Business Breakfast Club May Summary: Blockchain and Cryptocurrency
This month at Business Breakfast Club, Shaneel Parikh and Harry Hoang of Tailored Accounts, discussed blockchain and distributed ledger technology. Whilst Bitcoin and cryptocurrency has certainly created much hype and challenged the legal and financial landscape, Blockchain is much bigger than Bitcoin. It has the potential to revolutionise multiple industries as well as alter our social and economic infrastructure.
Some of the topics covered:
What is Blockchain Technology?
Blockchain is a continuously growing list of records or transactions which are linked and secured in blocks using cryptography. These blocks subsequently reside within the ledger amongst all users. Important to an understanding of blockchain is a consideration of what distributed ledger technology is as whilst every blockchain is a distributed ledger, not every distributed ledger, is a blockchain.
What is Distributed Ledger Technology
A distributed ledger is a database of transactions (or data) that is shared across a network of participants. It is “distributed” because the record is held by each of the users of the network, and when a record is added, each user’s copy is updated with new information both instantaneously and simultaneously.
What types of Blockchain Systems Exist and What are their Governance Structures?
In practice, there are two key types of “Blockchain” systems that exist: permissioned or private blockchain and unpermissioned or public blockchain systems. Whilst the courts are yet to consider the legal structure of either system, it is important to consider how the courts could analyse such structures and in particular, which players in such systems the court may ultimately deem liable if something goes wrong.
Benefits of Blockchain
- each record is near real time and therefore provides an accurate and time-stamped record of a transaction;
- public blockchain systems are widely accessible to any individual with a computer;
- it uses DLT, each network node verifies the transaction and holds an updated copy therefore providing an immutable record ;
- it is censorship resistant meaning that once it a transaction is made and paid for, it cannot be subject to third party intervention; and
- each transaction is irreversible.
With the recent changes to the Privacy Act, there are certain considerations for Privacy with blockchains. For the owners of private blockchain systems, there are concerns regarding assumption of responsibility for an eligible mandatory data breach that occurs on the private blockchain system. If you operate private blockchains and provide ‘administrator’ access to a third-party contractor for example, and that third-party contractor unlawfully discloses information, irrespective of whether you played any part in the disclosure, there is a strong chance that you will be held jointly-liable for the privacy breach as ultimately you control the system and the information within.