Idaho's Blockchain Won't Be Small Potatoes

[music]

00:04 Phil Haunschild: We were looking at maybe how can we replace or improve government functions with Blockchain technology. We found that’s kind of a niche that there’s not many people looking at right now, but there’s a whole lot of potential and we’re trying to really dive deep into that and become a leading figure in the Blockchain movement through that.

[music]

00:32 Paul Matzko: Welcome to Building Tomorrow, a show that explores the ways tech innovation and entrepreneurship are creating a freer, wealthier, and more peaceful world. As always, I’m your host, Paul Matzko and with me in the studio…

00:43 Aaron Ross Powell: Aaron Powell, Director and Editor of lib​er​tar​i​an​ism​.org.

00:45 Paul Matzko: And joining us today is special guest, Phil Haunschild. Phil, can you tell our listeners a little bit about yourself, what you do, where you work?

00:54 Phil Haunschild: Absolutely. I work at the Idaho Freedom Foundation, I am a policy analyst here, and we look at state issues here in Idaho. I’m looking at ways that we can make a more prosperous Idaho, ways that we can make it a better place to work, live, or raise a family. We’re particularly interested in reducing dependency on governments and holding special interest accountable here in the state.

01:14 Paul Matzko: Cool, and so the Freedom Foundation, who founded the IFF?

01:21 Phil Haunschild: We are just entering into our 10th year, so we found about 10 years ago. Our founder Wayne Hoffman who’s still our CEO and President found that there was a lack of free market leadership here in the state and so we had been working since then. We were able to have a lot of impact here in the state and able to produce some great free market ideas and see that making Idaho a better place.

01:41 Aaron Ross Powell: So we’re having you on today to talk about Blockchain tech, which is not something typically associated with state level think tanks and not somewhat surprising coming out of an Idaho state level think tanks. How did you get involved in Blockchain tech?

01:57 Phil Haunschild: About six months ago here at the office, we were all pretty interested in cryptocurrency. It’s about the time everything was booming. We were all buzzing here around the office saying, “Oh, what did you invest in today? Or, what are you looking at?” So we’re looking at what cryptocurrency was doing, what it was capable of and at about the same time, we were really looking at this 10th year, how are we gonna start making a huge impact, not only here in Idaho, but try and export stuff to other states? How can we have these new ideas that can make a change for the better? So we combined our interests and we were thinking, “Okay, well, what about Blockchain in government?” We’re seeing a lot of states implementing regulatory policy, looking at how they’re gonna regulate cryptocurrencies or manage smart contracts. We were looking at maybe how can we replace or improve government functions with Blockchain technology? And we found that’s kind of a niche that there’s not many people looking at right now, but there’s a whole lot of potential and we’re trying to really dive deep into that and become a leading figure in the Blockchain movement through that.

03:00 Aaron Ross Powell: So Blockchain right now is used chiefly for currency and most governments. I’m pretty sure the State of Idaho is probably not that interested in setting up a competing currency to the US dollar. So what is the value of Blockchain specifically for state governments? And I guess, how is Blockchain or the things you might use it for, how is it a better tool than say just a state-​run database?

03:27 Phil Haunschild: I’m seeing that’s one of the biggest challenges that people have with understanding and seeing the ways to implement Blockchain is, how does it differ from a normal database? And in a lot of cases I think, we’ve fallen prey to this and I think other people have, too, is a lot of the things that we think it could do really could be done equally well by a normal database, it just hasn’t. I think the key feature that Blockchain allows for is for that distributed network, so no single agency would be the one running something when you have a Blockchain network. One concern that we have is information sharing across agency. If you put information out there, you wanna maintain some security over that as an individual. And Blockchain allows you to keep control of your information and you can limit who has access to that while still allowing multiple parties to access it. So I think that’s the key feature that is new and it’s innovative and allows for a specific use for government.

04:26 Paul Matzko: Well, see, it’s interesting to me because when I think of one of the advantages of a distributed ledger is that it actually can provide for transparency while the actual blocks… The contributors to the Blockchain are pseudonymous, not truly anonymous, but pseudonymous. The actual information in there is transparent. Anyone can see it in the Blockchain, so I tend to think of that the use for the state being a way of providing transparency to citizens or I suppose to anyone on the Blockchain. So it’s interesting to hear but as a device used to allow state agencies to control the flow of information rather than seeing it as a way of promoting transparency of the state itself.

