Blockchain Basics

Many people have heard of Ethereum and Bitcoin-forms of cryptocurrency.  However, the real staying power will be in blockchain, the underlying technology these cryptocurrencies use.  Blockchain is a transformative technology for many sectors with internet-level disruption potential. Many are calling it “web 3.0.”

A blockchain is an encrypted distributed ledger technology (DLT) which facilitates recording, moving, and tracking assets. An asset can be a real property, intellectual property, common stock, debt instruments, identity, or anything of value. Assets are “tokenized” with a smart contract and deployed on the chain.

Data is organized into blocks and added to the ledger forming a chronologically ordered chain. Record keeping happens across multiple computer nodes that approve, verify, and store the ledgers data. Each node contains a complete timeline of data on the blockchain. If one node were to be hacked, the other nodes information is not altered. An altered record would be easily distinguished.

Every block has a unique cryptographic hash which protects the data in the block and its place in the chain. Data put in the blocks is unchangeable. The blockchains immutable record provides a single shared source of truth.

Smart contracts are stored and executed on the blockchain. A smart contract can define conditions for asset transfers

Different Types of Blockchains

Blockchains are built as public or private networks.  Ethereum is an example of a public blockchain, Hyperledger a private one. These networks can be permissioned, restricting who can participate in what transactions. This allows tokens on the blockchain to be configured to comply with securities laws. There are also consortium or federated blockchains whereby multiple organizations govern the platform.

Best Use Cases

The Blockchain Council listed the top 10 blockchain use cases as:

1. Supply Chain Management

2. Digital Identity

3. Voting

4. Fundraising (Security Token Offerings)

5. Healthcare

6. Notary

7. Food Safety

8. Intellectual Property

9. Energy Market

10. Real Estate

(See e.g. https://www.blockchain-council.org/blockchain/top-10-promising-blockchain-use-cases/)

Allomer Law Group PC offers legal and technical consultation on these areas. Discounted rate for the first attorney consultation.