- Blockchain technology, commonly known as blockchains, are a hot topic. Most people do not understand them, and trust them even less. Blockchain was originally associated with the crypocurrency, Bitcoin, which has resulted in Blockchain garnering a bit of an ambiguous reputation. Most people again don’t understand Bitcoin, whereas others distrust it.
However, there is no denying that Bitcoin was a major turning point, and a major part of that was blockchain. Without blockchain there would be no bitcoin, but now the blockchain has outgrown its crypocurrency origins. Blockchain is now being sought after by a number of other technologies and businesses. They see great possibilities for the Blockchain, but the question this raises is in regard to the legal implications that it faces. As there are a number of questions related to Blockchain, let us first understand what a Blockchain is before getting into its legal implications.
What is a Blockchain?
The blockchain was originally invented by Satoshi Nakamoto in 2008. It was to serve as a public transaction ledger of the cryptocurrency bitcoin. Basically, as a ledger, it would record the creation of a bitcoin, as well as any and all transactions conducted using that cryptocurrency.
According to Don & Alex Tapscott, authors Blockchain Revolution (2016), “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Basically, a Blockchain is a growing list of records, called blocks. These blocks are linked using cryptography, thus making them secure. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. In layman terms, it includes a summary of the previous block, the transaction information, and the time at which the transaction takes place. This ensures that the blockchain has a true and complete list of all transactions that take place.
What are the Benefits of Blockchain?
The primary benefit of a Blockchain is that it cannot be edited or changed. Hence, it creates an honest list of records, one that unlike other technologies cannot be modified or backdated. This makes is very secure, which is why a number of banks and other financial corporations are looking to incorporate Blockchains into their own businesses for more secure transactions.
Another benefit of Blockchain is that it does not require a large network or server to process. Blockchain is a peer to peer network, which means that the device that does the transaction is also the one that codes the data and links it into a block. Hence, no large processing power is required. This significantly saves the business a lot of money and manpower.
Blockchain is also readable, which means that anyone can access the blockchain and see which transactions take place when. This results in greater transparency and access to transaction lists. The access to the Blockchain can be open to the public or limited to people who work at the company.
This is just a few reasons why businesses and corporations are interested in incorporating Blockchain. Still whether or not they will be able to incorporate blockchains, and the question of how to do so leads us to the main point: the legal implications of Blockchain.
What are the legal implications of Blockchain?
There are many legal implications that Blockchain faces. We’ll attempt to address the most major concerns.
The primary legal implication for a blockchain is the fact that it is still a fairly new technology. Most of the general public either don’t know of Blockchain or don’t understand it. Hence, the laws and regulation that govern this technology is limited at best. These regulations date back to older technology and have a blanket coverage over technology in general. They need to be updated in order to effectively address Blockchains.
The regulations that do exist can be categorized into two categories: enabling and prohibitive. Enabling regulations enable blockchain technology to be more fully utilized for all of its various use cases. On the other hand, most laws, rules and regulations prohibit or restrict certain types of activities, or require certain businesses to behave in a certain way. These mostly limit or prohibit the usage of Blockchains.
Most of the financial businesses, which are the primary types of business looking to incorporate Blockchains, are regulated by Securities Law. Securities Law regulate how exactly a financial business must conduct its business, as well as the requirements that the business, its holding, and its products must meet. Securities Law is still primarily based on old law and how things have always been done. It does not take into consideration newer technologies such as Blockchains. This needs to be changed, so as to allow a financial business to modify its business plan to incorporate Blockchains.
Many people still don’t trust crypocurrencies or any technologies related to it. In fact, they don’t trust new technology in general. While some countries are faster to accept new technologies, others disregard them. For example, China recently banned the ability to operate a cryptocurrency exchange. This really hampers the acceptance and adoption of technologies, especially technologies such as Blockchains.
The major concern with Blockchains is the fact that they are still fairly new technology. The world is changing quickly these days and wants to incorporate newer and better technology faster. This technology is usually more enhanced and makes things easier. But the problem is that technology can change in the matter of a few years, sometimes even in a few months. Older establishments such as law and securities, including older establishments such as banks and securities exchanges are not quick to change. They like the old way and stick adamantly to the way things have always been done. Not to mention that the heads of these institutions are nearly always old men over the age of 50, men who do not take lightly to change. Change in law and securities can take years. Hence, the adoption of newer technologies such as Blockchains is facing increasing hurdles especially in law and regulation. Hurdles that need to be overcome if more businesses want to take advantage of newer technologies such as Blockchains.
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