Welcome to Blockchain: Jessica Kong, MPP'16, and Cristina Martínez Cuellar, MPP/MBA'16, Explain the Emerging Digital Ledger

Blockchain, the digital ledger system that purports to be nearly invulnerable to tampering, has become a buzzword in tech, especially when discussing cryptocurrencies such as Bitcoin or Ether (the native cryptocurrency of the Ethereum blockchain).

Often referred to as Distributed Ledger Technology, or DLT, blockchain has been part of the focus of an executive order from President Joe Biden to ensure its responsible development of digital assets. Members of Congress have formed a blockchain caucus. Lobbyists have flooded the nation’s capital to shape regulation and venture capitalists are investing in blockchain-based startups.

Meanwhile, financial markets are currently experiencing a “crypto” sell-off as many investors see cryptocurrencies as risk-on assets partly due to their historic price volatility.

All of this contributes to the head-scratching puzzlement that blockchain can elicit.

Jessica Kong, MPP ‘16, and Cristina Martínez Cuellar, MPP/MBA ‘16, are here to clear the confusion and help everyone join the conversation.

They’re well suited to the task. Kong, associate director at the Development Innovation Lab at UChicago, managed a digital financial inclusion research portfolio in East Africa, worked as a policy associate and system test lead for the Federal Reserve and briefly served the Obama Administration in the Council of Economic Advisers and Office of Presidential Correspondence.

A Citibank vice president who manages unsecured lending products, Martínez Cuellar has also worked at the World Bank in financial inclusion and consumer protection in international development.

Both are board members of the Crypto Policy Lab, a nonprofit focused on educating the public on web3—the internet’s third stage—and encouraging more informed civic engagement on this latest version of the network.

In this Q & A, the two Harris alums simplify the blockchain learning curve by breaking it down into comprehensible, basic elements. Consider them blockchain welcome ambassadors.

For the uninitiated and the barely initiated, how would you define blockchain?

Maybe the easiest way to think of blockchain is as a technology that serves as a general ledger, except this ledger has features that allow for more trust in record-keeping. It comes down to blockchain’s refined database technology that can archive records and distribute the information across a shared network of computers to verify the legitimacy of the records.

It is, in one sense, a problem-solving system that works by tracking movement.

How does it work?

Records are timestamped, filed away, and continuously referenced through a network. By capturing the entire trail that led to a current state, blockchain is creating proof for what is true.

The key distinction for this archive/network database is that, instead of having one master file or central location, this archive can be distributed among many “nodes” or individual computers. Each computer maintains its own version of the database while talking to other computers in the network to make updates. Changes can be made anywhere in the system and information is shared across the network to keep every database in that system synchronized.

In this context, a “block” is a unit of measurement and receptacle that stores transactions or data values and connects to the previous unit. As new data values are created and timestamped, more blocks are generated, forming a “chain.” The most recent, timestamped block is at the end of the chain.

It might be helpful to think of each block as a basket that holds a bundle of records. Those records can be bitcoins, certified diamonds, land rights, or any other item that blockchains track. Each block contains the data. It also contains a hash—similar to a unique, digital “fingerprint,” that identifies the block and its contents—and the hash of the previous block. The blockchain grows as changes are made. Those changes are logged in timestamped order, bundled, and placed in a new block.

For a visual explainer, check out this one by Simply Explained.

How and when were blockchains created?

Blockchain pulls from technology that existed well before its own time (e.g., cryptography). The version as we know it today originated in 2009 with the release of Bitcoin, the online currency system that was created and published on the internet by the mysterious “Satoshi Nakamoto.” The identity of Satoshi Nakamoto remains unconfirmed. Regardless, many IT developers around the world have joined forces to construct and strengthen Nakamoto’s Bitcoin ecosystem.

It's important to note that Bitcoin is a blockchain, but not all blockchains are Bitcoin. We mainly discuss Bitcoin as it’s part of the technology’s origin story. It is the open-source nature of Bitcoin that has allowed for a new wave of innovation and has led to the creation of many other sophisticated blockchain networks.

Any cryptocurrency, in its most basic form, is a string of numbers sent from one location to another. The exchange of these numbers is constantly recorded and tracked on a log to determine who owns what and when. That log is the blockchain.

So, blockchain is the foundation that allows a cryptocurrency like Bitcoin to function, but the potential of blockchain extends well beyond that.

Can you provide examples of what you mean?

Sure. Blockchain technology features have proven to be helpful solutions for various problems, such as double-spending, disorganized repositories, and inefficient remittance systems. It’s been applied across several industries, including financial services, governance, regulation, and healthcare.

Let’s take financial services. A company named R3 has created a private blockchain called Corda to build a foundation for R3’s financial services—from retail payments to global trade operations. Corda can reconcile large volumes of data, allowing the movement of funds across country borders while exchanging information across multiple parties to prevent fraud.

In the decentralized finance world, permissionless—or open, public—blockchains facilitate peer-to-peer financial transactions and eliminate the need for some financial intermediaries. It can be particularly useful in lending cryptocurrency.

Another example is healthcare. The MediLedger Network uses blockchain to ensure compliance with the U.S. Drug Supply Chain Security Act by helping to track prescription medicines while preventing the sale of counterfeit medicines. The U.S. Food and Drug Administration ran a MediLedger pilot in 2017-2020 and found that it can achieve industry-wide interoperability—the capacity for computer systems to exchange and use information—provided strong stakeholder buy-in and appropriate standards exist. Blockchain also has shown potential for managing medical records between hospitals and providers. The Ever Network blockchain aims to do just that.

What are the most significant challenges or problems associated with blockchain?

Lack of awareness of the technology and how it works are probably the biggest challenges right now, which is why we’re working at CPL. We are not an advocacy group. We work to provide an unbiased understanding of this complex space for all to follow along. 

Where do you see blockchains heading in the future?

Blockchain applications are still relatively new and, certainly, many unknowns exist, but we’re really excited by all the possible applications, from landownership to paying taxes to voting and political fundraising. Remember blockchain is record keeping technology and it makes record keeping transparent. That means it has direct relevance to anything that has to do with keeping a ledger or record.

We’d personally like to see more dedicated focus on tech policy, specifically for the crypto space, and there are signs of this area becoming more of a priority for policymakers. How we handle the policy discussions going forward will be interesting to watch. As with any technology, we should be considering potential harm along the way and identifying policies that keep these impacts in mind, all while fostering innovation. That can be a very tricky balance. We’ll likely be in a better position the more we can educate others on this subject, as well as transition to a more intuitive user experience to assist with that understanding.

Where would you send people who want to learn more about blockchain?

A great place to start is our Crypto Policy Lab website – cryptopolicylab.org. We are hoping to gather a cohort of volunteers interested in dissecting this policy space, and we love hearing from others that have similar crypto policy interests. The intro page tackles basics on blockchain, crypto, and web3 and why you should care about them. From there, we are working on rolling out pieces with a much deeper dive and providing useful resources.

We also recommend UChicago members to plug into the UChicago blockchain community. One way to do this is by joining the ChicagoDAO’s Discord group. From there, you will find campus blockchain opportunities and hopefully learn alongside other university colleagues.