SPECIAL REPORT

A Brownstone Research Publication

Elected by Blockchain

By Jeff Brown

The Private Company Revolutionizing the Way Americans Vote

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Elected by Blockchain: The Private Company Revolutionizing the Way Americans VoteBy Jeff Brown, Editor, The Near Future Report

At 2:30 in the morning in Detroit’s TCF Center parking lot, a white unmarked van slowed to a stop. After the driver shifted the van into park, he stepped out to open the back doors.

He then proceeded to unload its contents into a worn red wagon, which was used to roll the item into the convention center where officials were busy counting votes into the early hours for the 2020 presidential election.

To the workers present, this didn’t seem out of the ordinary. But to a passerby, it could easily be interpreted as a bit odd.

In fact, this ominous scene was all caught on camera. And before long, the video was uploaded to social media and spread like wildfire.

Soon, allegations that the man was delivering ballots via the wagon in the middle of the night started to run rampant.

And like gas on a flame, at 4 a.m., the news reported that 100,000 more ballots were discovered.

The video and news story went viral. Even the president’s son, Eric Trump, tweeted about it… with 40,000 more following suit.

In the story’s wake, hundreds of thousands – if not millions – of Americans were left wondering if the

election was fraudulent. Could we trust the results?

It was a blow to the integrity of our election process.

To make matters worse, this wasn’t the only story of fraud circling the internet. It joined 12 more allegations of voter fraud in Michigan and dozens more across the country.

In the ensuing weeks, there were over 54 post-election lawsuits spanning swing states such as Arizona, Georgia, Michigan, Nevada, Pennsylvania, Wisconsin, and more.

These events damaged the confidence that American voters have in the electoral process. According to Gallup, confidence was already at an all-time low before the election, with only 59% believing votes would be counted accurately. That was down from 66% for the previous presidential election.

Lack of confidence in an election’s results also ends up costing millions of taxpayer dollars in order to deal with all of the lawsuits and special investigations.

In 2016, there were allegations of Russian interference in the presidential election. A two-year special counsel investigation led by Robert Mueller followed, resulting in $32 million spent but nothing to show for it.

Special Report 2021

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The loss of confidence in the electoral process is not only demoralizing – it’s expensive. And no matter what our political ideology is, it’s clear that this issue needs to be addressed – not only in the U.S. but around the world.

Some companies are tackling this issue through a kind of software technology that readers have likely heard about. Specifically, blockchain technology can be used to dramatically reduce and potentially eliminate fraudulent practices.

Welcome to The Near Future Report

Welcome to The Near Future Report. My name is Jeff Brown. Over the span of 30 years, I worked as a technology executive for firms like Qualcomm, NXP Semiconductors, and Juniper Networks.

I’ve earned degrees from Purdue University and the London Business School. I have professional certificates from MIT, Stanford, and most recently the University of California, Berkeley, School of Law. And I am an alumnus of Yale University’s School of Management.

I’m also an active angel investor in early stage technology companies. I’ve invested in more than 160 private deals with great success.

As a technology executive, I come from the industry. I worked hard climbing the ranks of high tech and ran divisions of large, leading-edge technology companies. And I invest in bleeding-edge technology and biotechnology companies at their earliest stages. Sometimes, I’ve even written the first check.

I tell you this because with so many so-called technology experts out there, it’s important that readers know that I’m truly committed to the world of bleeding-edge technology.

And my goal with The Near Future Report is to use my technology and investing expertise to help everyday investors profit from today’s best technology stocks. There has never been a better time to be a technology investor.

We’re investing in industry-altering trends such as artificial intelligence (AI), precision medicine, the future of transportation, 5G wireless networks, and cloud-based software.

In this report, we’ll be learning about a company applying blockchain technology to elections. Its technology has the potential to ensure the U.S. has fair, transparent, and free-of-fraud elections. And while this company is still private, it is one we certainly want to keep our eye on for a potential investment opportunity in the future.

But before we get to the specific company, we should understand what blockchain is and how the technology can restore confidence in the electoral process not just in the U.S. but around the world.

Blockchain’s Ability to Restore Trust

Longtime readers of my research will be familiar with blockchain technology. I’ve been covering the technology for over half a decade. In fact, I first recommended bitcoin in June 2015, when the cryptocurrency was trading for about $240.

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And as an active member of the Chamber of Digital Commerce, I’ve participated in education events with policymakers to advocate for a rational regulatory approach to blockchain technology.

