Lawyers follow blockchain developments with great interest. The underlying blockchain technology will lead to a revolution on several fronts.
From the point of view of many lawyers, blockchain will also change the legal world. Lawyers enlisted with LA Century Law (https://lacenturylaw.com) recognize these changes and thus take time to understand blockchain as a whole. Lawyers often receive questions related to bitcoin, ICO, and the AFM. Thus, it is their duty to review these questions and provide an answer based on their legality.
It is striking that the media often states that it will mainly concern virtual money (bitcoin or ethereum, or other altcoins), but little is written about the underlying technology, blockchain. Here too, the financial supervisor keeps an eye on developments and (fortunately) recognizes the possibilities.
What is Blockchain?
Blockchain is the structure behind (among other things) the bitcoin network (and now various blockchain networks). It’s a tricky subject but there’s a simple explanation. The blockchain consists of an infrastructure of transactions, which are validated by the network. These transactions are performed within a blockchain network, a decentralized database in which all transactions are registered and validated. The reliability of the transactions is continuously validated by the network itself.
Nodes (computers within a blockchain network) verify all information through algorithmic calculations and then agree on it. When all nodes together have reached consensus, then they agree to the transaction and it is added to the chain of the blockchain as a valid block. Sounds complicated, but is actually simple as it is.
Blockchain: the new internet or is it just hype?
Blockchain is often difficult to handle because blockchain technology is not yet widely applied, but blockchain technology will be widely implemented in the next ten years. Sometimes a comparison is made with a ledger. Lawyers also use a third party (trusted third parties, such as a bank, notary, a broker) for a transaction, but that can change with blockchain technology.
Blockchain is a common, digital administration, in which the blockchain itself ensures the validation of every transaction. The transaction is presented online as a block and that block contains all the information about the transaction. This block is then checked by miners. The miners receive a small compensation for the work they provide. If the miners in the network decide that it is a valid transaction, the block is approved and added to the blockchain. That can be a transaction in money, but it doesn’t have to be.
The possibilities of blockchain are endless. Every transaction can take place via a blockchain; This includes providing certain services, wages, administration, everywhere that currently requires an intermediary, but broad applications can also be applied (controlling drones, robots, etc.).
The advantage of blockchain technology is that the network ensures that no fraudulent transactions can take place. These simply do not pass the control of the blockchain and the transaction does not take place. Moreover, the great advantage of a blockchain is that the transparent administration can always be found in detail. All transactions with data, balances, and properties can be found on the blockchain. That is why the term “single source of truth ” is used.
Blockchain lawyer about risks
At the moment we are still on the eve of the implementation of blockchain technology and it is regrettable that it is also being misused, but lawyers are convinced that the technology will be further evaluated and the world will have changed in ten years’ time. When applying Blockchain technology, privacy (the forthcoming European Regulation on personal data), the financial supervisor (the AFM and the DNB), errors in coding, etc. must also be considered.