“The first generation of the digital revolution brought us the
Internet of information. The second generation — powered by
blockchain technology — is bringing us the Internet of value: a new
platform to reshape the world of business and transform the old
order of human affairs for the better.
Blockchain is a vast, global distributed ledger or database
running on millions of devices and open to anyone, where not just
information but anything of value money, but also titles, deeds,
identities, even votes can be moved, stored and managed
securely and privately. Trust is established through mass
collaboration and clever code rather than by powerful
intermediaries like governments and banks.”
– Dan Tapscott, author of Blockchain Revolution: How the
Technology Behind Bitcoin Is Changing Money, Business and the
World.
Dear fellow lawyers, there is yet another tech term we should
become familiar with: blockchain. I know, it’s becoming
overwhelming, all the technical terms legal professionals must add
to our lexicon.
But if you want to survive, or dare I say thrive, as a 21st
century lawyer, you need to know at least three things about
blockchain:
- What is it?
- How is it impacting your clients?
- How it may impact the legal profession?
What Is Blockchain
If you’ve heard of blockchain it’s most likely been in the
context of the digital currency bitcoin — blockchain is the
technology upon which bitcoin transactions are built. In essence,
blockchain is a distributed ledger (or register) made up of
digitally recorded and encrypted (cryptographically hashed) data in
the form of blocks, which when connected via the distributed
network of computers storing the blocks, form the blockchain.
Being distributed across a network of computers, the ledger is
not under any single control and thus operates by consensus. This
is quite different from a traditional transaction ledger — one that
is typically maintained by one entity (e.g. a bank) and audited by
another entity (e.g. a trusted intermediary). In a blockchain, all
parties have a copy of the ledger and can confirm in real time the
status of the transaction.
What Lawyers Need To Understand
blockchain creates a real-time digital record verifying that a
transaction containing certain data happened at a certain time and
in a certain order.
Further, integrity of the transaction can be trusted due to two
of blockchain’s fundamental characteristics: it is immutable and
highly hack-resistant. This translates into a very high level of
data integrity — once data enters the blockchain, it is resistant
to alteration, hacking, or deletion. Let’s explore these two
characteristics.
Blockchain Is Immutable
As each block of data is created in the blockchain, the block is
time-stamped. A block of data in the chain can be added to the
chain only after the time stamp is applied and verified by the
distributed computers across the chain.
The practical effect of time-stamping is that a block of data
can never be changed retrospectively. This means that each block in
the chain creates an accurate, time-stamped record as to that block
– when it was added, and in what order it was added. If an attempt
is made to change any data in a block already added to the chain,
it is rejected by the network of computers connecting the blocks in
the chain. The network won’t approve changes to data in a block
that has already been verified as to content and timestamp, as this
would have the effect of breaking the chain. Thus, the blockchain
is immutable.
Blockchain Is Highly Hack-Resistant
To date, a blockchain itself has yet to be hacked. Recall that
blockchain is the underlying technology. Systems built on top of
blockchain (such as cryptocurrency exchanges) have been hacked. But
the blockchain itself has not.
Understanding what makes blockchain resistant to hacking is
important from a legal perspective, so bear with me as we delve
into just a bit more of the technical minutiae.
Recall that blockchain is a distributed ledger, meaning that the
blocks of data comprising the ledger are spread across a network of
computers that could be located anywhere in the world. Each
computer (referred to as a node) holds all or part of the entire
blockchain, and applies the particular blockchain’s computational
algorithm to verify a block and permit it to be added to the chain.
This is happening simultaneously across the network, making it
(theoretically, at least) next to impossible for hackers to attack
the chain, since each instance of the data is being held in many
places all at one time, and a block may be verified and added to
the chain by any number of nodes.
Blockchain also is hack-resistant due to how the data in the
chain is stored and transferred. Data added to the chain is
cryptographically “hashed,” meaning that a short digest of the data
is created. It is this hash of data that is stored in a block and
transferred in encrypted form via the blockchain — not the actual,
underlying data itself. As a digest, the hashed data can’t be
decrypted to reproduce the full underlying document or transaction
data. However, within the chain, the hash can verify a copy of the
underlying document or transaction existing outside of the
blockchain.
