MEANING OF BLOCKCHAIN

Also known as Distributed Ledger Technology (DLT)

It is a shared immutable ledger that facilitates the process of recording transactions

and tracking assets across a business network. Anything of value can be tracked and
traded on the Blockchain network.

It is a distributed database, which is shared over a computer network. Blockchain

stores information electronically in a digital format to make transactions secure.
 Brief history of blockchain
• 1991: A cryptographically secured chain of blocks is described for the first time by Stuart Haber and W Scott Stornetta.
• 1998: Computer scientist Nick Szabo works on ‘bit gold’, a decentralised digital currency.
• 2000: Stefan Konst publishes his theory of cryptographic secured chains, plus ideas for implementation.
• 2008: Developer(s) working under the pseudonym Satoshi Nakamoto release a white paper establishing the model for a
blockchain.
• 2009: Nakamoto implements the first blockchain as the public ledger for transactions made using bitcoin.
• 2014: Blockchain 2.0, separating it from currency, explores potential for financial transactions beyond currency. Ethereum
introduces smart contracts, representing financial instruments like bonds.
• Bitcoin Role: Nakamoto created bitcoin in 2008, a peer-to-peer cash form without a central bank. The original and largest
blockchain, the original and largest, runs the ledger and is still used today to orchestrate bitcoin transactions, solving several
problems in the field.
• The Second Generation: Blockchains like Ethereum and Ripple run altcoins and different applications, such as ether, a
distributed currency and smart contracts, and ripple, a real-time gross settlement system, currency exchange, and remittance
network.
 Key elements of blockchain

• Decentralization: Unlike traditional databases controlled by a single entity, blockchain

operates on a peer-to-peer network. This decentralization reduces the risk of data
manipulation and single points of failure.
• Distributed Ledger: Every participant in the network has access to a copy of the entire
blockchain, ensuring that all transactions are transparent and verifiable. This distributed
nature enhances trust among participants.
• Immutability: Once data is recorded in a blockchain, it is nearly impossible to alter or
delete. Each block is cryptographically linked to the previous one, forming a secure chain.
This feature ensures data integrity and historical accuracy.
• Consensus Mechanisms: Blockchain networks use various consensus algorithms (such as
Proof of Work or Proof of Stake) to validate and agree on transactions. This ensures that
all network participants reach a common agreement before adding new data.
• Smart Contracts: Some blockchains, like Ethereum, support smart contracts. These
automate processes and enforce agreements without intermediaries.
 How blockchain works
• Step 1: Transactions are recorded as data blocks, displaying the movement of tangible or
intangible assets, including information like who, what, when, where, and how much.
• Step 2: Blocks form a data chain, confirming asset movement or ownership changes, and
securely linking together to prevent alteration or insertion between existing blocks.
• Step 3: Blockchain blocks transactions in an irreversible chain, ensuring immutability and
trust. Each block strengthens previous verification, preventing tampering by malicious
actors.
How blockchain works
How blockchain works
 Types of blockchain technology

• Public blockchain networks: Public blockchains like Bitcoin allow anyone to participate, but they have
drawbacks like computational power, transaction privacy, and weak security, which are crucial for enterprise
use.
• Private blockchain networks: A private blockchain network is a decentralized peer-to-peer system governed
by a single organization, enhancing trust and confidence among participants, and can be hosted behind a
corporate firewall.
Private and public blockchain networks can be permissioned, limiting participation and
transactions, requiring invitations or permission for participants.
• Consortium blockchains: A consortium blockchain allows multiple organizations to maintain and share
responsibilities for a business, ensuring permissions and shared responsibility for transactions and data
access.
• Hybrid Blockchain: It is the mixed content of the private and public blockchain, where some part is
controlled by some organization and other makes are made visible as a public blockchain.
 Blockchain in legal industry

