It is hard to open a newspaper, see tech company ads, or read a professional trade publication lately without encountering references to “blockchain” platforms and applications.
If you haven’t been closely following the technology’s rapid expansion, you may feel as if the chain has left the station and you missed out. Mentions in daily news reports chronicling the technology’s rapid expansion come in every flavor and context: cryptocurrency speculation (Bitcoin, Ethereum, Litecoin, etc.) characterized by wild appreciation interrupted by major swoons, ICOs (initial coin offerings) and TGEs (token generation events) used to raise money for startups and access applications for user communities, securities regulation and guidelines from the SEC and foreign regulators, “smart” contracts proposed to eliminate trust issues and inefficiencies in a growing variety of applications and sectors, and others too numerous to mention. In reality, while the pace of recent progress has been impressive, there is a great deal of unrealized potential, needed development, uncertainty and risk ahead for the foreseeable future with plenty of opportunity to get informed and even shape how the technology is leveraged in new industry sectors going forward. Here, we offer a brief description of blockchain technology, its current applications and how it might transform the world of commercial contracts.
Blockchain is the technology on which cryptocurrencies like Bitcoin and Ethereum are built. A blockchain is an open, distributed database of information and transactions that is continuously reconciled. In somewhat oversimplified terms, “blocks” of encrypted code are created to reflect a specific set of information and transactions. Once a block is created, it is propagated throughout a network and then replicated by every node on that network—effectively creating an immutable, “open ledger” for the specific information and transactions memorialized in that block. Each subsequent block (reflecting new or additional transactions or information) is then attached to the block that preceded it, forming an immutable “chain” of permanent blocks, all replicated for definitive verification on every node of the entire network.
Most notably, blockchains have been used to create and document every trade of cryptocurrencies to date, including “issuances” of crypto “coins” and “tokens” used to fund companies and projects. (No, this is not a way to avoid the securities laws of the US and other jurisdictions.) While there have been hiccups, and there will certainly be more, the blockchain protocol is widely regarded as extremely secure and maximally tamper-proof. In addition to creating a permanent and immutable record of currency transactions, blockchain has been touted as an ideal way to reliably archive and access medical records, corporate records (the State of Delaware has already authorized the use of blockchain technology for corporate shareholder ledgers), supply chain records (did the containers leave the port and what exactly was in them?), property and title records, etc.