Blockchain – The Concept and its Legal aspects

blockchain-3446557_1280

Blockchain made its debut when Bitcoin was introduced to the world as a peer to peer version of electronic cash in 2009. While Blockchain cannot be discussed without reference to Bitcoin – Bitcoin is just one of the several hundred applications that use blockchain technology.

So what is Blockchain?

Blockchain is exactly what the name means– a technology that allows blocks of information to be created and stored in a chain.

A blockchain is a singly linked list of blocks, with each block containing number of transactions and assets in a business network. An asset can be tangible e.g. land, a car, cash, or intangible such as patents, copyrights, or branding.

It provides a decentralized, immutable data store – that can be used across a network of users, create assets and act as a shared book that records all transactions. Each transaction or “block” is transmitted to all the participants in the network and must be verified by each participant “node” solving a complex mathematical puzzle. Once the block is verified, it is added to the ledger or chain of blocks – affording greater transparency and trust to all parties involved. From the standpoint of information, the real advancement of this distributed ledger technology is that it ensures the authenticity of the ledger by crowdsourcing oversight and removes the need for a middlemen or any central authority. It also provides answer to digital trust as-

  • it records important information in a public space and does not allow anyone to remove it;
  • it is transparent, time-stamped, and decentralized.

Blockchain is viewed as “near unhackable,” because transactions/information are verified and validated by multiple computers that host the blockchain. Besides to alter any data or information – a cyber-attack would have to strike (nearly) all copies of the records simultaneously.

Why do we need something this complex? Let us read through the below example.

Blockchain Img 1

So what happened here?

You and Abhay both trusted the bank to manage your money. There was no movement of physical bills during money transfer. An entry in the register was all that was needed.

This is the problem with the current systems.

To establish trust between ourselves – we depend on individual third-parties.

  • We deposit monies with banks because we trust them.
  • We borrow money from them because we trust them.
  • We know if there are problems, the banks will “do the right thing”.


You might ask, “What is the problem depending on them?”

The problem is that they are singular in number.

What if that register in which the transaction was logged gets burnt in a fire?
What if, by mistake, your account manager had written Rs.15, 000 instead of Rs.10, 000?

What if he did that on purpose?
Could there be a system where we can transfer money without needing a bank?

Now, if this trust can be replaced by a technology – it has the potential to reduce the role of banks, lawyers, auditors, accountants and all.

How a Blockchain works?

A blockchain retains a growing list of records chronologically in a decentralized\distributed database where the storage devices for the database are not linked to a common processor (centralized) but distributed between multiple processors called nodes.

Blockchain Img 2

It maintains a complete and increasing number of the transactions which are grouped into blocks so that every individual in the network can see it or be aware of.

Now things get attractive. A block, which is a data structure/ record where data or transactions are permanently recorded and maintained – can be added to the chain if all nodes (individuals) in the network concur to add the next valid block to the chain.

Blockchain Img 3

The validity of the new block is determined by the first miner node – the one that solves an extremely complex algorithm (and then is rewarded).

Once data is entered into the network, it is really hard to modify or hack the information for two reasons:

  • Firstly, this technology uses cryptography to make sure that users of the network can only edit the part of the network which they own through a private key necessary to modify the block.
  • Secondly, immutability of the network is established by the fact that every block includes the hash of the previous block – so any effort to alter or modify a transaction can be easily observed by the complete network.

In short, each block contains–

  • hash of the previous block,
  • a time stamp (date and time of the transaction),
  • Proof of Work (work done by the miners to validate the transaction), and
  • a summary of the transaction.

A Blockchain network can be private (requires permission to join) or public (permission less).

Smart Contracts in Blockchain

Smart contracts are agreements between two or more parties of a network whose execution is mechanized by a computer-generated program.

Smart contracts can help people exchange money, property, or anything that has value, in a transparent way without the need of any intermediary. (e.g. banks, accountants, etc.).

The system works on the “If this happens, then…” principle and is viewed by the whole network, resulting in a secure flawless transaction.

Blockchain Img 4

Legal Issues / Challenges in Blockchain

  1. Distributed Jurisdiction

Blockchain is a distributed data structure where nodes are potentially situated in different parts of the world. As a result identification of a competent jurisdiction and applicable laws can be complex. Thus, the insertion of an exclusive governing law and jurisdiction clause is essential to ensure that a user has legal certainty to the law to be applied for determining the rights and obligations of the parties to the agreement and the courts to handle disputes, if any.

  1. Intellectual Property Rights

The IPR issues which can arise are similar to ones that are for open source software projects. Conflict of interests  (between the Investor and User) over the Intellectual Property Rights are bound to happen and legal frameworks including IP will need to keep pace with such challenges.

  1. Data Protection Regulations

As we have seen in a blockchain , once data is stored it cannot be modified (at least, not easily), having implications for data privacy, specifically where the data is sufficient to disclose someone’s personal details.

This is also in direct conflict with GDPR that states the right of a data subject to obtain the erasure of personal data from a data controller concerning him/her. Hence, technology-based solutions need to be found to design privacy-protecting blockchains.

  1. The Enforceability of Smart Contracts needs to be made simpler

Smart Contracts that simply codes a particular process but do not include, or operate in combination with contractual terms – may not fulfill requirements of certainty, as required in Contract Law.

Also, for a legally binding contract offer and acceptance is mandatory. In a Smart Contract, these two elements are sometimes ambiguous creating uncertainties.

  1. Due diligence on blockchain

Lawyers who are tasked with performing due diligence on the buy and/or sell side in connection with these investments need to comprehend blockchain technology and the upcoming business models based on the technology. There will be unique issues concerning ownership of data residing on decentralised ledgers and intellectual property ownership of blockchain-as-a-service offerings operating on open source blockchain technology platforms.