05:16 Phil Haunschild: I think so. I think actually what I was talking about limiting what you’re sharing. I was actually talking about that as an individual. So, if I, Phil Haunschild, I’m gonna provide this information to the Department of Labor, for example, it doesn’t have to be that they get all of it and then they can share it all with the Department of Health and Welfare. I maintain control over my individual information and I can limit who I give access to. As far as the public transparency aspects, that is another huge key piece to it as well. I’ve been talking with folks just about open data policies. If you want you can require that all financial information, all budgets are posted on a Blockchain and then there’s no changing it or you can’t change it, but everybody will know when and how that was changed.

06:00 Paul Matzko: That you did. Yeah.

06:01 Phil Haunschild: So that’s key feature of it as well.

06:05 Aaron Ross Powell: How does for a state-​run Blockchain like this or a Blockchain that’s meant to be used by state agencies, how does the mining economy work? Because for traditional Blockchain, you incentivize people to secure the Blockchain to verify transactions, maintain records by then paying out a portion of transaction fees, or giving them some newly created tokens on a regular basis so then you can get more and more people adding to the network and the whole network becomes more robust the more people are using it. What’s the incentive here? Or is this, would only state agencies or state computers act as miners in these situations? Or are there incentives for me to contribute computing cycles on my Mac at home to verifying transactions on a system like this?

06:58 Phil Haunschild: That has been one of the biggest sticking points for us here at the office is we’re pondering and going through these projects, trying to get all our bases covered and meet all the key aspects, figuring out how you’re gonna monetize the system is pretty challenging. How do we incentivize people to be the minor to secure the system and make sure that the network is robust like you said. One, it will lead for is having public agencies do it. For example, with the public notices that we’ve been talking about every different entity, or that every different agency could be a separate node on the network that’s securing it. And we would also love to see private actors. So we’ve thought about creating a token to manage this. Part of it depends too, on each use case. I [07:44] ____ know if necessarily you could have one Blockchain that covers all government use cases for it. So yeah, that’s been something that we’re looking through and trying to figure out what’s the best way to do that, to make sure that people have incentive to be securing the network, and they have those incentives to make sure that it works.

08:00 Paul Matzko: Why don’t we step back a second? I think all three of us have been looking at the stuff that’s on the outline and know that we’re talking about public notice requirements, but for our listeners, when I say public notice requirement or a publishing mandate for state documentation and notifications, what is that and how is it currently work?

08:25 Phil Haunschild: Public legal notices, they go by in some state’s public notices, some state’s legal notices. And what they are, they’re required in all 50 states. And generally, the most common thing that people come across is name changes. So if I wanna change my name, I’m gonna go to the court, I’m gonna get that court approval, and then they’re gonna say that I have to go to the newspaper in my county or in my state and post it for four weeks and say, “Well, my name is now what I’m changing it to,” sometimes why I’m doing so. So you have the same kind of things for public agencies too. Here in Idaho, for example, when a county or a city, or some other agency, when they wanna have an auction and they wanna sell public items then they have to post it in a newspaper for a handful of weeks. When they set their budget for the year, they have to post that in a newspaper. So it’s the statutory requirements for a set amount of postings in a newspaper is what they are.

09:21 Aaron Ross Powell: Are they buying these ads in the papers?

09:24 Phil Haunschild: Exactly. It’s price fixed. Here in Idaho, it’s about 6 1/2 cents per line of type that goes in the newspaper. Some of them, if it’s a real short notice, it’s only 10, 20 bucks or so. But if you’re putting in a treasurer’s notice or putting in your budget for the year, at times it’s $300, $400. So it’s pretty substantial and especially for smaller agencies, smaller counties, it takes up an enormous sum of money across the state. In total, it takes up anywhere from 3 million to 5 million based on our estimates. It’s difficult ’cause you’ve gotta talk to every single agency and find out, “Okay, how much did you spend on it this year?”

10:03 Aaron Ross Powell: This just makes me wonder if we embraced another system for this, a more efficient system whether it’s Blockchain or something else, would we run into the small town newspapers lobbies fighting to keep this from changing?

10:17 Phil Haunschild: That is exactly actually what happened earlier this year. We were working on this public legal notice issue. At the beginning of the year, come legislative session, we were just looking at giving them the opportunity to post it online. There wasn’t really much more specificity than that, rather than posting it in the newspaper. And it was killed and I think you could say it was in large part due to the newspaper lobby. You have a lot of public officials who really care about how much their local newspaper likes them because people read it sometimes.

