What is blockchain and how it affects legal liability

What is blockchain and how it affects legal liability. In this article I will explain what exactly is a blockchain, how it works and who is using it.

blockchain legal liability
image source: pixabay

Until the last few years, not many people knew about blockchain, what it is and how does it work. It might be confusing for some people the word blockchain but is not that scary as it sounds.
Read the full article to learn more about blockchain and legal liability.

What is blockchain and how does it work?

According to Don and Alex Tapscott, authors of Blockchain Revolution, the blockchain is an incorruptible digital ledger of economic transactions.

Invented by Satoshi Nakamoto in 2008, this next-generation database can be used to record not only cryptocurrency and other financial transactions but also anything that has value. This means anything from the latest mobile purchase, a free voucher or electronic coupon, or even a property contract can be placed in a blockchain.

In the present, blockchains are not used at their full potential, they are mainly used for keeping and tracking cryptocurrency transactions, especially Bitcoin the first decentralized cryptocurrency, but also other crypto coins.

Key points that create blockchain

In simple words blockchain technology is created from three components:

 – Private key cryptography (A private key is a tiny bit of code that is paired with a public key to set off algorithms for text encryption and decryption. It is created as part of public key cryptography during asymmetric-key encryption and used to decrypt and transform a message into a readable format

 – A distributed network that includes a shared ledger ( A distributed network is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. There is no central administrator or centralized data storage)

 – Means of accounting for the transactions and records related to the network ( recordkeeping system )

A blockchain works by holding information under a decentralized database managed autonomously from one individual to another one.

Blockchain technology in general acts as a large network of individuals who can validate to reach a consensus about various things, including transactions. This process is certified by mathematical verification and is used to secure the network. 
In addition, this digital database regularly updates on its own and may either be available for public viewing and distribution or setup privately via the intranet.

What makes blockchain so interesting and different from other technologies?

So what makes blockchain so interesting and different from other technologies Blockchain has become so interesting and different from other technologies when it’s system begin facilitating the rise of digital currencies over the past several years. 

While the potential of blockchain is started to drive more and more attention to public and investors, it might be just a matter of time until this technology will be implemented into financial institutions and there are many reasons to believe blockchain is the future of all kind of transactions:

1. Transparency: Being open source, this technology gives the opportunity to its users or developers to make changes if something is altered.

2. Smart Contracts ( A faster and cheaper way to make payments without borders)

3. Safe Identity:  ( Blockchain offers a high level of security, including your identity, many people had experienced identity theft with traditional bankings systems, but thanks to blockchain technology, is almost impossible to have your identity stolen).

4. Accounting: Self-automated recordkeeping system eliminates human errors. In order for a transaction to occur, that records are verified every single time they are passed on from one blockchain node to the next. 

With so many advantages of this technology, we might wonder how does blockchain affect laws and liability in general?

Interesting blockchain details
image source: pixabay

What blockchains mean for legal liability?

Unlike traditional ledgers and databases, blockchain networks for Bitcoin and other cryptocurrencies can go beyond the boundaries set by legal jurisdictions because servers for this digital ledger can be based anywhere.

In case of a fraudulent or erroneous transaction, identifying its location within the blockchain could be a challenge. Therefore, it can be tricky figuring out which laws to enforce or implement when dealing with this technology.

Blockchain, despite its advantages, can also be used as tools to make criminal activities harder to track down due to the anonymity provided to its users. There are also worries that irregular transactions might eventually make it to these digital ledgers due to possible loopholes in the network approval process such as the 51% attack, raising questions on information security as well.

Other legal issues worth considering before dealing with blockchain technology include data privacy, intellectual property issues, and smart contracts.

Blockchain can potentially be an integral part of a business; however, it can also expose businesses to more risks that they have not encountered before. A company successful adoption of any new technology depends on its ability to manage the risks that come with that new technology; therefore, a company must establish strong governance, risk management strategies, and frameworks of control.

Source of the article: https://www.hoganinjury.com/blockchain-how-it-affects-legal-liability/

If you like this article, drop your comment below and let me know what you think about blockchain technology.

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2 Responses

  1. 20/06/2020

    […] the need to use their name or go through a bank. They run on a distributed public ledger called blockchain, which is a record of all transactions updated and held by currency […]

  2. 21/07/2021

    […] the need to use their name or go through a bank. They run on a distributed public ledger called blockchain, which is a record of all transactions updated and held by currency […]

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