  1. Compliance with financial services regulation

Many sourcing arrangements require regulatory bodies to incorporate relevant contracts – a series of provisions that speak about exercising control, and gaining operational continuity. With blockchain, this may be a challenge. The contracts and overall agreements would need to be carefully reviewed to ensure compliance, as needed.

This article has been authored by Deepali Kharbanda from Team LawSkills.

To enroll for a free certification course on Blockchain Technology and become an industry expert, click here!

To read our guide on Blockchain Technology for amateurs, click here.

LawSkills logo image

10 Must Watch Movies for Law Students

9f0d0109366a3436c3751a7fadc5f690

Law has always been an intriguing profession. Films, television and literature have glamorized this profession for years with climax ending in a dramatic court case. Often, we find the protagonist winning in the end with profound oratory – giving the audience thrill and excitement.  The fictional stories presented in the movies tell a great deal about the political and social situations. Even though these movies do not show the viewers about the real legal scenarios; they offer immense possibilities to educate law students about the actual societal conditions.

Here is a list of ten movies based on law, comprising both from Indian Film Industry and Hollywood, that are a must watch for law students.

  1. 12 Angry Men (1957)

Henry Fonda produced and starred in this adaptation of Reginald Rose’s stage play describing  hostile deliberations of a jury in a death pen­alty case. It chronicles gut-wrenching examination of the prej­udices, prejudgments and personal psychological baggage of the assembled jury over the fate of a young Puerto Rican defendant. Director: Sidney Lumet

  1. Baat Ek Raat Ki (1962)

It is a mystery story with courtroom drama about a lawyer defending the guilty and investigating the case to find the real mastermind of the sinister murder plot. Director: Shankar Mukherjee.

  1. Erin Brockovich(2000)

Story of a  real-life paralegal and sassy single mom, whose determined investigation into a suspicious real estate case turns up a pattern of illegal dumping of highly toxic hexa­valent chromium and one of the heftiest class action suits in U.S. history. Director: Steven Soderbergh

  1. Inherit the Wind (1960)

The film is based on a real-life case in 1925; two lawyers argue the case for and against a science teacher accused of the crime of teaching evolution. Director: Stanley Earl Kramer

  1. Jolly LLB 1

The story is inspired from the real accident of 1999 where Sanjeev Nanda is charged with hit and run case, and small reference is given to Priyadarshni Mattoo case. The story focuses on six innocent wage earners and their fight to earn justice. It depicts judicial corruption and behavior of the rich. Director: Subash Kapoor

  1. Kanoon (1960)

The film presents a case against capital punishment, arguing that witnesses may be genuinely deceived, and their  false testimony may lead someone wrongly to the gallows. Director: BR Chopra

  1. Mohan Joshi Hazir Ho (1984)

It is  a satirical movie on the poor judicial system. The film talks about cases which are being stretched in the court room for decades, and plaintiffs lose all hope and money as the corrupt run free. Director: Saeed Akhtar Mirza

  1. My Cousin Vinny (1992)

Vincent “Vinny” Gambini is a brash Brooklyn lawyer who managed to pass the bar exam on his sixth try. He is representing his cousin and a friend—two California-bound college students arrested for capital murder after a short stop at a convenience store in rural Alabama. Director: Jonathan Lynn 

  1. Pink (2016)

It is a courtroom drama and social thriller involving three young women, who are implicated in a crime, when a retired lawyer steps forward to help them prove their innocence. Director: Aniruddha Roy Chowdhury

 

  1. To Kill A Mockingbird (1962)

The movie is about Atticus Finch, a lawyer in the Depression-era Alabama, defending a black man against an undeserved rape charge, and his children against prejudice. Director: Robert Mulligan

This article has been authored by Rituparna Prasoon from Team LawSkills.

LawSkills logo image

Career Counseling in Law

If you are wondering how to bring into line your legal career with your passions or are puzzled with matter in the vein of following and more…

  • How or where to start look for legal jobs?
  • There’s so much contradictory information about the legal job market that I feel weighed down !
  • Are legal job search strategies different from other kinds of job searches?
  • What exactly is “networking,” and how do I do it?
  • Should I go for litigation or become an in-house counsel?
  • I have a law degree, do I necessarily have to pursue a career related to law? Can I change my career stream now?
  • Are there job options beyond litigation and corporate?
  • Are there any avenues for Lawyers in Media ?

In this situation, looking for an experienced and qualified career counselor becomes necessary. Career Counselors will assist you in successfully navigating your path to a more fulfilling Career by helping you discover your potential and aptitude and accordingly suggest the right route to choose.

 

This article has been authored by Rituparna Prasoon from Team LawSkills.

LawSkills logo image

Advice from a Law School Career Counselor

If you are an ambitious and motivated student who is willing to try out myriad things, law is your ideal career option! In addition to the popular image of a lawyer in flowing black robes arguing in court, there are countless more opportunities for a graduate law student.

Here are some of the guiding principles for winning at the legal career.

  1. Read a lot and gain information about the legal topics taught at Law school.
  2. Don’t undervalue the importance of practical experience at this stage. Therefore go for internships. Try to intern in diverse fields in order to gain better hands on different branches of law. Internships will also provide you with wealth of examples to talk about during your job interviews.
  3. Be active in your college alumni association. Take advice from your seniors regarding skills and values requisite for a job, ask them to mentor you. A good networking can take you places.
  4. Be conscious and write about important issues around you. Set yourself different through articles, speaking engagements, and other opportunities to set up your expertise.
  5. Build yourself as a brand. Create a narrative of your opinion. Make sure all of your marketing materials (social media, resume, cover letter) speak about it consistently.

 

 

This article has been authored by Rituparna Prasoon from Team LawSkills.

LawSkills logo image