10:47 Paul Matzko: The 70-​year-​old voters who comprise the single largest block of voters who turn out for local elections, they’re reading their local paper and you better not anger them. Yeah. What’s interesting to me, I suppose it’s a matter of, the question is why is this policy in place like a public notice policy? It’s not primarily meant to be a subsidy for a legacy media system, it’s meant to promote transparency. The idea being that these laws were passed in a time when the overwhelming majority of literate Americans were subscribers to newspapers, and this was a way of letting them know what the government was doing on their behalf. So if the goal is transparency, I think there’s your argument for changing the system, making it transparent once again because right now I think you said in the article you sent, it’s something like only 10% of Idahoans are subscribed to a newspaper.

11:46 Phil Haunschild: Yeah. Actually, it was a nationwide statistic I was looking at. I think fewer than one out of 10 Americans have a newspaper printed. And so there’s like 30 million newspapers printed daily in the US, which, I mean, almost close to 400 million people here in the US, it’s a pretty small number of people. And then if you limit that to the people who actually read the legal notices section of their newspaper, it’s infinitesimally small.

12:11 Paul Matzko: And if I were a journalist trying to hold to account my local council or sheriff or whoever, or someone in some other small town, I’d have to go try to track down the back copies of that newspaper if they still existed, try to find a microfilm, try to scroll… It would be a real hard process to access that information if it wasn’t right in front of your face. Whereas, if something’s on a Blockchain, you can in theory go through and search that much more easily. And anyone who’s on the Blockchain could do that, right?

12:45 Aaron Ross Powell: Well, let me just… It seems one obvious concern then is if part of the argument against putting the stuff in the newspaper is that only one in 10 or fewer than that of Americans get a newspaper, I’m certain that far fewer than one in 10 Americans know how to browse a Blockchain explorer. So it seems like you’d be hiding, you’d potentially be hiding the data even more.

13:16 Phil Haunschild: Yes, that’s true. And most people don’t know how to look through a Blockchain. If you just put a bunch of data in front of me, I wouldn’t know how, but you have APIs, so application programming interfaces, which allow… It’s the same way we can look at Google Maps or something like that. We can post it on any website and then you can go through it and then it’s just like a typical database. So I could search here, I could search Boise in the system and look at every legal notice that Boise submitted or I could type in Ada County, or if I wanted to search it by auctions or bids, then I could limit my search of that. So that at that point, it would be just like searching with a Google search or something like that. You could also have it ripped so that it’s automatically posted onto Twitter or Facebook or other social media sites. So there’d be a whole lot more ways to access it than there currently are, which is that one newspaper in your county. Some do post it online, some newspapers do, but it’s certainly not all of them that do. So there, it’s kind of scatter shot as well, trying to find that central place to find them.

14:18 Paul Matzko: So I can imagine a system where Idaho bucks the all-​powerful local newspaper lobby and pass a legislation like this creating a system that costs less than $3-$5 million, so there’s cost savings. They require as part of the legislation, all the agencies who currently fulfill their public notice to do so on the Blockchain. They use that money to incentivize, say, you can have a program where it incentivizes non-​agency node creation. I can imagine this whole system being enacted, they could require API to make it easy for the general public to access the information on the Blockchain. So, I suppose the next step is, why Idaho? This is a project of the Idaho Freedom Foundation for the interest of Idaho. Why Idaho rather than say, New York or Texas? Why is your state a good place to try this out?

15:17 Phil Haunschild: I think there’s a handful of reasons for that. One, we’re a small state, which some people look as a liability but we really think that’s a benefit. It means we’re nimble, it means we’re flexible, and we’re constantly trying to find new things to do and ways to improve as a state. I probably could guess that the newspaper lobby in Idaho isn’t quite as powerful as the newspaper lobby in New York or something like that where they have far larger newspapers. We have a growing tech population here in Idaho. Here in Boise, it’s an interesting dynamic where some of our biggest employers are tech companies. Idaho is not seen as a tech hub, but it is definitely a growing aspect here, and part of that means that people are looking for new ideas. We have a pretty conservative populace who’s interested in ways that we can reform government and especially ways that we can eliminate subsidies to private industry. So I think that’s a really big benefit that Idaho has is the fact that we’re small and we’re interested in government reform.

