THE LEGAL ASPECT OF BLOCKCHAIN TECHNOLOGY-
We’re quite confident, said Marc Andreessen in an interview with The
Washington Post, “that we’re sitting here in 20 years, we’ll be talking
about blockchain technology the way we talk about Internet today”.
Everybody is looking at how blockchain's distributed ledger technology is
altering the manner in which associations direct their business
transactions. Blockchain is as yet a forthcoming innovation – so it is very
hard to appreciate how it functions without investigating the code or
getting profound into software engineering ideas. To help with that, this
module ought to kick you off.
A blockchain is independently connected chain of square, with each
square containing various transactions. It gives a decentralized, immutable
information store – that can be utilized over a network of users, make
resources and go about as a mutual book that records all exchanges. Every
transaction can be effortlessly questioned, bearing more transparency and
trust to all parties included.
Let’s go through the below case study!
Abhay is your closest companion. He is voyaging abroad, and calls you
and says, "Hello, I require some cash. I have come up short on it."
You answer, "Alright, don't stress. I'm sending some immediately," and
You at that point call your account manager at your bank and let him know
that you want to transfer Rs.10,000 from your account to Abhay's account.
Your account manager answers, "OK, sir."
He opens up the register, checks your account balance and makes the
payment. You at that point call Abhay and let him know, "I've sent the
cash. You can withdraw Rs.10,000 from your bank that I have just
What just happened?
You and Abhay both trusted in the bank to deal with your cash. There was
no real movement of physical bills to transfer the cash. The only thing that
was needed was an entry in register. Correctly – it is only an entry in
register that neither you nor Abhay controls or possesses.
And here comes the
problem with the
To set up trust between ourselves – we rely upon individual outsiders. For
quite a long time, we've relied upon these mediators who could be banks,
attorneys, examiners, or bookkeepers to confide in one another. You may
think, "What is the issue in depending upon them?"
The issue is that they are singular in number. If discontent has to be
injected in the society, all it requires is one individual/association to go
corrupt – deliberately or unintentionally. Consider the possibility that that
register in which the exchange was logged get burnt in a fire. Consider the
possibility that, by mistake your account manager has written Rs.15,000
rather than Rs.10,000.
Consider the possibility that he did that deliberately. For a considerable
length of time, we have been putting all our investments tied up on one
place and that too in another person's i.e. outsider.
§ We store monies with banks since we confide in them.
§ We obtain cash from them since we confide in them.
§ We know whether there are issues the bank will for the most part
"make the best choice".
Could there be structure where we can at still transfer cash without
requiring the bank? Presently, if this trust can be substituted by innovation
that everybody trusts – it can possibly diminish the job of banks, legal
counsellors, evaluators, bookkeepers.
The better question would then be- is there an approach to keep up the
register among ourselves rather than another person or outsider doing it for
us? Now, that is a question that is worth investigating.
The blockchain is the answer to the question.
1.1. WHAT IS BLOCKCHAIN?
The Blockchain is the Internet of Value as opposed to the Internet of
Information. It's a stage for everybody to comprehend what is valid. It
gives an open decentralized database of any exchange including value.
Blockchain is exactly what the name suggests. It is an innovation that
enables blocks of data to be made and put away in a chain. Each time
another block is made, it is added to this chain to form what has been
known as a “digital ledger”. A blockchain is only a document/an
information structure i.e. how information is sensibly assembled and put
In its simplest form, blockchain is a decentralized innovation or distributed
ledger on which transactions are namelessly recorded. This implies the
exchange record is kept simultaneously across a system of random PCs or
servers called "nodes". The ledger contains a persistent and complete
record of all exchanges performed which are grouped into blocks: a block
is just added to the chain if the nodes, which are individuals in the
blockchain coordinate with elevated amounts of processing power, agree
on the following 'legitimate' block to be added to the chain. An exchange
must be checked and form part of a block if every one of the nodes on the
system affirm that the exchange is legitimate.
The Blockchain has no single central database, so no single individual can
defraud or hack the system. The blockchain is considered as the worldwide
trust machine. It is basically "a distributed database of records or public
ledger of all transactions or digital events that have been executed and
shared among participating parties". The verification through Blockchain
technology makes the trustworthiness of the data we get. Every exchange
in the public ledger is checked by accord of the vast majority of the
members in the framework. It is encoded and contains a certain and
unquestionable record of each and every exchange ever made. Bitcoin, the
decentralized peer to peer computerized currency, is the most famous
model that utilizes blockchain innovation. Without a doubt, the Bitcoin
was made utilizing a procedure known as blockchain. As a rule, it holds
the potential for releasing new applications and abilities to change
numerous segments, territories of business and law.