What does this mean, for practical purposes? First, if a hack to
a block in the chain is attempted, it doesn’t expose the underlying
data within the document or transaction because the hashed data is
simply a digest and not a complete record of the data. Thus, the
underlying data is not exposed to potential hacking.
Second, because the transaction ledger is stored across a
distributed network of computers, redundancy is created. The
underlying, hashed data is stored simultaneously across multiple
machines, making it infinitely more difficult to hack.
These characteristics help ensure both the privacy and
authenticity of the underlying data within the blockchain, two
properties that are highly relevant to legal transactions.
CLICK TO ENLARGE
And it’s not just data that can be transferred via blockchain.
Cryptocurrencies use blockchain to transfer economic value. How
about transferring energy? Music? Real estate titles? It’s either
happening, or about to. Time to discuss why lawyers should care
about blockchain.
How Will Blockchain Impact Your Clients
It’s disrupting, or has the potential to disrupt, a number of
industries that rely heavily on lawyers’ counsel and advice. And
this disruption will create opportunities for us to help, as
industries wrangle with how disruption impacts everything from
operations to regulatory and legal structures. I predict these
disruptions will create niche practice areas for those lawyers who
choose to understand blockchain (more on that in Part II of this
series).
I offer but a few examples of blockchain’s current and potential
impact on business and industry:
Finance
One word: fintech. The financial industry is facing immense
disruption thanks to fintech, which is the application of
technological innovation to traditional activities of the financial
industry – ranging from banking to investing to payment processing.
Think Bitcoin, PayPal, Robinhood, Prosper, LearnVest — just to name
but a very few examples.
There are dozens of blockchain-based fintech companies offering
a range of products and services. A few examples of how blockchain
in fintech is disrupting the status quo in finance: 21.co wants to
build the machine-payable web with bitcoin. Skuchain is building a
supply-chain network on a blockchain structure, to govern all
phases of trade transactions. T Zero’s tagline is “the trade is the
settlement” — it seeks to take the (considerable) friction out of
settling securities transactions using blockchain.
Blockchain is a natural fit for the financial services industry
for obvious reasons: it self-verifies and authenticates
transactions, and it’s hack-resistant. Bitcoin and other
cryptocurrencies are among the first to use blockchain to support
friction-less financial transactions, but they are far from the
last.
Energy
Highly-regulated, the energy industry is being disrupted by
startups using blockchain technology such as Transactive Grid,
which created a peer-to-peer market for the buying and selling of
energy. Other blockchain-based startups in the energy space include
Grid Singularity and SolarCoin.
These disruptors will present a challenge for the current
regulatory structure. And lawyers who understand blockchain will
have the unique opportunity to shape the future of the energy
industry.
Music
In the near future, all transactions involving the creation and
sale of music may very well take place on a blockchain structure.
Consider Resonate, which uses blockchain to create a new kind of
music streaming platform aiming to give artists greater control and
a greater share of profit. Or Ujo Music, which seeks to build an
“open music ecosystem” on the Ethereum blockchain. Pledge Music is
a global direct-to-fan platform that allows artists to completely
bypasses traditional “friction” in the music industry (record
labels, publishers, distributors).
By its very nature, blockchain is uniquely suited to address the
piracy, control and monetization issues of music that have become
rampant in the digital age. To lawyers representing traditional
players in the music industry: your clients need you to understand
how startups like Resonate, Ujo Music, and Pledge Music are
changing the rules for how music is protected and monetized.
Real Estate
Real estate transactions are ripe for improvement: the mountains
of paperwork, lack of transparency during and after transactions,
and opportunities for error in public records – all can be
addressed vis a vis blockchain. Enter Ubitquity, which is creating
a blockchain-based platform to securely record, track, and transfer
deeds, to help “real estate, title, and mortgage companies benefit
from a clean record of ownership, reducing future title search
time, increased confidence, and technology.”
The Midasium Blockchain proposes to be the “blockchain of real
estate,” with the goal of creating “a global shared distributed
ledger system for securely executing and recording real estate
financial transactions over the internet.”
