Legal implications, questions, opportunities and risks
Blockchain is increasingly in the news, but still primarily as the underlying software used for cryptocurrencies such as Bitcoin. Many businesses have yet to realise its potential and the extensive ways in which blockchain can be used to make processes more efficient or to develop new service offerings, but momentum is gathering as its applications are more widely understood.
Decentralized technologies such as blockchain are expected to be the next big wave, comparable in many people’s eyes to the transformation that followed the development of the internet so a basic understanding of blockchain is essential.
However users need to be very clear about the legal implications, risks and opportunities that blockchain presents as well as its relative immaturity and current technological limitations including capacity.
What is blockchain technology?
At its simplest, blockchain involves recording information in a way that creates trust in the information recorded. The blockchain software is used to synchronize data stored in a distributed manner amongst peers on all the computers or servers (“nodes”) participating in a particular network. This allows for multiple records of identical data. Trust is created because all the nodes in the network control, check and consent to any additions (or changes) to what is recorded. Blockchain can be used for record keeping, transferring value (via cryptocurrencies or otherwise), and smart contracts to automatically execute a transaction when one or more pre-conditions are met.
The data once stored on the blockchain cannot just be manipulated or changed – it is in principle immutable. Every block contains a unique summary of the previous block in the form of a secure hash value – think of the way a jigsaw puzzle pieces fit together. And because each block is connected, the timing, order and content of transactions cannot be altered and blocks cannot be replaced unless all the nodes agree with the proposed change.
Please download the Thought Leadership Paper for more information or get in touch with Inger Bijloo.