16:18 Aaron Ross Powell: Going back to the question I asked earlier about why Blockchain? So, for what we’ve just described with posting of public notices, what specifically would be the benefit of writing this on to either a new Blockchain that we’ve set up, or via smart contracts on the Ethereum Blockchain versus say, the state setting up a Wiki or hosting the Wiki on Google or Amazon Cloud server? Because you’re still gonna have to… One issue is blockchains are… Anyone can write transactions to them, anyone who has a node set up can write a transaction to them, and then the other people have to verify it, but you precisely don’t want that with public notice. You don’t want me to be able to make up random name changes or whatever else and post them to this thing, so you need to verify, make sure it’s legit, make sure that anyone who’s reading through the transaction knows that everything they’re seeing is legit. So I guess in this specific instance, what’s the benefit of doing it with a distributor ledger versus a Wiki?

17:38 Phil Haunschild: I’ll go through why Blockchain. Why we think that’s the best solution, and then I’ll jump into how we think we’ve solved the, as you could say, the nonsense posting problem. There’s three key features of blockchains: They’re permanent, they’re distributed, and they’re immutable, so they can’t be changed. And those tie up perfectly with the three necessary features in public notices that they’re permanently stored so that if you wanna go back, you can see what your government was doing for 100 years back, if that’s what you’re looking at. They’re widespread and they’re easily accessible by a large amount of the population, which, as we were talking before, newspapers aren’t anymore. And then you have to have that third party notice, so you can’t just have your local city posting it on their website, ’cause they might change it or you don’t really have any proof that they did post it. That’s something that newspapers provide currently, where they’ll provide the entity giving it to ‘em a slip essentially that they can then take to the court if the court asks later and say, “Hey, look, we did post this. Here’s when we did it, here’s what it said, and here’s the dates that it was published.”

18:44 Phil Haunschild: So Blockchain allows you to do all three of those things effectively and we think more permanently and more distributed, let’s say. We’re providing more widespread access to a greater portion of the population than newspapers do currently. So that’s why we lean on Blockchain as being the solution there. As far as preventing the nonsense notices, I always say if I had this place where it would create a permanent notice, I might post that my birthday is coming up in August, and I’m interested in receiving items from Amazon, Bed Bath & Beyond, and Target. So you have to be able to prevent somebody from doing that because there are certainly would be people and it would take away from the need for and the use of legal notices when you don’t have any that matter.

19:30 Phil Haunschild: So what we do is we’d have a public-​private hybrid where anybody can access that information, so that’s the public face of it. The private face would be that you have to have your posting key if you want access to it. As a posting node you have to get given access, and that’s where we’re looking at ways that you verify who’s giving the access. One that we’ve looked at is a consensus approach. So you look at all the public entities that are on there currently, they would then verify whether or not somebody requesting access to post is a public entity. The second option is you have one central figure. Here in Idaho, we looked at maybe it’s the State Controller’s Office. They’re essentially our state auditor. Maybe they give a posting key to the public agencies that want to post. So that’s how we would limit who can post on it, ensure that it keeps the legal notice aspect to it.

20:26 Aaron Ross Powell: Have you talked with any politicians about this? One fear you have is, politicians tend to not understand tech super well. The Internet is a series of tubes, and Blockchain is tech that even people who understand tech sometimes have trouble understanding. Have you brought this in front of anyone? Has there been a reaction to it?

20:57 Phil Haunschild: Going back to why Idaho, I think this is actually one of the things that is really beneficial ’cause we’ve had a lot of people express interest in this. It makes sense for most every government agency because it’s a way for them to save money. Just state agencies alone spent about $1.25 million last year, so they’re really interested in reforming it. So we have several county officials who have said they’d love to work with us on implementing stuff, some highway districts and some state agencies, so we definitely think there’s enough interest and we’re actually working with a company here in Boise to develop a private Blockchain for this purpose so that we can begin testing it out and hopefully bring it to our state legislature, and say, “Hey, it works and here’s how we can save money for our taxpayers.”

21:45 Paul Matzko: Do you have a target goal for how much you… So when you go to them, you say, “We can save you money.” What kind of savings are you promising?

21:53 Phil Haunschild: We don’t have a number at the moment, we don’t know exactly what it’ll cost to develop this. And actually, we developed a proof of concept for hardly anything, it was based on a template that this Boise company already had and they spent a couple hours putting it together, and it’s functional. So really, it would be incredibly minimal. I think I’ve heard estimates from a couple companies, we are looking at bids from them. And it was about, I think they said about $50,000 they could put something and get it up and running in the state. So it’s dramatic cost savings over what we’re currently doing.