As Midasium’s site notes, blockchain’s characteristics align
quite well with the requirements of real estate transactions:
durability, transparency, immutability, longevity, and reliability
and availability of data. This likely is why the country of Sweden
is considering the placement of its entire land registry system on
a blockchain.
If you do any legal work for clients involved in any aspect of
real estate transactions, you need to understand that things are
about to change radically thanks to blockchain.
Healthcare
One clear application of blockchain is its use to manage patient
medical data (electronic medical records or EMRs) — for one example
see MedRec. Gem, Another blockchain startup, has created Gem
Health, which seeks to apply blockchain to a host of healthcare use
cases, including EMRs, wellness apps, global patient ID software,
and medical inventory management.
The healthcare technology company Pokitdot has created DocChain,
the company’s implementation of blockchain for healthcare data.
DocChain creates a single and secure network that connects all the
stakeholders in a patient’s care — from EMRs, to their medical
device sensors, to the pharmacy filling their prescriptions.
Hashed Health, a Nashville-based startup, is creating a
consortium of healthcare companies to leverage blockchain
technology for the purpose of advancing innovation industry-wide.
Hashed Health’s website identifies a number of reasons why
blockchain is an ideal technological medium for the healthcare
industry: blockchain reduces costs, increases speed, increases
security, reduces fraud, and reduces risk. (Remember these five
benefits – they are highly relevant to blockchain’s impact on the
legal profession, which I’ll cover in Part II of this series.)
These benefits clearly illustrate the disruptive impact that
blockchain can have on the heretofore strictly siloed maintenance
and transfer of medical data. It’s an industry that has profited
mightily from the friction created by middlemen and regulations.
The benefits of blockchain clearly illustrate why lawyers serving
the healthcare industry owe a duty to their clients to understand
this technology and its import for the healthcare industry.
How May Blockchain Impact The Legal Services
Industry?
I’m saving the legal industry, and how it will be disrupted by
blockchain, for Part II of the blockchain for Lawyers 101 series.
The future of blockchain and law is at once imminently disruptive
and ripe for opportunity. Stay tuned.
This article was first publish on lawtechnologytoday
“The first generation of the digital revolution brought us the
Internet of information. The second generation — powered by
blockchain technology — is bringing us the Internet of value: a new
platform to reshape the world of business and transform the old
order of human affairs for the better.
Blockchain is a vast, global distributed ledger or database
running on millions of devices and open to anyone, where not just
information but anything of value money, but also titles, deeds,
identities, even votes can be moved, stored and managed
securely and privately. Trust is established through mass
collaboration and clever code rather than by powerful
intermediaries like governments and banks.”
– Dan Tapscott, author of Blockchain Revolution: How the
Technology Behind Bitcoin Is Changing Money, Business and the
World.
Dear fellow lawyers, there is yet another tech term we should
become familiar with: blockchain. I know, it’s becoming
overwhelming, all the technical terms legal professionals must add
to our lexicon.
But if you want to survive, or dare I say thrive, as a 21st
century lawyer, you need to know at least three things about
blockchain:
- What is it?
- How is it impacting your clients?
- How it may impact the legal profession?
What Is Blockchain
If you’ve heard of blockchain it’s most likely been in the
context of the digital currency bitcoin — blockchain is the
technology upon which bitcoin transactions are built. In essence,
blockchain is a distributed ledger (or register) made up of
digitally recorded and encrypted (cryptographically hashed) data in
the form of blocks, which when connected via the distributed
network of computers storing the blocks, form the blockchain.
Being distributed across a network of computers, the ledger is
not under any single control and thus operates by consensus. This
is quite different from a traditional transaction ledger — one that
is typically maintained by one entity (e.g. a bank) and audited by
another entity (e.g. a trusted intermediary). In a blockchain, all
parties have a copy of the ledger and can confirm in real time the
status of the transaction.
What Lawyers Need To Understand
blockchain creates a real-time digital record verifying that a
transaction containing certain data happened at a certain time and
in a certain order.
Further, integrity of the transaction can be trusted due to two
of blockchain’s fundamental characteristics: it is immutable and
highly hack-resistant. This translates into a very high level of
data integrity — once data enters the blockchain, it is resistant
to alteration, hacking, or deletion. Let’s explore these two
characteristics.
