the line from trusted blockchain anonymity to money laundering. Distributed ledger applications are presently in experimental and early commercial use in applications and for industry sectors now extending far beyond Bitcoin, and far beyond fintech (financial technology.) This paper evaluates blockchain technology and the role of regulators and policymakers in shaping the evolution and commercialization of this disruptive innovation particularly for the Internet of Things. As blockchain is increasingly used to establish a secure trust relationship and permanent record in a wide array of networked markets, will the diverse regulatory treatments of –essentially the same – innovation create new policy barriers to its wide application? Are there information policy measures, which can help industry and users, avoid the inevitable pitfalls of a novel technology? If so, is there a new alignment of distribution of authority among regulators, which these innovations will spark? Presently for example, the Securities and Exchange Commission and IRS. This original research will be among the first to deconstruct blockchain for a wide array of industrial sectors and Internet of Things markets. Most prior work has focused on blockchain applications for financial markets, and specifically the cybercurrency Bitcoin, and in particular its cryptographically driven consensus process to establish and maintain trust. While it is important to understand how blockchain technology utilization can increase technical efficiency and reduce transaction costs with an immutable, auditable record of all transactions, that only explains why this technology innovation has sparked such interest. Most important is the ability of blockchain to combine trust and privacy with transparency in new way. The research methods for evaluation of blockchaining the Internet of Things include socio-technical field tests and multi-method pilot studies currently being planned. Preliminary results and insights from industry and policymaker interviews and will be shared in this paper. Suggestions for further blockchain Internet of Things policy research will conclude the paper.