22:30 Aaron Ross Powell: So let’s say this takes off and this works in Idaho and that the government moves over to it for all public notices. Is this something where in the long term, the best next steps would be every other state embracing it? And then we have 50 public notice blockchains being run by the citizens of 50 different states? Or would the long-​term goal be, say, one at the federal level that then everyone makes use of? Is there a benefit to one versus the other?

23:06 Phil Haunschild: We’re hoping that we can start something here that could then be spread to every state and the federal government if they’re interested, so there’s one single Blockchain running all of this. We’re talking with some folks in Utah about being able to work with them. This is one of the challenges of trying to figure out how do we verify new public entities to join the Blockchain ’cause if it’s a central figure here in the State of Idaho, there’s no real reason why they should be the ones verifying people in other state. So that’s why we were looking at the consensus-​based approach of having the majority of agencies on the network verifying any new one.

23:44 Phil Haunschild: So we’re hoping that it could spread to states and go to Utah, go to Arizona, go to Mississippi and see it growing. ‘Cause then the easier it is to access public information, the easier it is to hold your public officials accountable. So if you have one central place, one clearing house where you can go to access information across all the states, I think that’s more effective. In addition, you could start with legal notices and we figure you can start adding meeting minutes there. So any time a public meeting is held, you could post the agenda, post the minutes and post the notices for that meeting. You can include budget information, any financial data. So really, it opens up to store a lot more public information and make it far easier to access for the public.

24:26 Paul Matzko: Well, there’s the Supreme Court Justice Brandeis’s laboratories of democracy angle to it which you start out. You just try it in one state and if it works, other states will naturally see the advantages and adopt it. So I like that model. For sake of time, how about we move to one of your other ideas? And I know you have a number of ways you’re seeking to apply Blockchain technology, but you wrote an essay recently for National Review, you and Janae Wilkerson, calling for replacing on the… I think it was on a national level but replacing welfare with Blockchain, smart contract enabled tax deductible private charity. Can you walk us through that idea?

25:09 Phil Haunschild: Yeah. So if legal notice is this kind of our starting point, this is kind of the big fish we’re hoping to fry.

25:16 Paul Matzko: This is a lot big…

25:16 Phil Haunschild: In the Blockchain technology.

25:17 Paul Matzko: Scaling up from public notice to replacing welfare state is audacious. Yeah. [chuckle]

25:25 Phil Haunschild: Yeah, definitely. But, hey, we figure we might as well go big here and see what we can accomplish ’cause we think there is a lot of potential. So we just started with the premise that the government doesn’t need to be the one that handles welfare or charity. We feel like we’ve relegated private charity to our government agencies, both at the federal level and the state level through their public welfare programs. And we’re seeing problems with that in a lack of civil society, seeing problems in mismanagement of funds. So we’re thinking, “Okay, how can we eliminate the government’s role in connecting donors and recipients of charity?”

26:07 Phil Haunschild: And we were looking at kind of has been most known as eliminating the intermediary, in banking for example. So with Bitcoin or Ethereum, you don’t have to have that bank to verify your transaction. You’re able to do that right from me to you. We’re seeing the same thing with charity, that we can give rather than having to give our taxpayer dollars to the state government who gives it to the federal government, who gives it back and it goes through this stream and ends up with it a recipient, we can build that civil society and build that community by giving it directly to that recipient. So that’s what we’re looking at and what we’re hoping that we can begin to implement here in the next couple years.

26:48 Aaron Ross Powell: So I have questions about the details of this because it’s a cool sci-​fi idea and it seems like it’s a very libertarian, almost libertopia sort of thing that is really exciting to reproduce this social safety net without needing the state’s involvement and in a purely privately funded way. I mean, it’s embracing civil society because then it’s all of us funding each other as opposed to funding the government that then hands bits and pieces of it back to us. One of the roles the government plays in the welfare system is verification. You have to file taxes and through that, the government has a pretty good sense of how much money you made and it sees… There’s reporting on your paychecks and so throughout the year, the government has a pretty good sense of what your income looks like. And so because of that, it can know with a decent degree of certainty whether you, say, qualify for welfare.

28:00 Aaron Ross Powell: But with the Blockchain and with the, as Paul said at the beginning, this pseudonymous nature of it, or we could even be totally anonymous in some cases, it’s harder to know how much money I make. So are we looking at… Aaron got this year so many Bitcoins into this address, but I could have other Bitcoin addresses that I’ve been accumulating money into to make it look like I qualify for welfare. And then, relatedly we all have Social Security Numbers, which is how the government knows that the person who reported this tax is the same person that we’re going to send the money to. But the nature of a crypto economy makes that sort of verification harder as well. Those are the two immediate things that strike me as fairly large hurdles to getting a purely Blockchain and smart contract-​based system off the ground.