Blockchain Is Immutable
As each block of data is created in the blockchain, the block is
time-stamped. A block of data in the chain can be added to the
chain only after the time stamp is applied and verified by the
distributed computers across the chain.
The practical effect of time-stamping is that a block of data
can never be changed retrospectively. This means that each block in
the chain creates an accurate, time-stamped record as to that block
– when it was added, and in what order it was added. If an attempt
is made to change any data in a block already added to the chain,
it is rejected by the network of computers connecting the blocks in
the chain. The network won’t approve changes to data in a block
that has already been verified as to content and timestamp, as this
would have the effect of breaking the chain. Thus, the blockchain
is immutable.
Blockchain Is Highly Hack-Resistant
To date, a blockchain itself has yet to be hacked. Recall that
blockchain is the underlying technology. Systems built on top of
blockchain (such as cryptocurrency exchanges) have been hacked. But
the blockchain itself has not.
Understanding what makes blockchain resistant to hacking is
important from a legal perspective, so bear with me as we delve
into just a bit more of the technical minutiae.
Recall that blockchain is a distributed ledger, meaning that the
blocks of data comprising the ledger are spread across a network of
computers that could be located anywhere in the world. Each
computer (referred to as a node) holds all or part of the entire
blockchain, and applies the particular blockchain’s computational
algorithm to verify a block and permit it to be added to the chain.
This is happening simultaneously across the network, making it
(theoretically, at least) next to impossible for hackers to attack
the chain, since each instance of the data is being held in many
places all at one time, and a block may be verified and added to
the chain by any number of nodes.
Blockchain also is hack-resistant due to how the data in the
chain is stored and transferred. Data added to the chain is
cryptographically “hashed,” meaning that a short digest of the data
is created. It is this hash of data that is stored in a block and
transferred in encrypted form via the blockchain — not the actual,
underlying data itself. As a digest, the hashed data can’t be
decrypted to reproduce the full underlying document or transaction
data. However, within the chain, the hash can verify a copy of the
underlying document or transaction existing outside of the
blockchain.
What does this mean, for practical purposes? First, if a hack to
a block in the chain is attempted, it doesn’t expose the underlying
data within the document or transaction because the hashed data is
simply a digest and not a complete record of the data. Thus, the
underlying data is not exposed to potential hacking.
Second, because the transaction ledger is stored across a
distributed network of computers, redundancy is created. The
underlying, hashed data is stored simultaneously across multiple
machines, making it infinitely more difficult to hack.
These characteristics help ensure both the privacy and
authenticity of the underlying data within the blockchain, two
properties that are highly relevant to legal transactions.
CLICK TO ENLARGE
And it’s not just data that can be transferred via blockchain.
Cryptocurrencies use blockchain to transfer economic value. How
about transferring energy? Music? Real estate titles? It’s either
happening, or about to. Time to discuss why lawyers should care
about blockchain.
How Will Blockchain Impact Your Clients
It’s disrupting, or has the potential to disrupt, a number of
industries that rely heavily on lawyers’ counsel and advice. And
this disruption will create opportunities for us to help, as
industries wrangle with how disruption impacts everything from
operations to regulatory and legal structures. I predict these
disruptions will create niche practice areas for those lawyers who
choose to understand blockchain (more on that in Part II of this
series).
I offer but a few examples of blockchain’s current and potential
impact on business and industry:
Finance
One word: fintech. The financial industry is facing immense
disruption thanks to fintech, which is the application of
technological innovation to traditional activities of the financial
industry – ranging from banking to investing to payment processing.
Think Bitcoin, PayPal, Robinhood, Prosper, LearnVest — just to name
but a very few examples.
There are dozens of blockchain-based fintech companies offering
a range of products and services. A few examples of how blockchain
in fintech is disrupting the status quo in finance: 21.co wants to
build the machine-payable web with bitcoin. Skuchain is building a
supply-chain network on a blockchain structure, to govern all
phases of trade transactions. T Zero’s tagline is “the trade is the
settlement” — it seeks to take the (considerable) friction out of
settling securities transactions using blockchain.
