Blockchain technology has been utilised for almost a decade and has propelled the cryptocurrency Bitcoin into ubiquity after its creation in 2008. However, even after all this time, we have barely scratched the surface of what blockchain technology is capable of bringing to the digital age. The colossal success of Bitcoin has led to a technological race to find the most lucrative and efficient ways of utilising blockchain technology in various industries. The legal profession is perfectly poised to reap the benefits of blockchain both as an integrator and as an advisor on the murky legal issues that will no doubt arise.
You may be wondering what exactly is a blockchain and why there is so much interest all of a sudden. The essential characteristics of blockchains are:
• A network of systems or computers each hosting and storing the same duplicated database.
• Constant reconciling of the database over the network of computers. This prevents corruption of the data.
• No centralised location of the database.
• Each new transaction is recorded as a new block, so all past blocks remain a historical record of transactions.
The nature of blockchains makes them nearly impossible to corrupt. For example, imagine in a network of 100 computers that all have a record of a $100 transfer last Friday. If one of the computers had its record altered to show a $50 transfer, this would be reverted back to $100 when reconciled with the records of the 99 other computers.
This makes it almost impossible to hack a blockchain network of millions of computers. You would need to simultaneously hack and alter the same block on the majority of the computers on the network. Blockchain technology is, therefore, very appealing to the financial, legal and security industries where information needs to remain secure.