A blockchain is literally a chain of blocks of data recording transactions, connected using digital, cryptographic signatures. Confusingly, blockchain technology is often referred to simply as “Blockchain” (with cap B) or as “the blockchain” (with the definite article prepended). No doubt this usage stems from its initially unique and most widely-known application as the technology behind Bitcoin which was the inspiration for subsequent implementations (which are sometimes known as altchains).
A blockchain is thus a form of database that can be equated with a traditional ledger, a term still used in the digital age to describe a record of accounting transactions. More widely, a ledger might describe a record of any sequence of transactions, such as land registrations or transfers of intellectual property.
The other central attribute of a blockchain database is that it is a distributed ledger, meaning that the ledger is not maintained by a central authority but is distributed amongst participants, such that each has access to the ledger whose copies are updated more or less in synchrony.
In Ledgers and Law in the Blockchain, Quinn DuPont and Bill Maurer summarise: “the key characteristics of a blockchain that make it a special kind of ledger and that are particularly appealing to developers and proponents are that it is: distributed, decentralized, public or transparent, time-stamped, persistent, and verifiable.”
A most important invention
The potential wider applications of blockchain technology dawned on the technologically informed during 2015 and have prompted some commentators to ask “Is Blockchain the most important IT invention of our age?” (John Naughton in the Guardian); and to refer to it as “The trust machine” (a leader in the Economist): “This innovation carries a significance stretching far beyond cryptocurrency. The blockchain lets people who have no particular confidence in each other collaborate without having to go through a neutral central authority. Simply put, it is a machine for creating trust.”
In a report published in January, Distributed ledger technology: beyond block chain, the Government Chief Scientist, Sir Mark Walport, set out how this technology could transform the delivery of public services and boost productivity: “Distributed ledger technology could provide government with new tools to reduce fraud, error and the cost of paper intensive processes. It also has the potential to provide new ways of assuring ownership and provenance for goods and intellectual property.”
A Strategist’s Guide to Blockchain is another accessible guide, focussed on the potential opportunities: “The distributed ledger technology that started with bitcoin is rapidly becoming a crowdsourced system for all types of verification. Could it replace notary publics, manual vote recounts, and the way banks manage transactions?”
… for lawyers
By now lawyers should be pricking up their ears. Indeed, according to the recent Gazette article Bitcoin technology heralds ‘smart contracts’ era, Timothy Hill, technology policy adviser at the Law Society, picking up on the report, said it is essential that lawyers are aware of the technology: “block chains – or distributed ledgers – are a powerful innovation that could have a profound impact on both the law and the provision of legal services. They could be used to declare wills, transfer property or create self-executing contracts. They also raise profound questions about the future balance between technical code and legal code.” (Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that obviate the need for a contractual clause.)
It’s a certainty that there will soon be blockchain applications for managing digital rights. In a “short but sweet” prediction for 2016, Simon Deane-Johns, consultant solicitor with Keystone Law and Chair of the SCL Media Board, foresees that “within two years one or more creative industries will agree the basis for using a blockchain or other distributed ledger technology to track the use of their work and fully account for royalties due.”
More and more people are coming to the same conclusion.
In the history of digital rights, the music industry has always set a leading example, so it’s no surprise to find a number of commentators suggesting that blockchain technology is the answer. The problem per Bitcoin for Rockstars: How Cryptocurrency Can Revolutionize the Music Industry is “simply that no central database exists to keep track of information about music. Specifically, there are two types of information about a piece of music that are critically important: who made it and who owns the rights to it”. And the solution, per How the Blockchain and VR Can Change the Music Industry is “if we could put every song’s MVD into a global decentralized database owned by all who interact with it, then this would start to solve a multitude of the music and content industry’s problems regarding ownership, payments and transparency.”
Eoin O’Dell expands on the blockchain’s potential application in the resale of digital goods in this Newsletter.
Further reading
Wikipedia: Block chain database
DuPont and Maurer: Ledgers and Law in the Blockchain
The Economist: The trust machine
GOV.UK: Distributed ledger technology: beyond block chain (the Walport report)
strategy+business: A Strategist’s Guide to Blockchain
Nick Holmes is Editor of the Newsletter. Email nickholmes@infolaw.co.uk. Twitter @nickholmes.
Image: Party Fever by Namecoin on Flickr
