How to monitor a US$2 trillion rescue package

THE US government is on the verge of issuing the largest rescue package in the country's history. It is equivalent to US$5,500 per American, and about half the country's annual budget. But how can Americans be sure that the money being disbursed in their name is fairly and transparently distributed?

Of course, there are checks and balances in the system. Congress' Government Accountability Office routinely investigates disbursements (it is currently looking at President Donald Trump's US$26.5 billion aid package to farmers, and it issued several reports on the 2008/9 financial bailout which saw the Treasury Department disburse US$440 billion.)

But there is a better way: to build transparency into the process from the get-go. This way uses blockchain - and before you sigh and turn the page, let us explain for a moment why it would work, could work, and should work before a penny is spent.

Blockchain was designed to allow all transactions to be visible. You want that when it comes to government spending - the more transparency the better. (This level of transparency is, in theory, available to the supervising agencies, but virtually never to the public at large.)

The blockchain was also designed to also be tamper-resistant. You want that when politicians, agencies, companies - anyone involved in the distribution of government funds - cannot always be trusted to not tweak expenditures and money flows. Blockchain was designed to be a database run independently of any single party.

You want that when you are not convinced that the government, or senators or Congress-people, do not have some skin in the game and want to control as much of the process as possible. Some senators, for example, have been accused of quietly selling off stock after private briefings about the coronavirus, before informing the public.

So how might this work? And is it workable?

Money disbursed by the government changes hands through many agencies and eventually contractors before it is spent on concrete goods and services. During these intermediate stages, it may not be necessary to transmit the actual cash but some sort of IOU, which could be redeemed with the agency in charge of disbursing the funds. This is the layer where blockchain comes to play.

This is how it would work. First off, you need an independent database of all the transactions - that is the blockchain. Anyone interested in getting involved could apply to the government to help by running it on their computers - as so-called nodes - that process all the transactions. All this would be independent of government, although they, or another government department, or the House, could approve the applicants to be nodes.

This is called Proof of Authority, and would save us from some of the problems that some blockchains face, which rely on computer processing power to determine who gets to the handle the transactions. All this would ensure that concerned parties - non-government groups, watchdogs, government critics - could get involved and add their credible oversight to the process.

So you now have a database which can register and record any transactions. Then you can issue a cryptocurrency on the blockchain especially for this aid: coins, digital tokens, that represent each dollar of the overall fund. So one coin - let us call them TAO, standing for Tax Accountability Office - represents US$1. This does not replace the actual money, but works as a representative of it.

Think of it like a money order or gift token. Instead of disbursing the actual funds down the government tree, the issuing body sends these tokens (instead of the actual money) to other agencies, and then eventually to businesses that provide the service.

ANYONE CAN SEE

Up until then, every transaction of every dollar in the fund is stored on the TAO blockchain, meaning anyone can see where it has gone. Only when the money is spent on something tangible is the token converted into currency, as the redeeming company submits its request to the agency overseeing the disbursement. At this point, their history in the blockchain ends with them being "burned" or discarded.

This information is all public, stored on a blockchain that anyone can see. Third-party apps could allow anyone to select a specific disbursement of funds, and drill down into how much of that money was sent to each subordinate entity, and where the money went from there, all the way to the bottom where it was exchanged with the government for cash, along with any legal documentation which accompanied the final withdrawal - right down to the last cent.

Such ease of presentation, and security that the information presented is accurate and cannot be modified, could enable a new era of accountability for how precious citizens tax dollars are spent.

Yes, this does involve some extra work, but not much. Setting up a blockchain is not as complicated as it sounds. You will need an app for people to move the tokens, and another for the government to issue tokens, and review and approve exchange of tokens into cash. But it is not a competing currency, just a mechanism to add a layer of transparency to the money earmarked for disbursement. It is a record of what really happened.

The result would be one of the most transparent disbursements in history. It could save millions, possibly billions of dollars in wasted expenditure, investigations, enquiries and legal action. It could restore confidence in government and serve as a model for future government expenditure. It would help to illustrate a practical and proportionate use of blockchain technology, where everyone can and should have an interest in the outcome.

Blockchain will not solve the Covid-19 crisis. But it might help us to calibrate our governments' responses to it, and ensure that we make the best use of the funds they earmark for easing its impact. Who knows? The idea just might catch on.