29:00 Phil Haunschild: Yeah, I think it’s often one of the biggest challenges with Blockchain as well is, while the information on the Blockchain might be verified and secured, you don’t have any way of knowing that the information on there is correct to begin with, or if plugging all that information in the start. I mean, you have Oracles is what they’re called, that will plug information if you’re looking at weather for example, you might have a certain website it draws the information from and plugs it into the Blockchain. So we weren’t looking at necessarily turning everything into a Blockchain-​based economy. What we’re looking at is using a particular token providing recipients or basically anybody who wants one with the wallet. And that wallet would give them access to this, we call it Charity token.

29:47 Phil Haunschild: They would be able to receive or give tokens using their wallet. They could use that wallet on their phone to pay for goods or services at the store. I mean, you develop a point of sale system and we’ve looked at a couple, and talked with a couple folks about implementing those. So it allow you to do electronic payments at the store using this token, and the key thing with that is, so you can manage who’s receiving it and what they’re allowed to spend it on and what purpose it can go for. For example, if you wanted to replace SNAP, if you want to replace food stamps, you could set the exact same parameters on the tokens that you give somebody. You might give them $100 this month and they’re only able to spend it on SNAP-​eligible goods at the store or the Women, Infants, Children program, for example, there.

30:35 Phil Haunschild: Here in Idaho, they actually give you a paper voucher. It might say good for $10 of fresh groceries or good for 1 gallon of 2% milk. Right now you take those paper vouchers to the store and they take it off your tally, and take it off your total, and you walk away with your milk. This would allow you to do the same electronically, and it’ll allow anybody to give that individual that good or that service via the Blockchain token.

31:03 Paul Matzko: And in theory it would make it harder, like if it’s a paper token I imagine you’re gonna have some issue with fraud and resale and verification on the end that this was actually the paper token meant for this person, and that’s actually being used for that purpose. So in theory, would it provide a certain way of guaranteeing that the funds are actually being spent in that manner?

31:30 Phil Haunschild: Yeah, and there are so many biometric identification tools we have on our phones now. You could use facial recognition or you could use a thumb print scan. If you wanna access your wallet on your phone and you wanna pay for something at the store, you might have to just take your thumb print and scan it. That’s the only way to open up the QR code they scan or something. Sort of like many ways, that way we think it would be a major way to reduce fraud and trafficking in welfare payments.

31:56 Aaron Ross Powell: How would this be different from giving everyone… So right now the State of Virginia, when I file my taxes if I get a tax refund, do they just give me a… They send me a debit card that has my tax refund worth of dollars on it for me to then use and you can limit… I have a debit card hooked up to my health savings account, and when I scan that at CVS, it knows that these are the things that I can pay for with a health savings account and these are the things I can’t, so it just takes that amount off the bill and then I have to scan my regular debit or credit card for the rest. So how does the adding tokens to that system improve things versus just sticking with debit cards with dollar amounts?

32:45 Phil Haunschild: There’s a cost factor to the debit cards with dollar amounts. Let’s say for example, if I wanna give money for fresh food to somebody that I’ve interacted with on the street or something, then I’m not gonna be able to go to the store, buy a Visa card for him, get that back to him. This would allow me, if we both have the application on our phone, or if we figure you could even print out on a piece of paper a QR code and that could work the same way as a wallet for somebody that doesn’t have a smartphone, which is an ever shrinking number these days. It would allow me to give him money right then and there, and I could limit what it’s good for. I think a challenge a lot of people have when they’re giving money to individuals is they don’t know what it’s gonna be spent on.

33:30 Phil Haunschild: I know I’ve heard Carnegie’s Gospel of Wealth, for example, that’s hundred years ago, he said, “There’s no greater evil really than just giving money to somebody who’s trying to get out of an addiction,” or something like that. And so this would allow you to limit what you’re giving it for and have some security and control over what you’re giving. It would allow somebody who’s seeking help to be able to get that help in an easier fashion as well, rather than just by a debit card or something like that.

