Blockchain primary for city government chief information officers. Originally prepared for the Cities Leadership Forum hosted by Cities Institute, Philadelphia March 2022.

1. Presented to Cities Today Leadership Forum
March 24, 2022
Updated v.05.01.22
Blockchain Primer for City CIOs
Mark Wheeler
Chief Information Officer for Philadelphia
https://www.linkedin.com/in/markwheelerphl/

2. What is Blockchain?

3. Blockchain
• Ledger of cryptographically-signed transactions stored on a distributed
network. A “block” represents one or more transactions on the ledger.
• ID of each new block is cryptographically “chained” using the hash (ID)
of the previous block.
• Highly defensible against alteration. Assures provenance. Auditable.
source: https://medium.com/swlh/blockchain-characteristics-and-its-suitability-as-a-technical-solution-bd65fc2c1ad1

4. Source: https://pipeandpiper.co.uk/2021/08/16/what-is-cryptocurrency/
How a Blockchain Works
Consensus model
Incentive
model

5. Consensus Models/Mechanisms
• New blocks are added only when a majority of nodes, that maintain
the network, come to agreement on the validity of the transactions.
Validation of blocks
requires solving a complex
mathematical problem.
Operators compete to write
to the ledger for a reward
(tokens / cryptocurrency).
Highly energy consumptive
by design.
Proof of Work
Validation of blocks
requires owning a specific
amount of network tokens.
Operators are picked at
random or by weighted
algorithm.
Much less energy
consumptive.
Proof of Stake
Proof of Burn
Proof of Capacity
Delegated Proof of Stake
Proof of Storage
Proof of Time Spent
etc..
Proof of ….

6. Types of Blockchains
Permissionless
Decentralized, peer to peer
Permissioned
Centralized or Hybrid-Decentralized
• No single authority controls access.
• Decentralized governance over how
the blockchain tech evolves.
• Public, highly transparent.
• Slower transactions speeds than
existing Cloud DaaS.
• Disintermediates 3rd parties in data
transactions.
Ethereum, Solana, Bitcoin, Algorand
• Central control over access and
governance.
• Requires know your customer (KYC).
• Private or public, but less
transparent.
• Faster transactions speeds than
permissionless blockchains.
• Consensus model still used.
Hyperledger, Quorum, Blockcerts, Ripple

7. Comparison to DaaS
Databases as a Service
 Faster than blockchains
 Highly scalable
 Highly integrative with 3rd party
systems
 May store files and hyperlinks as
objects – depending on platform
 Transactions are alterable
Transactions per Second
 Bitcoin 7 TPS
 Ethereum 24K TPS
 Hyperledger 20K TPS
 Visa 1.7K or 24K TPS
Blockchains don’t store files, only
metadata (and links to files)
Blockchain transactions speeds
are determined by
 How frequently a block is produced,
and block size
 Network load
 Purpose + design of the blockchain
See end of slide deck for sources/references

8. Digital Wallets
Custodial Wallets
 3rd party entity holds private and
public keys for transactions.
 Know Your Customer (KYC) feature
is a requirement.
 Benefits include account recovery,
reporting, and trade/buy tools for
variety of cryptocurrencies.
Self-managed Wallets
 Private/public key pair is managed
entirely by the owner via software
application or hardware device.
 If seed phrase or device is lost, no
recovery option.
 Dedicated to a specific blockchain
or limited variety of chains.
 Different key pairs stored for each
blockchain.
The tool by which tokens may be owned/held and transferred.

9. Tokens: Fungible vs. Non-Fungible
Fungible
 A token that can be traded or
exchanged 1:1.
 Applies to cryptocurrencies.
 Example: one bitcoin is equal to
and exchangeable for another
bitcoin.
Non-Fungible (NFT)
• Tokens created with a specific utility or
uniqueness so that one NFT cannot
equal another.
• Programmable for uses as a verifiable
credential of an identity, certification,
authorization, etc.
• Proof of licensed ownership to a digital
file of art, music, text, etc.
Cryptocurrency is a token, but not all tokens are a cryptocurrency

10. Smart Contracts and Oracles
Smart Contracts
• Non-complex software code.
• Used to automate payments and
governance processes.
Oracles
• How data external to blockchains is
accessed to execute smart contracts.
• Oracle networks may be decentralized
with multiple, independent data
sources for reliability and security.
Sources: https://www.blockchains-expert.com/en/are-smart-contracts-ready-for-mass-adoption
https://research.csiro.au/blockchainpatterns/general-patterns/interacting-with-the-external-world/oracle
Data sources

11. How it Scales (the makings of Web 3)
Distributed Ledger or Blockchain
Fungible Tokens (cryptocurrency) Non-Fungible Tokens (NFT)*
Application Development and 3rd Party Integrations
Smart
Contracts
Programmable
Tokens*
Oracles
Payment
Networks
Wallets
(custodial or self-managed)
Layer 2
Layer 1
Node Operators Miners
*some layer 1 blockchains can produce NFTs, others require layer 2 technology.
Decentralized
Apps (dApps)