• Electronic Signature: Electronic signatures on Ethereum offer speed, efficiency, and cost savings, reducing manual tasks and
facilitating parallel signing and verification without full read access to the content.
• Intellectual Property: Blockchain-based innovation NFTs represent unique property, enabling robust digital rights schemes
and IP enforcement systems for creators to monitor usage and ownership of their creations.
• Property Rights: Blockchain technology offers a transparent, immutable way for property owners to manage their rights and
transaction costs, reducing costs and enhancing economic activities.
• Tokenization: Tokenization converts asset rights into digital tokens, enabling smart contracts, smart contracts, and
microtransactions, allowing creators to legally sell fractions of their assets.
• Decentralized Autonomous Organizations (DAO): A Decentralized Autonomous Organization (DAO) is an electronic
decision-making system used for scalable online cooperation, grant coordination, and public goods funding, requiring proper
legal wrapping.
 Blockchain in legal industry
• Limited Liability Autonomous Organizations (LAO): LAOs are decentralized
organizations that allow members to invest in early-stage Ethereum ventures and share in
the profits.
• Automated Regulatory Compliance: Blockchain technology enables a shared ledger
system for automatic compliance data reporting and automates law functions like tax
compliance.
• Machine to Machine Payments: Smart contracts offer a secure, append-only interface for
IoT applications, addressing transparency, longevity, and trust challenges without a
central administrator.
• Blockchain-Based Arbitration System: Blockchain-based arbitration systems utilize smart
contracts for user agreements, ensuring enforceability and a reputation system for
community selection, paving the way for a global, universally available judicial system.
 Use of blockchain in various
sectors

• Healthcare: Blockchain has revolutionized the healthcare industry by securing sensitive medical data, reducing data breaches, and making healthcare more
cost-effective. It reduces middlemen and errors, maintains patient privacy, and helps track medicine supply, counterfeit drugs, and waste emissions.
• Finance and Banking: Blockchain is rapidly gaining popularity in finance due to its security, transparency, and automation. Multinational companies are
adopting cryptocurrencies for financial transactions, while smart contracts and decentralized finance (DeFi) offer various financial services, including lending
and stablecoins.
• Agriculture: Blockchain technology enhances efficiency, trust, and transparency in the agriculture industry, particularly in intelligent farming, food supply
chain, insurance, and product transactions. It improves traceability, trust, and transparency, empowering consumers and reshaping insurance processes.
• Media: Blockchain technology revolutionizes media industry by providing efficiency, transparency, and cost efficiency, preventing copyright infringement, and
improving transparency and monetization of content sharing.
• Government: Blockchain technology enables governments to securely store identity information, store transactions, and improve contract creation and
execution, reducing transaction time by over 90% in Sweden's land registry.
• Supply chain management: Blockchain enhances supply chain management through smart contracts, trustless tracking, and product conditions monitoring,
reducing intermediaries, fraud, and corruption, ensuring transparency, efficiency, and safety.
• Infrastructure and Energy: Blockchain technology enhances efficiency, transparency, and security in the energy sector, reducing costs and promoting
competition. It eliminates centralized intermediaries, facilitating local electricity use and transfer.
Challenges in
blockchain
Scalability: Blockchain networks struggle
Security: Blockchain technology faces
with high computational requirements
challenges in security, including breaches
for transaction validation, making them
and hacking attacks. Companies are
inefficient for fast processing. Solutions
improving network security through
include scaling systems for faster, cost-
smart contract verification and multi-
effective transactions, but achieving
signature wallets.
scalability remains a challenge.

Interoperability: It is the ability of

different blockchain networks to
Complexity: Blockchain's complexity can communicate and interact with each
hinder widespread adoption, but efforts other. It is a key challenge in the
to simplify implementation, create user- blockchain industry, as various platforms
friendly interfaces, and promote often lack compatibility, leading to
collaboration between experts can help inefficiencies and hindering
reduce barriers to entry. collaboration. Cultivating interoperability
can create a cohesive, efficient, and
inclusive digital landscape.