34:00 Paul Matzko: So in full disclosure, I’m on the BLI, Basic Living Income, corner as a replacement for welfare. And part of that is… So mentioning the Carnegie idea about harming the poor by letting them spend the money on whatever they want, economists will often point out that in-​kind donations and targeted where you can only spend this money that the state’s giving you for welfare on certain things, you can only spend it on medicine, or these categories of food and not these categories, there’s a problem with that because it leads to inefficiencies where someone… They know that they need at their local store that this particular product is actually the thing that’s gonna best help them meet budget. They need a Cup O’ Noodles, but there because some bureaucrat in Boise, or in the case of a federal level DC, well, Cup O’ Noodles has too much sodium, it’s not good for you, that you can only spend this on kale. But the local people know their conditions, they know what is actually best for themselves. It requires a certain level of distrust to limit what people can use their cash to do. So when I talk about economists talking about this, I think of folks like Tyler Cowen or Alex Tabarrok.

35:22 Paul Matzko: In fact, I imagine that Christmas at the Cowen household has to be relatively boring, wherein you open the presents under the Christmas tree instead of a truck. Like, “Oh, nope, here’s another $10 bill, or a cash grant, instead of a present.” So some of that’s the economists in me, the person who enjoys economics in me talking. Wouldn’t this proposed system, allowing people to put… To more effectively put limits on how money is spent, wouldn’t that just introduce more such inefficiencies? How would you respond to those concerns?

36:00 Phil Haunschild: Yeah, that’s one of the biggest criticisms of the Women, Infants, and Children program versus the food stamps program is that with WIC you’re limited to a gallon of milk, $10 of fresh fruit. And a lot of it goes to waste because they get it for free but they don’t really need it so they don’t use it. The problem we find there though is that it’s not flexible. So what we’re looking at here is the ability for that individual interaction. You’re able to talk with somebody and say, “Okay, what is it that you need? What is it that will help you get out of the circumstance that you’re in?” And you’re able to tailor it exactly to that person’s situation. For example, we envision working with a couple non-​profits here in the area, and we’ve been reaching out and talking with them where they pair up every individual going to their program with a budget counselor taper. So there’s essentially a case worker and they’re finding, “Okay, what steps do you need to make to get out of this trap that you are in right now, and how can we help you get there?”

36:58 Phil Haunschild: So if you can limit it and say, “You’re only gonna have access to this $50 that I’m giving you, if you verify that you have been attending work everyday, if you verify that you’re sticking to the budget that you’ve set for yourself,” you’re empowering and incentivizing people to take the steps that they need. So I think it really, it provides the flexibility that you don’t have with the current system right now. Like I said, when you have bureaucrats who don’t know everybody’s individual situation, it really isn’t necessarily helpful.

37:29 Aaron Ross Powell: I confess to being potentially worried about the privacy implications of all this because… So one of the reasons that WIC can be so inefficient and it can say you can get your couple of pounds of vegetables but that’s not quite what you need at the moment is because the government doesn’t know what you need at the moment. So it doesn’t have enough information about you to know that. But if we need a system now where you have to meet with a counselor who then assesses what you need and then somehow that has to get synced up with the token distribution system or the token use system or the wallet, then the government needs to be given or whatever the central authority is setting those limits for you on an individual basis has to have access to that information. And I’m uncomfortable with that being the state for all sorts of reasons.

38:24 Aaron Ross Powell: But we also, it ends up looking like the same stuff that we get creeped out about with Facebook or the Cambridge Analytica stuff that was in the news that we have these centralized private organizations that are gathering an extraordinary amount of information about you that then is susceptible to theft or susceptible to use by governments against people that the government doesn’t terribly like. Is this system, does it raise more privacy concerns than what we already have? And how do we address those? Especially in the ethos of Blockchain and crypto is all about privacy enhancing.

39:12 Phil Haunschild: I think two things: One, we were looking at taking this away from the state. So the state wouldn’t be the one managing these programs, and they could use the same system to manage a system that has the identical parameters to SNAP or WIC, for example. But we’re looking primarily at non-​profits or private individuals being able to use this as their own means of providing charity to members of their community.

39:36 Aaron Ross Powell: Okay, that makes sense.

39:37 Phil Haunschild: So I think that solves one concern that the state’s not having. But like you said, with Cambridge Analytica and Facebook, there’s still a concern with private individuals holding so much information over us. And part of it with Blockchain, you’re able to control the information that you give. So you might upload your proof that… Your pay stubs, for example, showing how many hours you worked, whether… And that might be a condition for you to receive your money and you might give that to your single entity and allow them access to show that, yes, you did meet the requirements. But they wouldn’t be able to share that information. It would be limited to that one interaction. I think that would secure some of the information that way.

