Blockchain technology enables the creation of a decentralized environment, where the cryptographically validated transactions and data are not under the control of any third-party organization. Any transaction ever completed is recorded in an immutable ledger in a verifiable, secure, transparent and permanent way, with a timestamp and other details. In the blockchain. The nodes of the blockchain collect new transactions into a block, hash them into a hash tree. The block is broadcasted to everyone on the blockchain and the block is added to the blockchain.
A blockchain is characterized by censorship resistance, immutability and global usability, and has a global network of validators called miners, who maintain it through block rewards and named cryptotokens. This decentralization assures fault tolerance, attack resistance and collusion resistance. The blockchain is decentralized politically; meaning that no one controls it; and architecturally meaning no infrastructural central point of failure exists. The blockchain is logically centralized meaning there is one commonly agreed state and the system behaves like a single computer. Anyone has the autonomy to access a blockchain, to download a copy and play a role in maintaining the blockchain, thus that computer becoming a node.
The copy will be actively updated along with every copy on every other node, edits can only be made to the blockchain with consensus among the individuals running a node. The process of adding a new block (containing thousands of transactions) to a blockchain, by hash verification procedures, is called mining. The new block is linked to the last one in blockchain. Each blockchain starts with the genesis block, containing its settings.
The advantages of the blockchain technology are the following: self-sovereignty, users identify themselves and maintain control over the storage and management of personal data; trust meaning the technical infrastructure offers secure operations (payments or issue of certificates); transparency and provenance to perform transactions in knowledge that each party has the capacity to enter into that transaction; immutability meaning records are written and stored permanently, without the possibility of modification; disintermediation meaning no need for a central controlling authority to manage transactions or keep records; and collaborative, which provides the ability of parties to transact directly with each other without the need for third-parties.
The main drawbacks are the high consumption of hardware, energy and time needed for the mining process. Also, blockchain technology is complex and can be difficult to understand. There is a plethora of development platforms in continuous release and the novelty associated with the blockchain languages.
An IP Registry is a natural application of blockchain technology. A blockchain will securely create a registry, cataloging and storing original works. Using blockchain as an IP registry will help provide clarity to copyright authors, owners and users. By registering their works to a blockchain, authors will end up with tamper-proof evidence of ownership. This is because a blockchain transaction is immutable, so once a work has been registered to a blockchain, that information cannot ever be lost or changed. Access can be given to third parties to see the complete chain of ownership of a work, including any licenses, sub-licenses and assignments.
Blockchain, serve as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically. Blockchain will make possible the capability to create a contract (smart-contract) that can be automatically generated based on when certain variables are achieved without any human legal intervention. Blockchain will provide the opportunity for law firms to position themselves as trusted strategic advisors to clients navigating the myriad legal, regulatory, and logistical opportunities that blockchain technology and its applications will provide.
There are many blockchain platforms usually centered on coin or smart contracts. Blockchain platforms are based on different algorithms, and different developing tools and programming languages. Ethereum(http://ethereum.org), is an open-source blockchain platform, defines smart contracts and is designed for a large variety of decentralized applications. A new block is added to Ethereum at each node every 10 seconds (https://ethstats.net), and the number of nodes is greater than 16 thousand. The United States (US), China and Russia are running around 60% of Ethereum nodes. (http://ethernodes.org). The Ethereum main network is a public network that is open to anyone, but it is possible to run a private Ethereum network.
Any possible blockchain strategy for law firms must begin with an understanding of what the expected value the technology will bring to the firm. This includes an understanding of the firms practice areas that blockchain will affect. The strategy must contain detailed blockchain business and technical requirements and how they relate to the various practice areas under consideration. The blockchain strategy should contain a pilot (or short term) project that is scalable. This pilot project must contain specific ROI objectives at specific well-defined milestones.
- Use Internal (private) Ethereum based Blockchain Platform: Ethereum is an open-source blockchain platform for smart contracts. The Ethereum private network allows for certain advantages, like faster processing and private transactions within a permissioned group of known participants.
- Capture detailed blockchain business and technical requirements and how they relate to the various practice areas under consideration. Align the specific blockchain capabilities along with the specific value proposition to each of the practice areas.
- Select a Blockchain Vendor: There are a myriad of blockchain vendors. Making sense of which blockchain vendor to choose is an arduous task. Performing a vendor selection process is essential to selecting and partnering with the “right” vendor to fulfill your specific requirements in creating an internal (private) blockchain solution.
- Launch a pilot project to demonstrate the value of blockchain technology. The pilot must be scalable with the ability to add the law firm’s IP specialties.