1、 1 Report POTENTIAL USES OF BLOCKCHAIN BY THE U.S. DEPARTMENT OF DEFENSE March 2020 2 This paper was produced by the Value Technology Foundation, a 501 c (3) Think Tank, with: 3 Table of Contents Foreword by Congressman Darren Soto. 4 Introduction . 5 Briefing Requirements . 6 Blockchains Global Imp
2、act . 7 Topic A: Improving Cybersecurity . 11 Topic B: Reducing Single Points of Failure in Emergency Decision Making . 16 Topic C: Blockchain for Improving the Efficiency of Defense Logistics and Supply Chain Operations . 20 Topic D: Enhance the Transparency of Procurement Auditing . 26 Topic E: Ho
3、w Blockchain Disrupts People, Processes, and Industries, and Ancillary Private Sector Use Cases . 30 Conclusion . 34 Appendix A: What is Blockchain and Distributed Ledger Technology (DLT)? . 35 Appendix B: Contributors . 39 4 Foreword by Congressman Darren Soto DARREN SOTO 9TH DISTRICT, FLORIDA Cong
4、ress of the United States House of Representatives Washington, DC 20515 WASHINGTON OFFICE 1507 LONGWORTH HOB WASHINGTON, DC 20515 (202) 225-9889 KISSIMMEE DISTRICT OFFICE 804 BRYAN STREET KISSIMMEE, FL 34741 (407) 452-1171 April 1, 2020 To the Value Technology Foundation: To continue its standing as
5、 a world leader in technological innovation, the United States needs to engage with policymakers, the private sector, and academia to promote the research and development of blockchain technology. While China and Russia have invested millions of dollars worth of research and development (R (2) Reduc
6、e single points of failure in emergency and catastrophe decision- making by subjecting decisions to consensus validation through distributed ledger technologies; (3) Improve the efficiency of defense logistics and supply chain operations; (4) Enhance the transparency of procurement auditing; and (5)
7、 Allow innovations to be adapted by the private sector for ancillary uses. The briefing shall also include any other information that the Under Secretary of Defense for Research and Engineering determines to be appropriate. Report link: https:/docs.house.gov/billsthisweek/20191209/CRPT-116hrpt333.pd
8、f (p. 2793 of 3,488) 7 Blockchains Global Impact What Is Blockchain? Through the use of decentralized distributed ledgers that are hosted among groups of participants, blockchain enables near real-time concurrent access, validation, and recording by multiple, decentralized participants of any given
9、blockchain in a “write-once, read many” manner. State-of-the art cryptographic techniques generate digital fingerprints and signatures for the data transactions. Data integrity is ensured due to the use of hack-resistant consensus or protocols to ensure all nodes are synchronized, along with digital
10、 signatures that authenticate the content. Ledgers are immutable, meaning that they cannot be changed without proper consensus, or agreement, among network participants. Any attempts to alter any block will alert the participants of the tampering attempt. “Smart contracts” can be created to apply bu
11、siness rules automatically as contractual or business obligations are met. The “distributed” nature of the ledger ensures that all participants, across different geographies and environments, can transact with a shared common view. Different blockchain network types, i.e., public or private, have ru
12、les for participants access privileges. Public blockchain technologies are open and consequently allow all participants complete access, while a private networks permissioning enables participants to only perform certain actions and access critical information as appropriate. Blockchains can be used
13、 to provide high-quality, trusted data on a large scale to track any assets and transactions that can be digitized, ranging from cryptocurrency to tracking or audit data for physical or digital objects (e.g., aircraft parts and ocean freight). For further information regarding these technologies, pl
14、ease see Appendix A: What is Blockchain and Distributed Ledger Technology? Blockchains Value Proposition to the Department Of Defense Blockchain technology has the potential to change countless industries: logistics, supply chain, identity, financial management, deployment, track and trace, banking
15、(i.e., through currency trading and meeting Know Your Customer (KYC)/ Anti-Money Laundering (AML) requirements), additive manufacturing, and many others. The technology has proven itself disruptive to counterterrorism, cyber-intrusion, defense, intelligence, and global monetary policy, in addition t
16、o currency valuation and manipulation. The Department of Defense helped usher in the era of the internet that positioned the U.S. as a global leader in the financial space, increased gross domestic product (GDP), and developed advanced defense capabilities through significant investments. Keeping th
17、e U.S. the de-facto location for capital investment, technological advancement, and defense leadership is predicated on control, security, and innovation continuing to occur within the U.S. As nations around the world look to the power of cryptocurrency and blockchain technologies to reduce the U.S.