And as longtime readers will also know, blockchain is more than just the technology that underpins digital assets and cryptocurrencies. This decentralized ledger technology can be applied to everything from supply chain maintenance to contract execution and even democratic elections.

And before I go any further, I’d like to make one thing clear. This research report is not intended as a political statement. As an analyst, my responsibility is to provide unbiased research for the benefit of my readers.

I know the 2020 presidential election remains a polarizing topic. But the point I would make is that – no matter our opinion on the topic – we can all agree that having secure voting systems is a critical part of any electoral process. And that’s what the private company I’ll share with you today promises to deliver.

But first, let me explain what blockchain is and how much growth is ahead for the space.

Blockchain is a distributed ledger of transactions and information. As one entity transacts (or sends information), each transaction is added to a growing list of previous transactions to form a timestamped list of events. Blockchain gets its name from this process since these pieces of information are batched (or “blocked”) together in blocks that each reference the one prior to it. This creates a chain. The linkage the blocks form is a blockchain.

The benefit of each sequential block referencing the one before it is that it ensures this chain of

data is “tamperproof.” This is why blockchain transactions are referred to as immutable.

That’s because if any of the data stored within a block is tampered with, the blockchain will invalidate every block that follows.

Above is a graphic that illustrates what this block-to-block relationship looks like.

When it comes to an election, this immutability is where blockchain technology shines.

In the current election system, after a voter fills in the dozen or so bubbles on a ballot, he or she hands the ballot over to a poll worker. From there, the ballot might touch several hands before it’s officially tallied by an election official.

This process means there is a limited trail of this chain of custody after the voter hands over the ballot. And there’s no way for the voter to verify his or her ballot wasn’t altered after the fact. It is extremely vulnerable to fraud. Even the voting machines can be highly insecure. I literally read the user manual of the voting machines to understand the weaknesses in the security.

The reality is that the current voting system is built on trust, but voters are currently unable to verify its trustworthiness. And as we saw from the poll above, almost 50% of Americans do not trust this process, which is exactly why a new approach is necessary… and why blockchain technology offers such an interesting solution.

And the company that can provide a solution to

Source: ResearchGate

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county, state, or federal authorities stands to make a windfall.

That’s because right now, three traditional voting system vendors control 88% of the market.

A Large Market

One of those companies is Dominion Voting Systems, which received $118.3 million from 19 states and 133 local governments to provide services from 2017 to 2019, according to an audit run by OpenTheBooks.com.

And that’s just the beginning. Dominion’s contracts are extensive as well as massive.

Here’s a few so we get an idea… It has a $107 million 10-year contract with Georgia, $52 million from the state of New Mexico, a $28.7 million contract in Clark County of Nevada, and a $31 million 10-year contract with Cook County in Illinois. And the list goes on.

Even without diving into the details of each contract, it’s clear that providing software services for elections results in substantial contracts.

Congress also allocated $425 million for election security ahead of the 2020 presidential election, up from the $380 million it doled out before the 2018 election… meaning this money isn’t set to dry up anytime soon.

And this can result in hundreds of millions of annual revenue for any company able to get a foot in the door when it comes to providing voting solutions on election day.

What’s more, the global blockchain market is set to grow to almost $70 billion by 2027, which is a compound annual growth rate (CAGR) of 56.1%.

Combining the amount currently spent on

voting solutions with the potential market size of blockchain solutions, it’s clear that the company in this report is positioning itself for an incredible opportunity in the coming years.

The New Polling Location Is Our Phone

In the last election cycle, the company we’re highlighting here made headlines by becoming the first blockchain-based voting software to be used for a presidential election.

The company is Voatz. And over the last several years, its presence around the voting cycle has only grown. I’ll get into the details of its growth and what I see for this company in just a bit. But first, let me share a bit of background.

Voatz started as an idea born in a 2014 “Hack to the Future” hackathon where the founders looked to prevent voter coercion through a mobile voting platform. It was the early seedlings of an alternative method of voting to make the process more trusted and convenient.

Voatz was founded in 2015 and is run by Nimit Sawhney, a software developer who was in charge of research and design at his prior job, MoreMagic Solutions. That company was acquired by the multibillion-dollar French digital security company Oberthur Technologies.

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At its heart, Voatz employs Hyperledger Fabric as its blockchain. It’s a solution that was originally pioneered by IBM and is now run by the Linux Foundation.

