Blockchain definition is not an easy task. Some of the people trying to define it will say that the process is something completely new and it does not store any of the information on a central location but in a chain of computers (blocks), but some of them will say that it is based on a very old way of communication and storage adapted for today’s digital era.
However, according to this library, the major elements of blockchain nowadays are commonly identified:
- It cannot be corrupted and altered – every node on the network has a copy of the digital ledger and, to add a transaction, the other nodes need to validate it, according to the so-called consensus mechanism. If there is no validation by the majority of the nodes, the transaction is not added to the ledger.
- It is decentralized – there is no central authority that has control of it, but – as outlined below – there are different types of blockchains with various features.
- It is secure – since it is not under the control of any authority/body and because of all the information on the chain is encrypted and linked to the previous ones, to hack the blockchain, an attacker should decrypt the majority of the nodes on the blockchain, which ensures an extremely high level of security.
- It relies on distributed ledgers – all users maintain the ledger, and therefore the computational power is distributed across them and is extremely transparent since the information is visible to any third party and participant.
- It ensures a faster settlement – since there is no intermediary in transactions, settlements are more rapid than traditional transactions operated by banks, but cannot be instantaneous, given the complicated procedure outlined above.
It is fully decentralized and there is no one authority that has the control.
According to Hossein Nabilou, a postdoctoral researcher at the University of Luxembourg, in Bitcoin governance, users may employ a variety of mechanisms to participate in the governance of the network.
Firstly, to resolve disputes in the Bitcoin network, unlike other political decision-making processes, in addition to open and free entry and exit, every participant can fork the codebase or the blockchain and create her version of Bitcoin and try to persuade other users to follow her version of the chain or a code. By providing for the technical possibility that the new chain maintains the history of the blockchain going back to the genesis block, as well as the fact that the holders of the legacy coins receive the new coins proportionate to their holdings in the legacy chain, Bitcoin is most open to the competition provided by forks.
Within such an idiosyncratic network, it appears that the ultimate decision is principally made by those who can successfully fork Bitcoin and convince the majority of users to shift to the new chain. In this regard, the users of the Bitcoin network seem to possess the ultimate authority that decides which software to install and run or which implementation to follow. By refusing to run the software proposed or implemented by developers, users can exert considerable influence in Bitcoin governance. Meanwhile, the possibility of forking and the prominent role of users in the process means that unlike many other modes of resolving the societal collective action problems, which ultimately rely on coercion, Bitcoin governance is based on deliberation, persuasion, volition, and choice. Find more details in his article.
This way of storing the information is highly secure and not a bit can be altered without a trace. Blockchain technology is often referred to as “tamper-proof.” This is generally because each new digital ‘block’ containing a record of transactions is connected to all preceding blocks. To tamper with any of the records contained in a block, a dishonest participant would need to change all subsequent blocks in the chain to avoid detection.
Given that blockchain is a decentralized ledger, there is no single point of failure that dishonest participants can override. Instead, they would require a huge amount of power to override and alter every node simultaneously. This is especially prominent in public blockchains where there can be any number of nodes existing anywhere in the world. Blockchain, therefore, presents a lower risk of attack than with centralized systems, in which key servers can be targeted and altered without a trace. Blockchain also uses advanced public-key cryptography to secure its data, which relies on users having two cryptographically matched keys. When someone wants to send a user a file, they send the file to a user’s public key. The file can then only be opened by the user’s correlating private key. Together these features make blockchain a very secure method of recording data according to this research paper. There is a relatively low risk of data tampering or data being intercepted compared to traditional methods of transfer and storage, making blockchain a risk management system.
As “Businessinsider” published, Bitcoin tends to get the most hype, blockchain, the underlying DLT powering the virtual currency, has a much broader range of use cases. Blockchain has found a home in nearly every industry, from financial services and payments to healthcare, energy, and property (even intellectual property) management. And many legacy institutions are now finding themselves challenged by tech-savvy upstarts proposing blockchain-based solutions. But despite its increasingly prevalent use among businesses and consumers, blockchain is still a nascent technology when it comes to regulation. Around the globe, as within the US, no consistent policy has yet evolved. Rather, countries have been left to their discretion — with some, like those in Europe transposing regulation into their national laws, and others shunning the technology altogether. The grey area is vast, as many countries are trying to balance building a society that fosters innovation and entrepreneurship with one that protects its citizens from crime, fraud, and other harm.
Jurisdictional boundaries are not a barrier for this technology,
but some issues should be considered.
Blockchain has the ability to cross jurisdictional boundaries as the nodes on a blockchain can be located anywhere in the world. This can pose a number of complex jurisdictional issues that require careful consideration in relation to the relevant contractual relationships as stated in this publication. The principles of contract and title differ across jurisdictions and therefore identifying the appropriate governing law is essential.
In a conventional banking transaction, for example, if the bank is at fault then irrespective of the transacting mechanism or location, the bank can be sued and the applicable jurisdiction will most likely be contractually governed. However, in a decentralized environment, it may be difficult to identify the appropriate set of rules to apply. At its simplest level, every transaction could potentially fall under the jurisdiction(s) of the location of each and every node in the network. Clearly, this could result in the blockchain needing to be compliant with an unwieldy number of legal and regulatory regimes. In the event a fraudulent or erroneous transaction is made, pinpointing its location within the blockchain could be challenging. The inclusion of an exclusive governing law and jurisdiction clause is therefore essential and should ensure that a customer has legal certainty as to the law to be applied to determine the rights and obligations of the parties to the agreement and which courts will handle any disputes.
To conclude: A big change, such a blockchain technology, is not easy to make. It will take additional challenges for different areas of law practice and its applicability. Therefore, it is most likely that at some point, it may change the way legal services are performed in total. Most of the lawyers will be put in a new position in the process and that will revolutionize the legal practice in the future making countries and their legal systems to cooperate more closely. But, on one hand, having this kind of interaction as everyday practice makes easier to prove facts that cannot be changed without a trace. On the other hand, to see all the changes made chronologically in a more transparent, accessible and uncomplicated way. All this makes the process of determining responsibility simpler and easily accessible.