Blockchain: A Legal Perspective

Introduction

The advantage with Blockchain, a type of DLT (Distributed Ledger Technology), is its decentralized, immutable, tamper-proof feature. As we already know, it is a decentralized database of transaction data that is shared, replicated, and synchronized by multiple member participants across multiple nodes of a network (Oh and Shong,2017). And every single transaction is recorded with an immutable cryptographic signature called a hash, containing a timestamp, a link to the previous block, and transaction data (Mahankali & Chaudhary, 2020).

It provides verifiable integrity for transactions, as well as transactional security, all of which is conducted within a resilient system that is believed to be impervious to hacking, thereby preventing false and counterfeit transactions. Given that it is unalterable, keeping permanent records of transactions is possible (Koldemir, 2020).

It can be private/permissioned network with a closed ecosystem requiring permission to join and run on proprietary software; or could be a public (permissionless) network running on opens source software such as Hyperledger Fabric and Ethereum; or a hybrid platform. All these have varying levels of participation and transaction access. They also have their limitations of scalability, privacy, access and security, and centralization.

Different types of data viz., medical records, insurance records, real estate records, Intellectual Property documentation, supply chain details and any kind of data that requires a time stamp system and transaction validation can be stored on the network (Oh et al., 2017). Every entity on the Blockchain plays a part in maintaining the network and the data it hosts (Kommadi, 2022).

In this chapter, we look at the opportunities and challenges that Blockchain and other distributed ledger technologies have introduced, the regulatory challenges they present and how we can harness the potential of this technology while managing possible risks.

Blockchain technology interests lawyers and policy makers for its ability to create authentic records of transactions with little or no risk of vulnerability to exploitation. However, there are concerns and complexities involving practical applications of and the risks inherent in this technology (Iansiti & Lakhani, 2017). This chapter looks at Blockchain technology from a legal perspective and discusses the opportunities, risks and challenges that surround the use of this technology.

This chapter adopts a three pronged approach to discussing Blockchain technology; how it can be leveraged and the challenges that must be addressed before it can be adopted. The three areas of discussion are:

• 1.

  Legal and regulatory compliance issues;

• 2.

  The various business applications; possible risks and how they are addressed; and

• 3.

  The possibilities for harnessing this technology for well-being and welfare of the general public.

1. Legal And Regulatory Compliance

With emergence of Bitcoin on the scene, the underlying technology on which it runs, viz., Blockchain has generated tremendous interest in the business world in general and the financial sector in particular. Cryptoassets, Blockchain and smart contracts are set to change how we do business and provide services, across various sectors including the legal industry (European Economic and Social Committee, 2019).

The initial euphoria of being able to conduct transactions without need for trusted intermediaries has given way to a more cautious approach, recognizing the need for regulated markets in which Blockchain and other DLT can function effectively.

Blockchain and DLT, is disruptive technology at its best, offering exponential possibilities for growth, but given that it is still at an incipient stage, there is a call for regulation and building effective governance models (Tiwari and Pal, 2022). Only then can we harness its immense potential effectively, without adversely affecting the interests of stakeholders and the general public.

But new technologies introduce new legal issues. Here are a few of them: