The number of organizations participating in Blockchain Week underscore the belief that 2017 will definitely be of huge ramifications for this technology.
Blockchain Week is just around the corner. The number of organizations participating in this event underscore the belief that 2017 will definitely be of huge ramifications for this technology. Essentially, a blockchain is a shared database, which works by recording transactions conducted via a peer to peer network. This database system is supported by a computer network just like the internet. While its data is accessible to all members of the network. Members get to install the software locally and can retain their own copy of the database.
Whenever transactions are executed through the network, they are converted into immutable data blocks that are ultimately included in the database. The use of advanced cryptography then guarantees these transactions are always secure. You may like to think of a blockchain as a next generation business processes application. One that can automatically offer validation to transactions made via a network, which does away with 3rd parties. A blockchain network can be permission-less, making it accessible to all like Bitcoin. Alternatively, it can be a permission-only closed network, whose membership is invite only.
The cryptocurrency Bitcoin is widely regarded as the first instance of blockchain. Yet this year is viewed to witness the launching of blockchain 2.0. This occurrence is believed will disrupt many processes in the financial sphere and even beyond.
As approved transactions are included in the database immediately and updated among all members’ copies, they can be concluded more rapidly. Also, as all information in the database is kept transparent, all members’ data is more secure. Organizations which provide financial services are especially interested with blockchain technology. Largely as a feasible means of overhauling redundant back office IT systems. While also a way of streamlining other infrastructures that depend on 3rd parties like settlements and stock exchanges.
For many though, the most fascinating aspect of blockchain is smart transactions. Unlike what the term suggests, smart contracts cannot be really considered as contracts legalwise. They are simply coded instructions, which sit on a blockchain. Their primary function is to outline contract terms, and execute them when specific events happen. For instance, funds can be relayed in adherence to the exact terms of an insurance cover, when an approved event occurs like a mobile device getting stolen.
These contracts extend a blockchain’s functionality beyond just a shared database. What they do is provide it with the capabilities of executing contract terms automatically. The utilization of smart contracts is still in its formative phase and raises some legal flags that need to be addressed. This includes: Can their developers ensure their coding matches regulations pertaining to the exact transactions, which take place via a network?’ Secondly, will attorney services be required to validate their coding?’ Thirdly, how will the innate transparent nature of blockchain 2.0 software influence the user’s privacy rights, them been open source?’ And finally, how can the immutability aspect of blockchain handle specific legal principles like cancellation of contracts due to fraud or duress?’
Regulation will undoubtedly play a major role in making the widespread utilization of blockchain a reality. Currently, some financial regulatory bodies now work with ingenious fiscal products such as those founded on blockchain. An excellent example is the FCA’s regulatory sandbox development in its ‘project innovate’ collaboration with the Bank of England. A robust regulatory body will certainly help blockchain’s transition into mainstream and many feel 2017 will witness much progress in this area. The key conference at this year’s Blockchain Week will see art societies and charitable organizations interact with bankers and techies. This suggests the utilization of blockchain in the foreseeable future will not be restricted to financial services or the private sector only. For blockchain’s big moment to occur, the above regulatory and legal challenges must be dealt with soon.