SHERIDAN — A package of legislation proposed for the upcoming legislative session could make Wyoming a leader in a developing technology market, according to a state group advocating for the bills.
The Wyoming Blockchain Coalition, a group of academics and business professionals formed to educate citizens about the potential benefits of blockchain technology, is campaigning for four bills that it says will create a regulatory environment friendly to businesses and entrepreneurs that want to pursue ventures that utilize blockchain technology. At the moment, no other state has implemented this kind of legislation.
“If Wyoming passes these legislative acts, we would be really well positioned to bring in investors and develop some really cool technology that could be used throughout the entire United States and beyond,” said Dr. Mike Borowczak, the director of the Cybersecurity Research Center and Lab at the University of Wyoming.
What is Blockchain?
Blockchain technology is best known as the software underpinning cryptocurrencies like Bitcoin, but it has wider applications.
A blockchain is essentially a hyper-secure series of records. Each record is secured in a “block” that is timestamped and imprinted with a unique code that corresponds to the previous block in the series, called a hash. A block could contain, for instance, a financial ledger. But a block cannot be edited.
In order to update the financial ledger, a new block would have to be introduced into the chain.
Every member of a blockchain network stores a complete record of the data in the network. When a new block is introduced, it is checked against every other node in the network to ensure it fits into the chain by verifying the new block’s hash and confirming that it adheres to all of the network’s rules; in the case of a financial ledger, then, a fraudulent transaction could not be recorded. In this way, the branches of the network “agree” that all of the data in the chain is authentic and permissible.
In the case of Bitcoin, this authentication process is what prevents the currency from being counterfeited. Caitlin Long, the former president of the blockchain firm Symbiont, contends that this verification process is far more reliable than traditional methods.
“You’re putting your trust in math instead of putting your trust in people,” Long said. “And it turns out math is a lot harder to break than people.”
Tampering with a blockchain would require a hacker to rewrite every block in every node of a network, which could mean editing millions of files on millions of computers, simultaneously. David Pope, the executive director of the Wyoming Blockchain Coalition, noted that, given the value of assets presently stored on blockchains, there is tremendous incentive for hackers to break into them, yet there has never been an instance of a blockchain being infiltrated.
“Right now there is about a $200 billion bounty on someone being able to hack a blockchain, and no one has successfully done it,” Pope said.
Because blocks in a network cannot be edited, a blockchain will contain a complete history of transactions or changes to a document. And because each new block needs to be authenticated by the network, only legitimate modifications will be recorded. A financial ledger displayed on a blockchain would provide a complete, self-audited history of transactions.
There are currently three bills related to blockchain technology, and one more that is expected to be introduced before the Legislature commences. The first would revise Wyoming’s Money Transmitters Act to remove exemptions on digital currencies. Right now, Wyoming’s banking regulations make purchasing cryptocurrencies impractical compared to other states.
“To be blunt, this would put us in line with everybody else in the United States,” Borowczak said.
A similar bill failed to pass in 2016, but Robert Jennings, an advisor to the Wyoming Blockchain Coalition, said he attributes that bill’s failure to unrelated political squabbles and a lack of understanding about the bill.
“What it comes down to is, will the state of Wyoming allow people who want to purchase cryptocurrencies do it or not?” Jennings said. “I’m confident the state will give people the freedom to pursue that interest.”
The second proposed bill would allow corporations to use electronic networks to maintain or store corporate records. This would allow records like deeds, titles and receipts to be created and transmitted digitally. The bill does not pertain exclusively to blockchain, but Pope said that blockchain technology would become the most efficient method of managing these records.
The third bill would exempt digital currencies from securities regulations. Currently, digital currencies are treated like stocks in Wyoming, which means people or companies conducting transactions with digital currencies are considered broker-dealers and required to pay fees and register with the state. If the bill passes, digital currencies will be treated more like gift cards — a unit with an assigned value that can be exchanged for products or services in a specific context. The change would make it easier for digital currency developers and investors to operate in the state and, according to the Wyoming Blockchain Coalition, make Wyoming an attractive destination for businesses that deal with digital currencies.
The fourth initiative, which has not yet been introduced as a bill, would allow for the creation of series LLCs (SLLC) in Wyoming, a company structure that is attractive to many blockchain companies. An SLLC is composed of a master LLC that controls several other LLCs that are distinct from one another for liability purposes.
To illustrate, Jennings noted that an SLLC structure would benefit a company like Uber if and when it transitions to automated cars. Uber would become the master LLC and each automated vehicle in its fleet would be registered as its own entity. The structure would allow the company to license, track and insure each vehicle and, at the same time, insulate other vehicles in the fleet from liability should one of them get into an accident.
Currently, 17 states allow for the creation of SLLCs. Jennings said that allowing them in Wyoming will make the state more competitive in attracting businesses.
What’s in it for Wyoming?
Pope said he believes blockchain technologies could be implemented in the state to improve trust, efficiency and speed in processes like accounting, medical record keeping, and LLC filing, but admits that implementation could take a decade or more. Right now, he said, Wyoming would benefit from getting a head start on working with and studying the technology.
“To a certain extent, the best way to understand [blockchain] and influence it is to incorporate it into our policies right now,” Pope said. “In this way, Wyoming can also benefit from the technology while the technology is growing.”
Borowczak agreed that embracing the technology early could have long-term benefits for Wyoming and focused specifically on how it could stimulate the University of Wyoming.
“Right now, we have 17 students learning about blockchain and cryptocurrencies and how to implement and design software that leverages these,” Borowczak said. “We already have talent developing. And there are a lot of research opportunities, not just in computer science — in business, in law; these systems have a place throughout our society.”
Long, meanwhile, said there could be immediate financial benefits for the state if it adopts these policies, noting that one company, the Canadian firm BlockCrushr, has already opened an office in Wyoming because of the potential legislation.
“There are hundreds of millions of dollars being invested every month in this technology and I think we are well positioned to capture some of that if we can bring some of these businesses to Wyoming,” Long said. “But if we don’t build it, we know they won’t come.”