The Blockchain is a revolutionary technology and a hot topic for discussion but what is it?
In essence, it is simply a database, a ledger of any virtually recordable information (for example the transfer of Bitcoins) that constitute the ‘blocks’, which are then ‘chained’ together to form a cohesive record of that information.
Why is it revolutionary then? This chain of blocks is distributed amongst computers all around the world always competing to validate the next block based on a validation method agreed on by the majority. This joint feature, combined with high level cryptography, insures the immutability of the chain and makes it extremely difficult to attack or corrupt the information contained therein.
Its first implementation that went viral is Bitcoin, a digital currency made available by this ‘distributed ledger technology’. The attention that bitcoin attracts is rather due to its high price and even higher volatility, but it is important to mention that the technology it uses in its current form is rather an outdated one.
Many of you might have heard of Ethereum, Ripple, Iota etc. These ‘altcoins’ use newer technologies such as ‘smart contracts’ (auto-executing contracts with pre-programmed conditions), new mining algorithms that bypass the vast consumption of energy associated with Bitcoin and new network systems that do not consist of a single chain.
The technology has even wider ranging implications when we look outside of the fintech area. Data protection regulation GDPR, as we mentioned in a previous article, is increasingly stringent and at first sight directly opposes blockchain technology, in which information is held immutably on a global network. The regulation soon coming into force contains elements such as the ‘right to be forgotten’, limited data transfers, extraterritorial jurisdiction etc. that aim to ensure the adequate protection of private data. On the other hand, it also encourages encryption and pseudonomysation, which are fundamental concepts in the blockchain technology.
On the field of law, the distributed ledger technology has many applications that can help us improve and make the handling of information more efficient:
– Centrally held databases may soon be easily accessible, while maintaining their security;
– Audits may shorten, become more accurate and transparent;
– Certifying information may become faster and more precise by implementing a kind of ‘digital notary’;
– Encoding complex business rules with autonomous software agents may enhance business efficiency and the automatic execution of event-triggered smart contracts may give us more certainty.
These technologies have a high potential to revolutionise many aspects of our lives, and may be available to us even sooner than what we think, however it is important to carefully scrutinise these technologies before applying them and relying on them completely.
It is desirable the legislator to intervene promptly in adapting the current legislation in order to be abreast of the rapid technological changes.