40:16 Phil Haunschild: And two, we think when it’s private individuals and it’s non-​profits and it’s social charitable organizations that are doing it, they’re really searching for ways that they can most help individuals get out of the situation through, and there’s a non-​profit here in the area that actually had the opportunity to go through their programs, and individuals generally come to them when they’re trying to break out of debt. And one of the things they do is they take every credit card and debit card that you have and they make you go on cash and you set your budget and you put it all in your envelope. It’s kind of a Dave Ramsey style. And they’re able to help people that way. So they do limit the choices that people can make but they’re doing it for their own good, and they’re doing it in order to help them accomplish their own goals.

41:03 Paul Matzko: So a lot of the framing of the piece is this is we’re going to replace state provision of welfare. And I can imagine in theory, if this works, that being a legitimate argument, right? But a part of me wonders why, whether the approach, it’s kind of like with public notices. You start local. You start with the road improvement authority or a local town council, then the state, and then you worry about federal level provision. So with the example you just gave, it doesn’t seem to me like you would need to replace Idaho’s welfare system with this. Couldn’t private philanthropers and charities test this system on their own? As long as they’re giving benefits, that charity is tax deductible. Why would you want to push for a state level trial or a federal level trial? Couldn’t you roll this out through a private charity like the one you just described first as a proof of concept, show that it works there, and then propose it as a full-​bore replacement for your current Idaho welfare system?

42:14 Phil Haunschild: That is exactly where we’re leaning at the moment. We’re in the process of working with three non-​profits in the area; two, working with homeless members of our community; and the third that I was mentioning earlier, to see how we can make it work best for what they do through their work. If there’s ways we need to tweak it, ways we need to change it, wanna make sure that it’s practical and it’s viable for their system. We are hoping that we can do it entirely with private organizations, prove that it works, see the benefits, and make sure that it’s thriving, and then hopefully, take it to the state. We’re looking at the Women, Infants, and Children program originally because it’s a fairly small program here in Idaho and it has some room for flexibility there, show how it works there, and then hopefully from there, expand and expand and keep taking those steps up to larger and larger.

43:04 Phil Haunschild: Once we see it replacing welfare programs and with the same parameters and the same services, to begin attaching a tax credit component or some way to incentivize people to donate ’cause if we have these same services being provided through these programs, there’s no need for people to also be paying for public welfare through their tax dollars. So for every dollar you might give to one of these programs, they might take a dollar away from your tax burden. So that’s the end game is we’re hoping that not only will this improve the efficiency, ’cause so often that’s what new technologies do with government is they just make government more efficient at doing the same things we often don’t want it doing. And we’re hoping we can really eliminate government entirely from the process. I often talk about the Internet being example with education. We have this incredible new technology through the Internet where I can take a class from MIT or Harvard right here from my office.

44:04 Phil Haunschild: Yeah, we still have a K-12 education where we pick up kids at 7:30 in the morning, put them on a bus, drive them to one facility, and then they watch a YouTube video there on the Internet. We’re missing the potential on the disruptive nature of it and the way to improve things when we treat new technologies like that. So that’s what we’re really hoping we can dramatically change things using Blockchain.

44:27 Paul Matzko: Well, great, Phil. I appreciate you coming on. This is the exciting potential, and we will watch and the listeners will watch to see how this unrolls in Idaho with some of these test cases so keep us updated with how this goes. Now, you have some additional components of your Blockchain application to civil government. Do you wanna mention those here? What’s coming up down the pipeline?

44:57 Phil Haunschild: Yeah. So right now, we’ve put out a white paper and then put out some articles on this welfare reform concept as well as the public notices. Kind of in the pipeline, we were looking at a slew of different ways that we can utilize distributed ledgers and Blockchain technology in government, everything from land titling, which there’s a lot of research and a lot of money going into right now with the DeSoto and then the Overstock CEO working on that. There’s voting systems that we’re looking at, ways that you can utilize that to secure voting. We’re looking at business registries, ways that we can make a one-​stop shop for when you’re registering or licensing a business. There’s a whole handful of different things we’re looking at, and we’re hoping to have that out here in the next couple months, provide it to individuals across different states who might be interested in the work we’re doing.

45:47 Paul Matzko: Great. Appreciate your time, Phil. And for the rest of our listeners, until next week, be well.

[music]

45:58 Paul Matzko: Building Tomorrow is produced by Tess Terrible. If you enjoy our show, please rate, review and subscribe to us on iTunes, or wherever you get your podcasts. To learn about Building Tomorrow or to discover other great podcasts, visit us on the web at lib​er​tar​i​an​ism​.org.