It’s a solution similar to bitcoin, the cryptocurrency that popularized blockchain technology, in that they are both viewable by the public. This allows users to verify that what they think happened did in fact take place.

Where the two differ is that bitcoin is a “permission-less” network. That simply means that anybody can use this blockchain and verify its transactions.

Bitcoin allows anybody to act as a node. But the idea of allowing anybody to confirm a transaction isn’t a good solution for voting software because state-level actors may look to intervene in an election by controlling nodes on the network. These would be entities like Russia, China, or even domestic actors attempting to intervene in the U.S. elections.

Voatz, on the other hand, is a permissioned blockchain. This means the nodes that confirm and validate transactions on the Voatz blockchain are granted permission to operate. This is similar to how election officials are verified by the government before they are given their job.

Simply put, the blockchain technology that underpins Voatz enables the rest of the process to unfold securely and transparently.

How the Process Leads to Adoption

When we dig into the process of how a voter and an election official engage with Voatz’s software application, we can see it fits in with the current process.

Voatz blockchain technology could be easily integrated into our current elections. We wouldn’t need to create an entirely new election process.

In this way, Voatz will ramp up usage as users gain confidence in the system.

To understand how Voatz fits in with the current process, it’s best to break down the mailed-in absentee ballots, emailed absentee ballots from civilians, and emailed absentee ballots from military and overseas citizens.

• The voter requests to vote absentee just like they normally do. The only difference is they indicate they’d like to “vote mobile.”

• The voter then receives an invitation to download the Voatz app and verify their identity. This can be done by scanning a government-issued photo ID.

• Upon being verified, the voter uses their smartphone to vote. A paper ballot is then produced at their respective jurisdiction to be counted. This means the vote counters can integrate this ballot with the rest of the ballots.

• After the vote is counted, the voter receives a receipt confirming their selection, which is then signed.

• Once the election is complete, an audit confirms the tabulation matches voter intent.

That’s it. It’s a process that instills greater confidence in the voting process while also bringing it to the modern age. No more “hoping” that the ballots are handled appropriately. And no more worrying that non-citizens will illegally cast a ballot.

Throughout this process, Voatz incorporates various security measures such as biometrics, encryption, expunging identifying documents after the voter is verified, and facial recognition to verify the user. Ironically, this is significantly more secure than current identification processes.

Compounding Its Success

The results of this process are seen in the steady

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growth in election usage over the last few years.

Since 2016, the platform has witnessed 110,000 votes cast across 67 elections with experience ranging from states, cities, towns, universities, churches, and unions.

In 2018, West Virginia’s Secretary of State launched the nation’s first mobile voting pilot for military personnel, their families, and civilians stationed or working abroad (UOCAVA). Of the 183 eligible voters of the pilot, 144 sent a ballot via the app across 31 countries in all.

In 2019, the Denver Municipal election saw similar results with 120 ballots sent in. Feedback from the pilot was favorable from both the voters and election volunteers.

And 2020 was a significant leap forward for Voatz.

In light of COVID-19, the Michigan Democratic Party used Voatz to nominate candidates for the state supreme court among other positions. Nearly 2,000 delegates cast their vote on the platform.

Then in 2020, a Utah County resident became the first person to cast a vote for the president via a blockchain-based voting app on a personal cell phone.

This was a big moment that built on several earlier pilot programs held in the area. It also signaled Voatz is gaining more users and confidence in its software over time.

Voatz is still private. But it’s the company I’m excited about based on its growth over the years.

I track companies like this for years before they go public.

To date, Voatz has raised $11.38 million. It is still in its early days of adoption. But it won’t take much for the company to really take off, and there is clearly an excellent window leading up to the 2022 elections.

Voatz also received backing from Overstock’s wholly owned subsidiary, Medici Ventures, among others in its latest funding round. Medici Ventures has made a series of strategically important investments in the blockchain industry over the last few years, and Voatz is now part of its investment portfolio.

As I often say, technology has the power to address most of the world’s biggest challenges. That’s precisely what Voatz is doing. The company aims to reinstill confidence in electoral processes.

At The Near Future Report, we want to keep this company on our radar. It sits at the nexus of the tremendous growth we are experiencing in the blockchain industry and the lucrative government contracts in the voting solutions market.

Action to Take: We are adding Voatz to our watchlist as a potential future recommendation.

Regards,

Jeff Brown Editor, The Near Future Report

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