18、s capacity to be the worlds trusted broker, the U.S.s position as a global economic leader is at risk. With cyber-intrusion on the rise, the U.S. needs to invest in this technology to increase security and transparency across all industries. Investing in blockchain for defense purposes enables the U
19、.S. to continue its leadership and innovation in cyberspace, which has become one of the most hotly contested battlegrounds on the planet. 8 A global strategy is needed. As blockchain is a distributed system that fosters trust and value, it can be valuable among domestic entities. However, blockchai
20、n becomes even more powerful when it is built out and deployed amongst allies and strategic participants around the world. Permissioned and private blockchain networks can become mediums of data-sharing and coordination among world intelligence agencies or shared coalition defense initiatives. With
21、the right tools, blockchain networks can be monitored for unusual or nefarious activity. As both crypto- and fiat- backed currencies move towards blockchain enablement, money movement by terrorist organizations, money launderers, and drug cartels may be reduced significantly while real-time visibili
22、ty into global assets is established. By exchanging information on cryptographically secured, decentralized ledgers using DLT technology, global efforts by the U.S. and its allies can become tamper-evident, which lessens and exposes the impact of foreign sabotage efforts in cyberspace. Adversary Act
23、ivity In Blockchain Technology: China however, compounding factors such as cheap overseas labor and materials, a reduction in the number of domestic manufacturers, and proliferation of U.S. resellers have resulted in substandard acquisition conditions. The DoD requires increased oversight and greate
24、r collaboration with trusted manufacturers to help secure the supply chains of mission-critical components. Blockchain technology acts as a trust enabler within procurement ecosystems by allowing greater visibility and collaboration between origination and destination. Across the world, companies th
25、at depend on their supply chains are turning to blockchain technologies. Manufacturers, retailers, and the transoceanic shipping companies are implementing blockchain-based “track and trace” systems which provide visibility and trust of food and product components from their origins to the end consu
26、mer. These systems provide use cases for potential DoD supply chain usage of blockchain. Defense Supply Chain Challenges Until 2019, the GAO High-Risk List Report has included the management of the defense supply chain as a high-risk program since 1990. The GAO studies identified vulnerabilities to
27、fraud, waste, and abuse, and recommended better acquisition practices and inventory management in past reports. In 2019, the GAO removed the DoD supply chain risk management from the high- risk list because it had made progress in asset visibility and material distribution by addressing several acti
28、ons identified in the 2017 report. The initiatives undertaken by the DoD include creating a single portal system providing 7,500 users access to supply and transportation data, and the use of RFID technology to identify, track, and store information. The commitment of senior DoD leadership to make p
29、rogress in modernizing the defense supply chain and improving the management of its assets is commendable. However, it is imperative that senior leaders continue their efforts to implement technologies and initiatives to improve the visibility of supplies, delivery standards, acquisition-methods, as
30、set management, anti-counterfeit efforts, and data-driven decision making. Lack of collaboration and trust are at the core of the defense supply chain management challenges for the U.S. Army and other branches of the DoD as well. Naturally, challenges arise when dealing with a global network of supp
31、liers and sub-suppliers, many of whom are small and financially unable to invest in digital technology to support their businesses. Many of the challenges created by this complex ecosystem include: No single source of truth Record-keeping and reporting managed by many entities lead to incomplete and
32、 unreliable data across disparate systems. This causes significant difficulty in tracking and routing, inventory management, and asset readiness. Lack of trust and collaboration The defense supply chain procures a wide-spectrum of goods and products to support the warfighter, ranging from food to hi
33、gh-end weapons system components. Procuring these goods from a few trusted sources is nearly 20 https:/www.gao.gov/assets/590/588736.pdf 22 impossible at the scale required by the defense supply chain; thus, the DoD must procure from thousands of sub-suppliers. At such a large scale, trust and colla
34、boration are nearly impossible in comparison to the closed supply chain common in private industries. Real-time management and decision making All supply chains are challenged by unforeseen circumstances such as natural disasters, weather delays, labor disputes, or resource shortages. Inherent in mi
35、litary supply chains are the added threats of intentional sabotage, political instability, and, of course, combat disruptions. Agility is required in these circumstances to avoid crises, especially in the effort of supporting the safety and readiness of the warfighter. The lack of collaboration and
36、data transparency issues are exacerbated in critical scenarios where real-time information of goods within the supply chain and inventory are unavailable. This hinders efforts to ensure that the warfighter is prepared for any and all threats, and results in high costs associated with procuring addit
37、ional goods rather than redirecting existing supplies. Characteristics of a Blockchain Supply Chain Defense leadership has made significant progress in improving supply chain management through strategic initiatives and the introduction of new technologies to its ecosystem. The result of modernizing
38、 the defense supply chain is already being realized with billions of dollars in savings according to the GAOs 2019 report.21 However, blockchain technology can bring the defense supply chain into the future by bridging the gap between the physical and digital world and developing a logistics ecosyst
39、em that is fueled by collaboration and trust. Among the challenges that blockchain can address for defense organizations are: Traceability On-demand verification of the source, provenance, and identity of the software, hardware, and supporting documentation for components and systems. Assurance Grea
40、ter adherence to product quality and specifications as well as compliance with industry and regulatory standards. Transparency The ability to share, with specific permissions, permanent and verified records of transactions and transfers across an ecosystem of suppliers, partners, and customers. Fast
41、 Settlement The ability to implement smart contracts for ownership transfers and automated distribution of funds based on agreed business rules. Simplicity Streamlined reconciliation, elimination of exceptions, improvement of audibility, reduction of paperwork, and increased collaboration with ecosy
42、stem partners. Secure Trading Securing the buying and selling of components and products across the supply chain through improved understanding of supply chain partners credentials and practices. The characteristics of a blockchain-powered supply chain unlocks the value trapped in traditional supply
43、 chain ecosystems. The introduction of connected devices and software allows participants to gather more data efficiently, with improved data integrity and reduced data reconciliation costs. The availability of high integrity data allows participants to increase their business 21 https:/www.gao.gov/
44、assets/700/697245.pdf 23 intelligence through advanced analytics and data science solutions which were previously not possible due to non-standard data practices. The integration of blockchain technology introduces new opportunities for the DoD such as procurement efficiency, improved logistics, and
45、 inventory management, and improved supply chain security. Supply Chain Use Cases Supply chain use cases of DLT include: Provenance of Goods: For origin of goods, assured identity tied to a physical object, recall management, and certified products. The provenance of a good refers to its origin as well as a chronological record of its ownership, location, and other important information as it moves along a supply and distribution network. Blockchain combined with Internet of Things technology (GPS, RFID sensors, etc.)