Blockchain permits all exchanges over the supply chain to be tracked in
real time, guaranteeing that buyers pay for what they get. This expanded
perceivability into the working of the supply chain offers potential for
further developments to build effectiveness; blockchain not just enables
operational changes to be transmitted in real time, it additionally
empowers all parties to execute and share data with trust.
Klaus Schwab, founder and executive chairman of the World Economic
Forum, totals up its potential in this way: “in essence, the Blockchain is a
shared, programmable, cryptographically secure and therefore trusted
ledger which no single user controls and which can be inspected by
1.2. BENEFITS OF A BLOCKCHAIN
Speed and Efficiecy Transparancy
Traceability Increased Security
§ Speed and Efficiency: Due to the automation of the process of the
blockchain, transaction is completed more quickly and efficiently. In a
blockchain everyone has an access to the same information and
therefore there is no question of trust which allows the clearing and
settlement much quicker.
§ Transparency: Blockchain main the transaction histories more
transparent. It is a distributed ledger that is used and accessed by all the
people in the network and any modification or alteration can only be
made with the consensus of all which makes it more transparent.
§ Increased security: A blockchain is more secure than other types of
record keeping mechanism. Any transaction needs to be agreed on
before they are recorded. Since the information is stored across various
computer network rather than on a single network, the scope of
compromise is reduced.
§ Traceability: In a blockchain all the transactions are recorded which
leaves an audit trail that gives information about the source of the assets
and every stop it made during processing. This can be very helpful in
verifying the authenticity.
1.3. HOW A BLOCKCHAIN WORKS?
1. A want to send money to B.
2. The transaction is represented online as a “block”.
3. The block is broadcasted to everyone in the network.
4. Those in the network approves the transaction is valid.
5. The block then can be added to the chain, which provides indelible
and transparent record of transaction.
6. The money moves from A to B.
1.4. TYPES OF BLOCKCHAIN
1. Public Blockchain- A public blockchain refers to a completely open
network in which anyone can join, participate and play their role in
the network. These kinds of network usually involve an
incentivizing and encouraging mechanism to incentivize more
participants to join the network. In public blockchain networks there
is no point of control and also there is relative anonymity. Bitcoin,
which is the largest public domain blockchain network in the
industry today, is the best example of a public blockchain network.
2. Private Blockchain- A private blockchain is one which is not open
and requires an invitation by the network starter or the set of rules
prescribed by them. These are the permissioned networks which puts
restrictions on the persons who are allowed to join the network
meaning that the existing or the network starter can decide who the
future entrants are going to be. In private blockchain networks there
is some point of control and also there is no anonymity. Hyperledger
is an example of a private blockchain.
From the above it is quite clear what are the difference between the private
and the public blockchain network. Now let us see what are the similarities
between the two: -
§ Both are decentralized peer to peer networks.
§ Involves maintenance of a replica of a shared ledger of digitally signed
§ In both replicas are maintained in sync through a protocol referred to as
§ Both provides certain guarantees.
1.5. BLOCKCHAIN OPERATING SYSTEM
As we all know that we all are surrounded with the advanced technology
and nearly everyday we came across new and more advanced technology.
Blockchain operating system is also one of the form of advanced
technology. It is defined as an operating system which captures all the
commands and transactions from a user’s device that occurs on the
Blockchain. Blockchain operating system is divided into two main
components which is:-
This means that Blockchain operating system is the combination of
Blockchain which means “a time-stamped series of immutable records of
data that is managed by a cluster of computers not owned by any single
entity ” and Operating System which means “An operating system is a
program that acts as an interface between the user and the computer
hardware and controls the execution of all kinds of programs.”
Table 1 Traditional Operating Blockchain operating
Usage System System
Nature It is basically a link It is a layer beneath
between hardware and software to make
software interaction more easier.
It is more centralized It is decentralized
Operating System operating System
Google chrome, EOS, LibertyOS,
Minesweeper Overledger, TRON,
1.6. FUNCTIONS OF BLOCKCHAIN
• It helps to Create, issue, and manage the digital assets,
associated markets, and digital financial instruments on either
of the Blockchain networks.
• It also Send, receive, and manage payment transactions in
cryptocurrency and coins within a single dashboard.
• It is a suite of tools empowering anyone to utilize tokens and
participate in decentralized networks.
Advantages of Blockchain Operating System
• Security:- It provides security.
• Privacy:- It is an operating system which enhances and
protects the privacy of the user.
• De-Centralized:- It is the main advantage of Blockchain
technology as well. The de-centralized distribution of data
among its nodes promotes secure environment.
