What is Blockchain?

Les Fenêtres simultanées sur la ville - Robert Delaunay

Blockchain is the technology consisting of a database in chain, published and with time stamps used to avoid the modification of the data included in such chain. The data integration the chain is transferred in a decentralized manner between users and its accuracy is automatically verified with the set of users that receive the data. This system prevents the risk of verification and modification of the data by a single user, thanks to the replication of the information in several devices.

Therefore, blockchain allows creating a safer system to transfer data and store it, with a system that ends with the centralized data transfer and implements a decentralized data transfer. This new paradigm results in the loss of control by financial and public entities that nowadays are centralizing much of the data and its transfer.

Despite the most commented use of blockchain is the creation of a new financial system (with cryptocurrencies), which allows the execution of transactions safer and faster, and without the central role of current banks, this technology allows many other uses. Among these uses we can highlight the conclusion of contracts, the control of ownership over assets and its transmissions, hold elections, control money laundering and preventing terrorism financing, improve taxation enforcement, improve commercialization of intellectual property, etc.

Since a legal point of view, blockchain is a very complicated challenge to face, both because of its complexity and because this technology changes the socio-economic current system. Laws are based on our current specific socio-economic system, which in recent centuries has evolved, but maintaining relevant foundations that blockchain can abolish in a few years. This new paradigm may require a different approach to the used during the last centuries. However, our current laws already adopted some relevant amendments that combine with blockchain, such as digital signatures, but there are many issues that need more relevant and complex amendments. Obviously, one of the biggest challenges is how to regulate financial services provided through blockchain.

Although blockchain is seen as a threat for banking entities and that its implementation will reduce the relevance of these companies in the economy, it is also true that, since banking entities can also adapt its business to this new technology, this can be seen also as an opportunity to provide its services more efficiently.

Finally, for our laws another big issue to deal with is that blockchain requires big amount of data to be shared and validated by third parties, thus regulation on how the data is shared and what are its uses is one mail legal challenge for policymakers.