Japanese rabbits, beanie babies, Bitcoin. Each of these have at some point been the subject of speculative investment-bubbles. Drawing great attention and commanding prices well in excess of their underlying value, each was for a time touted as *the* investment to make. But, as the saying goes, what goes up must surely come down. Once-prized rabbits went in the pot, beanie babies to the garage sale, and Bitcoin, well, that remains to be seen. Regardless of Bitcoin’s ultimate fate, the technology that underlies Bitcoin and all other cryptocurrencies, known as Blockchain, is likely to offer far greater value to businesses in the long run.
A shared public ledger, blockchains offer a secure, decentralised form of record-keeping, with each device using the blockchain receiving its own copy of the blockchain. Though each device has its own copy, no single device may make unilateral changes, instead being updated through a complex cryptographic process requiring 51% of devices on the blockchain to affirm the change, offering security and permanence to the data stored on them well beyond that of traditional centralised solutions. Because this record is available to all parties using the blockchain, blockchains make an ideal platform for conducting peer-to-peer exchanges.
Enter blockchain’s first application, Bitcoin. Bitcoin and subsequent early implementations of blockchains only recorded transactions, but subsequent blockchains have been created to facilitate secure voting, distributed file storage and perhaps most importantly, smart contracts. Already touted as cornerstones of the blockchain revolution for the legal and financial industries, smart contracts afford a much wider range of opportunities to a wider range of firms and industries. Because blockchains provide a secure record that cannot be unilaterally changed, and virtually any file or document can be stored in one, they provide an ideal vehicle for recording and validating contracts. This opens the door to automatically generating legal contracts on the fly, combining boilerplate contract clauses with the particulars of a given transaction. These contracts can then be countersigned either by a human party, or used in fully automated machine-to-machine systems, where contracts can be signed, validated and executed autonomously.
Though blockchain technologies and the firms leveraging them continue to develop apace, the legal infrastructure necessary to support them remains, perhaps inevitably, underdeveloped and lacking in precedents. Law firms have been some of the first adopters of blockchain technologies, including the establishment of the Blockchain Alliance, comprised of some 25 blockchain companies and another 25 regulatory and law enforcement agencies including Interpol, Europol and the FBI to promote awareness and understanding of blockchain technologies.
Existing blockchain solutions already range in complexity, extending well beyond currency ledgers, an example being a blockchain-driven solution to AirBnB that fully automates the leasing process for landlords. Some startups have begun offering voting platforms for company boards and company incorporation services, each powered by its own blockchain. As the legal background to blockchain strengthens, there are a multitude of potential avenues into which blockchain technology might expand. The logistics industry, traditionally laggard in moving with the times, is frequently raised as an industry with much to gain from improved traceability and inventory control. In other areas, blockchain is being evaluated as a means to provide digital identification services that could help in the effort to combat online fraud while providing seamless sign-in services.
So while Bitcoin might be having its moment in the limelight, we shouldn’t overlook the technology behind it and its use cases beyond alternative currencies. Time will tell whether Bitcoin is a flash-in-the-pan, but the value and potential of blockchain technologies should not be underestimated.