1.7. DEVELOPMENT OF BLOCKCHAIN OPERATING SYSTEM
Overledger is the world’s first Blockchain operating system that is used
not only to inter-connect the Blockchain but also used in existing
enterprise platforms, applications and networks to Blockchain. The
concept is still evolving, and real world use is limited. However, if it
succeeds in offering a smooth and clutter-free working of the device OS, it
may not be too far to see more and more devices running on such
Applications of Blockchain Operating System
• ConsenSys Codefi:- It is used for global commerce and finance. It
was founded by in 2014. It has a capability to digitize financial
instruments and tokenization of system for finance, including
payment systems, data analytics etc.
• LibertyOS:- This is a software which is same as that of Ubuntu and
its main focus is on privacy and Security. It can even be used with
TOR Browser and thus, is more like LINUX.
• TRON:- It is also termed as one of the largest Blockchain Operating
System in the world and its main function is that it provides high
throughput and TPS.
• aelf:- This Blockchain System is similar to that of LINUX operating
System. It is a decentralized Cloud Computing Blockchain Network.
• GemOS:- It is meant to be an enterprise blockchain Operating
System which emphasized on boosting the collective intelligence or
Data IQ of previously data. It resembles which aelf.
Blockchain Operating System plays a very important role in development
and provides best justice to blockchain technology. Most of the IT
Companies are still working on this technology and blockchain Operating
System is emerging creation nowadays. If this development in Blockchain
Operating System keeps on enhancing and developing one day our phones,
laptops will constitute of this kind of operating systems and it will provide
more security, privacy and decentralized data. Thus, we need to have more
and more development in this field.
1.8. THE LAW CODE AS THE LAW
We are spending expanding measures of our lives interfacing inside
stages, whose client base put down that of existing country states, e.g.
Facebook appreciates in excess of 2 billion clients, Youtube 1 billion, and
Instagram 700 million clients. But then, their administration is extremely
distant from the estimations of fair nations. Rather, they are represented by
programming and algorithms that direct our interaction and online
communication through obscure rules implanted in source code, and
expounded by a bunch of private actors.
As more of our interactions are administered by programming, we
progressively depend on technology as a way to directly uphold rules. In
reality, instead of customary legal rules, which just stipulates what
individuals will or will not do, technical rules figure out what individuals
can or can't do in the first place. This take out the requirement for any
outsider implementation authority to intervene afterward, with the end
goal to punish the individuals who encroached the law. Software
ultimately winds up stipulating what can or can't be done in an explicit
web-based setting, more frequently than the material law.
Today, direction by code is dynamically building up itself as regulatory
mechanism adopted by the private sector as well as public sector.
Governments and public admirations progressively depend on
programming algorithms and innovative apparatuses for the purpose of
defining code-base rules, which are consequently executed by the
Depending on mechanical apparatuses and code-based principles as a way
to manage society realizes a variety benefits, mostly identified with the
capacity to automate the law and to implement rules and regulations from
the earlier, i.e. prior to the fact. However, regulations by code additionally
accompany critical downsides that might ultimately disturb a portion of
the fundamental precepts of law.
From one perspective, as opposed to customary legal rule, which must be
valued by a judge and applied on a case-by-cases premise, code-based
rules are written in the inflexible and formalized dialect of code, which
does not profit by the adaptability and uncertainty of common dialect.
Then again, the compositional implementation of online platforms
ultimately relies upon the explicit decisions of platform administrators and
programming engineers, looking to advance or keep a specific sort of
activities. Just like any other technological artefact, code isn't impartial,
yet intrinsically political: it has critical societal implications, seeing that it
may bolster certain political structures or encourage certain activities and
practices over others.
The Blockchain is a rising innovation, its decentralized ledger
functionality combined with security makes it exceptionally appealing to
solve money related and non-monetary business issues. Various
organizations and new businesses are working and putting resources into
investigating its conceivable business applications.
Today, the focal point of societal administration is imposed generally by
organizations and bureaucratic frameworks and the blockchain innovation
can possibly change business as usual fundamentally. As the technology
develops, blockchain could quicken a structural shift from legal rules and
regulation to code-based rules and conventions administered by
decentralized blockchain-based system.
The initial step toward understanding how to regulate blockchain
technology requires an investigation of its developing uses, alongside a
more analytical examination of the technology's advantages and
Blockchain has the possibility to become an indispensable piece of the
activity of numerous organizations. However, obviously, just like the case
with most new innovation benefit contributions, there are various risk-
based issues that should be precisely considered before business,
especially intensely regulated ones, can begin to completely understand
the potential advantage.