Today, it is essential for all lawyers to understand the legal issues surrounding blockchain technology. The Internet is now inextricably linked to the practice of law, but at one time it was confined to the domain of emerging technology and telecommunications lawyers. Just as the Internet has evolved from a new technology to an essential part of modern life, the technology that underpins “Web 3.0” is about to do the same. Today, there are over 1,000 blockchains in use across many industries and businesses. If blockchain hasn’t impacted your profession yet, it will.
Blockchain Basics
At a high level, a blockchain is essentially a decentralized database filled with transactions (or records). A group of transactions makes up each “block” in the “chain,” with the “chain” continually expanding as new blocks are added. It is a type of distributed ledger technology that allows unaffiliated (and potentially mutually unknown) parties to maintain an agreed-upon record or state of affairs. Depending on the blockchain, this “consensus” can be achieved through a variety of mechanisms programmed into the relevant operating software, with each blockchain deploying different governance structures, but in all cases, the technology is operated through decentralized computation. This is in contrast to a centralized database, where a single party has the unilateral authority to add or modify records, and can restrict or grant access to the database.
