NIST Report on Blockchain Technology Aims to Go Beyond the Hype

Estimated reading time: 4 minutes

Beguiling, baffling or both—that’s blockchain. Aiming to clarify the subject for the benefit of companies and other organizations, the National Institute of Standards and Technology (NIST) has released a straightforward introduction to blockchain, which underpins Bitcoin and other digital currencies.

Virtual barrels of digital ink are flowing in the media nowadays about these cryptocurrencies and the underlying blockchain technology that enables them. Much of the attention stems either from the giddy heights of value attained lately by the most well-known of these currencies, Bitcoin, or from the novelty of blockchain itself, which has been described (link is external) as the most disruptive technology since the internet. Blockchain’s proponents believe it lets individuals perform transactions safely without the costs or security risks that accompany the intermediaries that are required in conventional transactions.

The NIST report’s authors hope it will be useful to businesses that want to make clear-eyed decisions about whether blockchain would be an asset to their products.

“We want to help people understand how blockchains work so that they can appropriately and usefully apply them to technology problems,” said Dylan Yaga, a NIST computer scientist who is one of the report’s authors. “It’s an introduction to the things you should understand and think about if you want to use blockchain.”

The NIST document, whose full title is Draft NIST Interagency Report (NISTIR) 8202: Blockchain Technology Overview (link is external), introduces the concept of blockchain, discusses its use in electronic currency, and shows its broader applications.

A blockchain is essentially a decentralized ledger that maintains transaction records on many computers simultaneously. Once a group, or block, of records is entered into the ledger, the block’s information is connected mathematically to other blocks, forming a chain of records. Because of this mathematical relationship, the information in a particular block cannot be altered without changing all subsequent blocks in the chain and creating a discrepancy that other record-keepers in the network would immediately notice. In this way, blockchain technology produces a dependable ledger without requiring record-keepers to know or trust one another, which eliminates the dangers that come with data being kept in a central location by a single owner.

The blockchain idea has attracted enough supporters that there are now several hundred digital currencies on the market (link is external), and the companies that are investigating ways to employ blockchain number many more. Because the market is growing so rapidly, several stakeholders, customers and agencies asked NIST to create a straightforward description of blockchain so that newcomers to the marketplace could enter with the same knowledge about the technology.

“Blockchain is a powerful new paradigm for business,” Yaga said. “People should use it—if it’s appropriate.”

The question is when it is appropriate. As with any new tool, there can be a temptation to employ it purely for its novelty value. The report outlines some possible use cases, including banking, supply chain management and keeping track of insurance transactions. The report, Yaga said, was created partly to help IT managers make informed decisions about whether blockchain is the right tool for a given task.

“In the corporate world, there’s always a push to adopt new technologies,” Yaga said. “Blockchain is today’s shiny new toy, and there’s a big push to adopt it because of that.”

“We want to help people to see past the hype,” he said, “as lofty a goal as that is.”

NIST has been tasked before with writing definitions of emerging concepts in information technology, such as the definition of cloud computing it released in 2011. While Yaga describes the blockchain description as approachable—it’s “as high-level as I can write it,” he said—the document is longer than some other NIST definitions because the technology combines so many complex ideas. Among them are digital signatures, peer-to-peer networking and hash chains, all of which are tools common in cryptography and with which NIST has had extensive involvement.

“We don’t have any axe to grind or product to sell, though,” Yaga said. “A lot of articles you’ll read online feature a disclaimer indicating that the author owns a certain amount of cryptocurrency or stock in a company. I have no vested interest in the monetary value of these networks. But we don’t pass judgment on the technology; we just want to get past the rumors.”

To that end, Yaga said, the document began as a sort of FAQ addressing falsehoods the authors had come across—such as the idea that there was no need for trust in the system. (“You do need trust,” he said, “just not a trusted third party, like a bank.”) It expanded to discuss the technical tools common to most blockchain-based systems and also explored related issues, such as the high demands blockchain systems place on network resources.

The roughly 60-page report might enlighten anyone who wants a picture of blockchain that is not skewed to any players’ interests, but Yaga said he and his co-authors hope it will give perspective to technical decision makers in particular.

“A company’s IT managers need to be able to say, we understand this, and then be able to argue whether or not the company needs to use it based on that clear understanding,” he said. “Some people are saying you should use it everywhere for everything. We wrote with the perspective that you shouldn’t use it if it’s not necessary.”