Blockchain: is it the next big thing

Image result for accounting ledger book

Old school ledger

I will start by answering the question in the title: I don’t know.

This post is directed principally at lawyers and legal academics, arguing that whatever the trajectory of Blockchain technology, it is sufficiently significant that we must attempt to understand it at some level at least to think critically about its potential implications.

Some lawyers, principally in Big Law firms with a large banking and finance client base, are deeply engaged in Blockchain including to suggest that it will open new fields of practice. Other lawyers understand but dismiss its potential. In my experience however, the majority is unaware of its existence or cannot really say what it is. This latter position is fair enough, because in my view it’s not easy to find a simple explanation that lacks breathless proclamations of a new world order.

I’m a newcomer, having bitten the bullet after I observed ‘chatter’ about Blockchain had reached a tipping point. In my social media feeds, in recent months it has moved from random mentions (innovators) to dedicated early-adopter status even reaching mainstream media… This must surely mean that it’s time for lawyers to become conversant in the technology and its possibilities (and limitations). This post is a low-tech overview of some of the issues, from a lawyer’s perspective.

What even is Blockchain

Blockchain technology creates a distributed ledger that purports to be secure, facilitating and recording encrypted transactions instantaneously. ‘Distributed’ means that the transaction ledger is not recorded in a central register (such as on a sole server). Instead, the system relies on a multitude of dispersed individual computers to simultaneously record the same encoded transaction. The latest transaction is confirmed and re-confirmed multiple times a day, with each confirmation being a ‘block’ and each blockĀ  is added to the existing ‘chain’.

(Yes, such an open system requires multiple participants – world wide – to provide their computing power to support this system. As an open access system, anyone is able to join.)

This system is deemed secure because of two things. The first is that a user holds an encryption key for their data. when they transact, they offer a coded key to the other party, enabling the other to read that transaction. Only that other party can read the data and therefore access that transaction. Secondly, because that transaction is recorded by multiple computers and then verified again and again by multiple participants, it is said to be impossible to hack the transaction to alter it. It would be simply too hard to hack every single computer in the system to change the transaction.

For lawyers, I suspect that a useful analogy is old system land title. We used to speak of the chain of title, and that while the latest deed (a ‘block’) would reveal the face of the title, its validity depended upon the chain before it. But old system title was problematic because it was private. Deeds could go missing or could be created fraudulently, disrupting the chain of title and impugning subsequent transactions. These insecure elements of old system title are theoretically resolved by Blockchain through its being public and distributed.

Still unclear?

When I decided I needed to understand Blockchain better, I chose to read Don and Alex Tapscott’s book, Blockchain Revolution. I had read Don Tapscott’s work before, and it is intelligible to me. The book is a utopian view, that charts the possibilities of the technology. As a lawyer, it was useful for me to consider the diverse potential (and apparent) applications.

But I was (and remain) aware that the book is utopian. It does not answer all questions for me, but I have used it as my starting point to identify what I perceive to be issues surrounding the technology.

Ideology abounds

My purpose in investigating Blockchain is to attempt to understand the potential of this technology in legal applications. Tapscott and Tapscott point out for example, its use in recording copyright and tracking licensed use; in ‘documenting’ (through code) what is describe as irregular land titles (not an issue in Australia, but a big issue in some jurisdictions); and its most readily identifiable application, in finance. (Many will have heard of ‘cryptocurrency‘ and perhaps the most widely known, Bitcoin.)

There are other potential applications. As a means of recording data, Tapscott and Tapscott imagine a world in which citizens hold their own information on the Blockchain, rather than in centralised government registers. Birth certificates, tax records…all in control of the individual and shared when necessary via encrypted link. They imagine voting on Blockchain: holding politicians to account through tracking promises and their delivery via an accounting on this distributed ledger. Or juries, crowd sourced through the Blockchain and making decisions about disputes that have legal consequences…

The Tapscotts point, I think, is one of personal liberty and privacy whereby one’s own information is protected and will only be shared through the exercise of personal choice, and through devolved governance in a more participatory democracy. This provides some hints into the liberal or libertarian perspective on Blockchain. Looking deeper into Blockchain commentary than the Tapscotts’ work reveals the ideological motivation for cryptocurrency and the evolution of the technology. ‘Blockchain was built for peaceful anarchy and freedom.’ For adherents of this view, faith is invested in the ‘neutrality’ of code – it is ‘only maths’ – and it overcomes the partisanship and impositions of government.

Investigating the technology, and considering its implications, I think poses a challenge for the law and for lawyers. Theoretically, for some the intent behind this technology is in opposition to the tenets of justice and governance embedded within our law and legal system. The technology is neither bad nor good. But in exploring the potential of the technology and its applications, I think we need to be aware of the positions adopted by those who commentate. We must also be mindful of our own ideological standpoint – which is never neutral.

Is it the future?

To return to my question, I don’t know. At the moment I navigate between the utopian view, the skeptics, and the naysayers – including those who work in tech and understand Blockchain technology far better than I do. These are not anti-technologists, but are rightly skeptical about so many of the claims made about Blockchain.

This makes it easy for the profession to dismiss the technology as hopelessly utopian or unnecessarily disruptive. I think though that to do so uncritically is to turn away genuine possibilities for useful and positive reform. Reform how? I don’t know yet – although some claims seem far-fetched to me. For example, to suggest that Blockchain could or should replace our Torrens system of land titles fails to engage with a number of fundamental issues. (More on that in future posts.)

In the meantime, I think it is the responsibility of the profession (in all its guises) at least to attempt to come to grips with this technology and to think critically about our legal system and its future.

 

 

 

 

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3 thoughts on “Blockchain: is it the next big thing

    • Thanks for the feedback Melissa. I agree that it seems daunting. I hope to write more posts on the topic as I work to get my head around the issues and possibilities.

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