12 Jul BLOCKCHAIN
Blockchain is the best known distributed accounting technology. An accounting book is a database that keeps a final and final record of transactions. Blockchain allows a ledger to be maintained in a network through a series of nodes, which avoids a centralized location and the need for intermediary services. Thanks to the use of a common block chain that is synchronized between the nodes, the irreversibility of transactions is achieved, which allows nobody to “trick” the system or make fraud to benefit, modifying the account book to divert money (bitcoins) from one side to another without others knowing.
This is particularly useful to provide confidence, traceability and security in systems that exchange data or assets since banks act as an intermediary of economic transactions by effectively centralizing the movement of capital from one place to another as well as control over the process and your information.
Normally, operators depend on those banks and their way of doing things to complete that transaction, being subject to their conditions. This is where the blockchain comes into play, decentralizing all the management and passing the control of the process to the operators or users themselves and becoming, basically, part of a huge bank with thousands, millions of nodes, each of which becomes in participant and manager of the account books of the bank.
This account book is not only distributed and secure: the linked blocks have a hash (encoded) pointer that links to the previous block, as well as a timestamp and transaction data, and that information is public. That is to say, although the chain of blocks protects the privacy of its users, it allows to control the traceability of those transactions avoiding the traditional problem with the double spending of digital currencies or with false money, which reduces the confidence of the users in that currency and also in the circulation of it.
One of the concepts that are appearing most when talking about cryptocurrency and block chains is the ICO, the Initial Coin Offerings.
An ICO is a form of financing a business project that offers virtual tokens instead of offering shares, or what is the same thing, new critpodivisas.
These new cryptocurrencies have some hypothetical value due to their scarcity and demand, and are directly associated with the business project that creates them, if that project succeeds, the cryptocurrencies on which their funding was based gain value and that ends up offering an interesting return of the investment for investors.
There is great potential for blockchain to be used in many different areas, in addition to financial services, such as:
- Payments in the real world: a startup called TenX has created a prepaid card that can be reloaded with different cryptocurrencies and then pay with it anywhere as if that card had conventional money, regardless of whether that establishment accepts or not this type of virtual currencies.
- Carsharing: the company EY, a subsidiary of Ernst & Young Global Ltd is developing a system based on the chain of blocks that allows companies or groups of people to access a service to share cars easily.
- Cloud storage: storage services are usually centralized in a specific provider, but Storj wants to decentralize this service to improve security and reduce dependence on that storage provider.
- Digital identity: The chain of blocks could provide a unique system to validate identities in an irrefutable, safe and immutable way.
- Music: A system based on the block chain could be implemented to manage its reproduction, distribution and enjoyment from platforms such as Spotify.
- Public / governmental services, Social Security and health, registration of properties … to guarantee absolute transparency. There are even initiatives to “decentralize government”, and Bitnation is one of those projects that try to call us becoming “citizens of the world”.
• Authoring management: although related to what is mentioned for the world of music, Ascribe is a platform that tries to help creators and artists to attribute the authorship of their works through the chain of blocks. • Ethereum, which has its own chain of blocks and transacts intelligent contracts. • R3 Consortium: the very financial entities that many are trying to replace with Bitcoin or Ethereum have created the R3 consortium to find out how to take advantage of the block chain in traditional financial systems. One of the first problems of the application of this scheme is the anonymity that the design of the block chain provides, something that has been solved with the so-called “authorized ledger”, a very peculiar variant of the bitcoin block chain, for example, that does identify users that add blocks and that makes system transactions can only be accessed by certain parties. Decentralizing all these industries is much more complex than it seems, especially because those same intermediaries will try to reject these changes or adapt them to their own needs.
The Blockchain technology has come to stay, only missing to see the final form adopted. It is still early to see the scope of it and the way it will influence the current digital world. We are only in a first phase, the tip of the iceberg that allows us to glimpse the important potential of this technological tool.
At Navarro Llima Abogados we are fully aware of the impact that this new technology will have on our society and therefore on the legal world.
In the post of the next week we will discuss the influence that this new technology has had in the world of law.
Inés Usón González
Javier Navarro Lacambra