US needs to lead digital currency revolution, or other nations will

While the U.S. is consumed by understanding the Russian hacking into its presidential election, the other global power is claiming silent victory in a worldwide cryptocurrency competition.

Currently, China is the biggest entity mining bitcoins, claiming 70 percent of all mining equipment globally. Computers, known as “miners”, solve complicated mathematical algorithms, provide hashing power, keep record of transactions and get awarded by a bitcoin.

{mosads}The miners are rewarded with bitcoins for solving challenging cryptographic problems that verify other bitcoin transactions worldwide. At the beginning of the blockchain revolution, bitcoin mining was easier; algorithms were less complicated.

Over time, algorithms become more complicated and soon there will barely be any algorithms to solve. Each time an algorithm is solved, “blocks” are added to the “blockchain”, which ensures authenticity of every transaction.

Miners can be located anywhere in the world, but given that it can take lot of electricity and computing power, mining can be an expensive undertaking. Miners in China strongly believe that China will soon become the leading cryptocurrency power.

The digital currency market has grown exponentially in just four years. With a market cap close to $19 billion dollars, digital currency and its underlying technology —blockchain — introduced a new way for people to exchange value.

Cryptocurrency is produced by computers and held electronically online; it is not backed up or controlled by governments. 

According to Bitcoin.com, the U.S. hosts the highest number of cryptocurrency users and bitcoin trading volumes in the world. For the first years of cryptocurrency existence, the U.S. lead the way.

Recently, other countries, like China, Estonia, and South Korea, have made significant investment and progress in blockchain technology. Cost-effective hydroelectricity and computing infrastructure are driving China’s bitcoin mining dominance.

Needless to say, that dominance possesses risk, as any one entity with over a 50 percent share of mining could double-spend transactions, prevent transactions from gaining any confirmations and prevent other miners from mining any blocks.

This provides China with more control and influence on forks and direction of development, allowing for the creation of a cryptocurrency oligopoly. In addition, China’s central bank has hinted at the launch of digital currency backed by the central government to reduce circulation costs and boost financial transparency. 

On the other side of the world, Emiratis are investing in multiple cryptocurrency initiatives, including the establishment of the Global Blockchain Council, a public-private partnership uniting local businesses, government agencies and startups.

Dubai’s largest bank, Emirates NBD, is working to improve and advance remittance and financing by using blockchain technology. The government of Dubai has also announced plans to use blockchain for all public documents by 2020.

Cryptocurrency and blockchain technology should be embraced with open arms to strengthen the digital U.S. economy. Lawmakers and regulators in the U.S. should increase efforts to attract and stimulate innovative fintech startups to the country. 

The next administration should embrace this emerging technology and take steps to ensure the U.S. leads in global cryptocurrency by: 

I. Providing different regulatory environment: The U.S. should not let yesterday’s regulations manage next generation innovation.

Streamlined and well-clarified regulations will be a great offer for startups to understand and adopt regulations. Currently, the financial regulatory environment in the U.S. requires financial companies to acquire a different license in every state. That is pricey and time consuming.

A different approach should be taken for blockchain-driven financial businesses.  

II. Partnering and investing: Launch more investments and grants focused on fintech startups and provide technology to solve government problems. The U.S. is leading the world in government-funded research & development to encourage innovation.

More government funds should be set aside for inventing more efficient ways to mine digital currencies. 

III. Improving transparency and accountability through blockchain technology: The U.S. should adopt blockchain technology to, in part, prevent abuse of public funds.

For instance, issued digital programs (backed by blockchain technology) could be encoded by using smart contracts that could only be spent at approved vendors. Payments, such as food stamps and subsidies, could be managed more efficiently by the government.

Blockchain technology can be applied to collect taxes. As soon as payment is made to a vendor, a tax would be deducted and transferred to the IRS. 

Blockchain is already transforming the financial and, to some extent, health care systems. The U.S. should be in the forefront of the blockchain revolution and improve access to digital assets.

Nations and businesses that are prepared for this shift will lead globally and benefit from new opportunities digital currencies and blockchain technology present.

In the meantime, many countries in the world are seeking U.S. leadership in defining blockchain technology, along with its regulation and further development. 

Algirde Pipikaite is a digital strategist and vice president of International Relations at Augustus Global LLC, an international consulting group and public relations firm. Vikas Grover is the senior architect at Red Hat, Inc., a multinational software company that helps businesses align their IT and business strategies. 

The views expressed by contributors are their own and not the views of their employer or The Hill.