Blockchain is a natural fit for the financial services industry
for obvious reasons: it self-verifies and authenticates
transactions, and it’s hack-resistant. Bitcoin and other
cryptocurrencies are among the first to use blockchain to support
friction-less financial transactions, but they are far from the
last.
Energy
Highly-regulated, the energy industry is being disrupted by
startups using blockchain technology such as Transactive Grid,
which created a peer-to-peer market for the buying and selling of
energy. Other blockchain-based startups in the energy space include
Grid Singularity and SolarCoin.
These disruptors will present a challenge for the current
regulatory structure. And lawyers who understand blockchain will
have the unique opportunity to shape the future of the energy
industry.
Music
In the near future, all transactions involving the creation and
sale of music may very well take place on a blockchain structure.
Consider Resonate, which uses blockchain to create a new kind of
music streaming platform aiming to give artists greater control and
a greater share of profit. Or Ujo Music, which seeks to build an
“open music ecosystem” on the Ethereum blockchain. Pledge Music is
a global direct-to-fan platform that allows artists to completely
bypasses traditional “friction” in the music industry (record
labels, publishers, distributors).
By its very nature, blockchain is uniquely suited to address the
piracy, control and monetization issues of music that have become
rampant in the digital age. To lawyers representing traditional
players in the music industry: your clients need you to understand
how startups like Resonate, Ujo Music, and Pledge Music are
changing the rules for how music is protected and monetized.
Real Estate
Real estate transactions are ripe for improvement: the mountains
of paperwork, lack of transparency during and after transactions,
and opportunities for error in public records – all can be
addressed vis a vis blockchain. Enter Ubitquity, which is creating
a blockchain-based platform to securely record, track, and transfer
deeds, to help “real estate, title, and mortgage companies benefit
from a clean record of ownership, reducing future title search
time, increased confidence, and technology.”
The Midasium Blockchain proposes to be the “blockchain of real
estate,” with the goal of creating “a global shared distributed
ledger system for securely executing and recording real estate
financial transactions over the internet.”
As Midasium’s site notes, blockchain’s characteristics align
quite well with the requirements of real estate transactions:
durability, transparency, immutability, longevity, and reliability
and availability of data. This likely is why the country of Sweden
is considering the placement of its entire land registry system on
a blockchain.
If you do any legal work for clients involved in any aspect of
real estate transactions, you need to understand that things are
about to change radically thanks to blockchain.
Healthcare
One clear application of blockchain is its use to manage patient
medical data (electronic medical records or EMRs) — for one example
see MedRec. Gem, Another blockchain startup, has created Gem
Health, which seeks to apply blockchain to a host of healthcare use
cases, including EMRs, wellness apps, global patient ID software,
and medical inventory management.
The healthcare technology company Pokitdot has created DocChain,
the company’s implementation of blockchain for healthcare data.
DocChain creates a single and secure network that connects all the
stakeholders in a patient’s care — from EMRs, to their medical
device sensors, to the pharmacy filling their prescriptions.
Hashed Health, a Nashville-based startup, is creating a
consortium of healthcare companies to leverage blockchain
technology for the purpose of advancing innovation industry-wide.
Hashed Health’s website identifies a number of reasons why
blockchain is an ideal technological medium for the healthcare
industry: blockchain reduces costs, increases speed, increases
security, reduces fraud, and reduces risk. (Remember these five
benefits – they are highly relevant to blockchain’s impact on the
legal profession, which I’ll cover in Part II of this series.)
These benefits clearly illustrate the disruptive impact that
blockchain can have on the heretofore strictly siloed maintenance
and transfer of medical data. It’s an industry that has profited
mightily from the friction created by middlemen and regulations.
The benefits of blockchain clearly illustrate why lawyers serving
the healthcare industry owe a duty to their clients to understand
this technology and its import for the healthcare industry.
How May Blockchain Impact The Legal Services
Industry?
I’m saving the legal industry, and how it will be disrupted by
blockchain, for Part II of the blockchain for Lawyers 101 series.
The future of blockchain and law is at once imminently disruptive
and ripe for opportunity. Stay tuned.
This article was first publish on lawtechnologytoday
Read more https://www.nairalaw.com/lawyers-familiar-with-cryptocurrency-bitcoin/