Energy Consumption: Blockchain

technology's energy consumption raises
concerns about carbon emissions and
environmental impact. Alternative
consensus mechanisms like PoS and
Ethereum 2.0 aim to reduce energy
consumption.
 Emerging legal issues
• Jurisdiction: Blockchain's ability to cross jurisdictional boundaries presents complex issues, necessitating careful consideration of contractual
relationships. Identifying the appropriate governing law is essential in a decentralized environment, as transactions may fall under multiple
jurisdictions, making it challenging to pinpoint location.
• Service levels and performance: Vendors' willingness to offer performance assurances depends on risk/reward profile, service delivery
model, and multiplication factor. Balance of performance risk is key issue.
• Liability: Systemic issues with trading infrastructure, such as blockchain, can pose significant risks to customers, including unsettling trades
and security and confidentiality issues. Blockchain technology and operations vary, with public blockchains facing inability to control and
stop functioning, while private blockchains may not. Allocating risk and liability to malfunctioning blockchain services must be carefully
considered across all relevant parties.
• Intellectual property: Blockchain technology holds value, and ownership of intellectual property (IP) is crucial. Blockchain vendors must
determine their IP strategy to capitalize on commercial benefits and meet customer requirements. Customers may insist on ownership,
license, or restrict use. Financial organizations are adopting an "open innovation" approach, realizing technology must be shared for value.
• Exit: Exit assistance depends on solution and blockchain vendor's data holding. Data migration assistance is needed for customers without
data copies, ensuring vendor handovers upon agreement termination.
• Data privacy: Blockchain's privacy concerns arise due to its storage of data, which cannot be altered easily. To address this, technology-based
solutions, such as limiting network access to trusted nodes and encryption, are needed.
• Enforceability of smart contracts: Blockchain technology enables smart contracts, which are automatically executed upon specific criteria,
eliminating intermediary confirmation. However, legal enforceability remains uncertain, especially in permissionless blockchains without
central authority. Despite this, advances in electronic contract acceptability suggest smart contracts may be a viable option.
 Examples
• Feasible Payments: Banco Santander introduced the world's first blockchain-based money transfer service, "Santander One
Pay FX," in April 2018, reducing intermediaries and improving efficiency by automating the entire process on Ripple's
xCurrent, enabling international money transfers.
• Creating Smart Contracts: Propy, a popular real-estate portal, uses blockchain-based title registration services. For brokers,
realtors, and their clients, it automates all transactions that get stored on the DLT. Propy enables quick title issuance and
cryptocurrency-based property buying and selling using blockchain technology.
• Real Estate: Ubitquity, a SaaS blockchain platform and API, was founded in 2015 for real estate record-keeping, allowing
customers to store property data and track existing legacy documents.
• Logistics: DHL, a global shipping giant, utilizes blockchain technology to track and record global shipments, ensuring
transaction integrity and expanding operational capacities, thereby expanding its global presence.
• Healthcare: MediLedger is a trusted blockchain protocol in healthcare, enabling businesses to track prescription drug supply
chains, validate drug legitimacy, and manage expiration dates.
 Caselaw on blockchain
A. Internet and Mobile Association v. Reserve Bank of India
• The Reserve Bank of India (RBI) issued a circular on April 6th, 2020, raising concerns
about customer protection in relation to virtual currency (VC).
• The circular directed entities not to deal with virtual currency and prohibited them from
providing services related to cryptocurrency transactions. The circular aimed to
strengthen the financial market, improve currency management, promote financial
inclusion and literacy, and facilitate data management to prevent money laundering, data
hacking, and terrorist activities.
• A writ petition was filed by the internet and mobile association of India challenging the
proportionality of the circular issued by RBI. The petitioner argued that the RBI did not
have the legislative power to prohibit the trading of virtual currency and that it violated
the fundamental rights of the Indian constitution.
• The court ruled that the circular was unenforceable and unlawful on the ground of
proportionality and ordered the RBI to direct the central bank of India not to freeze
accounts and repay the prize with interest to the petitioner.
 Caselaw on blockchain
B. Roberson v. Person Unknown
• The English High Court has addressed cryptoassets in this case , referencing the UK
Jurisdictional Taskforce Legal Statement on Cryptoassets and Smart Contracts.
• The claimant, an English cybercrime insurer, paid a ransom of $950,000 to a Canadian
company that had been encrypted by the BitPaymer ransomware virus. The claimant paid
the ransom by buying 109.25 bitcoins and transferring them to a bitcoin address
provided by anonymous attackers.
• After recovering the ransom, the claimant sought to recover the bitcoins, which were
traced to an address linked to Bitfinex, a cryptocurrency exchange operated by two
British Virgin Islands (BVI) companies. The judge granted an interim proprietary
injunction against the BVI companies and the attackers, stating that bitcoins are
property and can be treated as property.
• The judge also considered substantive remedies for the claimant, suggesting that if the
bitcoins could be traced into the hands of Bitfinex, they might be held on constructive
trust or recoverable in restitution.
The Silk Road case study
• In 2020, the Federal government sued for civil forfeiture of Bitcoins
that were acquired during illegal activities by the Silk Road dark
website. Silk Road was a marketplace for various criminal activities,
including the distribution of illegal drugs. The marketplace earned
over 600,000 Bitcoins in commissions. Some of these Bitcoins were
tracked to a particular blockchain address over which the Federal
Government obtained control by seizing computers that identified the
address and the private key used to transfer funds from that that
address. In 2022, the founder of the Silk Road agreed to a forfeiture of
the assets held in that account to the U.S. government.