12. Gov Use Cases

13. Verifiable Credentials Source: Department of Homeland Security Interoperability Plug Fest March 2021

14. US Permanent Residency Digital Credential
• Prioritizes privacy and security to ensure individual control and
consent over use of individual’s data.
• Open source, royalty free, protocol standards to ensure and
enable multi-vendor, multi-chain, global cross-border
interoperability. Meaning – not on a single blockchain.
• DHS is creating an overlay of Web3 technology that’s enabled by
use of shared standards and data schemas by vendors.
• Includes bridge to paper docs to prevent digital divide issues.
Source: Department of Homeland Security Interoperability Plug Fest March 2021

15. Standards for Verifiable Credentials and
Identity on Blockchains
Source: https://www.w3.org/TR/vc-use-cases; https://identity.foundation;
Governments’ interest and funding in the
technology galvanized creation of standards.
Distributed ID (DID Doc and Resolver) replaces
current use of Public Key Directories managed
by 3rd parties.
Value = publicly auditable provenance of all
changes and interactions on the ledger by
issuer, verifier, and owner.
Issues:
• Will citizens’ wallets need biometrics?
• Loss of wallet = fully reapplying for the
digital credential.

16. Helium – Crypto Incentivized IOT
• Devices mine the company’s
cryptocurrency - HNT.
• Number of devices operating on
the network within a defined
geography sets limits on amount
of HNT mined per device.
• Sell / hold strategies for HNT
would include variables:
• Num of devices operating locally
• HNT market value
• Passive income targets
Source: Helium.com

17. Mining for the Digital Divide
• 20 Helium LoRaWan routers
in City buildings.
• HNT mining to fund internet for
1,300 HHs @ $120/yr = $156K.
• CA Emerging Tech Fund (nonprofit)
will hold wallet and exchange HNT
to USD and issue funds to City.

18. Colu – City Rewards Programs
• 5-year-old Israeli startup working with 10 U.S. cities
and counties.
• Reward participation in priority programs
(e.g., litter pickup, buying local, vaccinations) using
“white label” rewards sent to mobile app.
• Closed-loop economy: Residents can only redeem city
coins with participating business.
• Colu plans to expand platform with blockchain technical
features and offer an “Urban Change” protocol.
Source: Colu.com and Feb 2022 interview with Ortel Tevel, CEO and Michael Mazur, COO

19. Colu – City Use Cases
Akron, OH
• POC in downtown business district
with shopper rewards program.
• Sales doubled at participating businesses.
Boston, MA
• City encouraged shopping at local and minority,
women and immigrant-owned businesses.
• $1.5M in economic activity generated with 77% of
coins redeemed at M/W/I-owned businesses.
• Users surveyed expressed high level of satisfaction
with using city coins and mobile app.
Source: Colu.com and Feb 2022 interview with Ortel Tevel, CEO and Michael Mazur, COO

20. Final Considerations
and Concerns

21. When to Use Blockchain?
Source: https://medium.com/swlh/blockchain-characteristics-and-its-suitability-as-a-technical-solution-bd65fc2c1ad1

22. Considerations
• Scalability, Cost, Quality and Risk.
• Which type of blockchain is best suited for government? Depends on use case.
• Should cities only commit data to known, trusted nodes on a private network?
• When is a non-permissioned, public chain suitable?
• Difficult to separate the technical features (value) of blockchain from the currency
aspects and this reinforces negative public and media perceptions.
• Availability of support and expertise:
• Accenture, Deloitte, AECOM include in their government practices now.
• Software developers with smart contract experience are relative few.
• AWS, IBM offer different blockchain technologies as a service (BaaS).

23. Legal Concerns
• Under current state laws, municipalities can only hold and transact in $USD.
• GFOA advises against accepting cryptocurrency for receivables, using it for
payables, and investing in such products.
• Crypto is taxable under IRS Notice 2014-21
• SEC treats cryptocurrency as a security if the digital asset meets all three parts of
the Howey Test.
Sources: https://www.jdsupra.com/legalnews/cryptocurrencies-and-the-securities-and-6989064/
Gov Finance Offers Association (GFOA) https://www.gfoa.org/materials/cryptocurrency-advisory
Cities should not hold a wallet of digital assets that could be considered a
cryptocurrency (tradable/sellable). Advisable city enter into agreement with trusted 3rd
party as wallet holder.

24. Energy Concerns
Source: Cambridge University Bitcoin Electricity Consumption
Index ttps://ccaf.io/cbeci/index/methodology
Proof of Work (PoW) blockchains
are the focus of energy concerns.
Framing is “crypto is frivolous, so it’s
energy use is wasteful.”
Non-PoW blockchains are
no more energy consumptive than
other Cloud computing services.

25. Additional References

26. Comparison to DaaS
Blockchain transactions speeds
are determined by
 How frequently a block is produced,
and block size
 Network load
 Purpose + design of the blockchain
1. https://www.gartner.com/document/3888983?ref=solrAll&
refval=319822051
2. https://www.blockchain-council.org/blockchain/blockchain-
vs-relational-database-key-differences/
3. https://cointelegraph.com/news/upgraded-hyperledger-
fabric-sees-7-fold-increase-in-transaction-speed
4. https://news.bitcoin.com/no-visa-doesnt-handle-24000-
tps-and-neither-does-your-pet-blockchain/
5. https://utilli.com/2021/04/26/the-lightning-network-is-
poised-to-disrupt-utility-payments/
1
2
3
2
4,5
Transactions per Second
 Bitcoin 7 TPS
 Ethereum 24K TPS
 Hyperledger 20K TPS
 Visa 1.7K or 24K TPS