Blockchain and Smart Contracts
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The document discusses blockchain technology and smart contracts, emphasizing their definitions and legal implications. It explains how blockchains function as decentralized ledgers and outlines potential use cases, while also addressing legal concerns related to smart contracts, such as liability, enforcement, and jurisdiction. Concerns regarding equitable access to civic tech blockchains and smart contracts are highlighted as well.
Blockchain and Smart Contracts
- 1. Blockchain and Smart Contracts: Not Smart, Not Contracts Blockchain and Civic Tech Roundtable: Smart Contracts 2.0 Presented by Nelson M. Rosario June 27, 2017
- 2. Agenda 1. Blockchain 2. Smart Contracts 3. Legal Considerations marshallip.com | 2
- 3. Blockchains Or distributed ledgers if you prefer
- 4. 1. Blockchain marshallip.com | 4 Generally, what are blockchains? • A technology that guarantees trust and consensus on a distributed and decentralized network • More particularly, a blockchain is typically a tamper-evident append only ledger of transactions consisting of cryptographically linked blocks of transactions • Differences exist depending on particular characteristics of the blockchain – Participation (e.g. Permissionless v. permissioned) – Consensus (e.g. Proof of Work v. proof of stake) – Incentives (e.g. Tokenized v. tokenless)
- 5. 1. Blockchain marshallip.com | 5 Use cases for blockchain technology abound: • Potentially any situation that can benefit from cryptographically linked time- stamped data that needs to be tamper-evident • Multiple private consortiums, and governmental initiatives have been created: e.g. Illinois Blockchain Initiative, Enterprise Ethereum Alliance Governmental Private Voter registration Peer-to-peer transactions Business licensing Supply chain management Digital identity Internet of Things
- 6. Smart Contracts Really more like smart agreements, but I digress
- 7. 2. Smart Contracts marshallip.com | 7 First, what is a contract? • “A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” – Restatement (Second) of Contracts § 1 • Agreement between two consenting parties that will be recognized as legally binding • Legal enforcement of promises • Assuming two parties capable of consenting to legal and reasonable terms – Typical formulation: Offer + Acceptance + Consideration = Contract
- 8. 2. Smart Contracts marshallip.com | 8 Generally, what are smart contracts? • The end of lawyers – Probably not • Scripts that execute automatically • Distributed and decentralized public agreements • They have some important properties – Transparent to participants in the network – No middlemen – Executed by the network – They can hold balances of tokens
- 9. Legal Considerations Lawyers, like life, find a way
- 10. 3. Legal Considerations marshallip.com | 10 General legal concerns: • Liability is unclear – When a smart contract breaks, who is liable? The drafter? The network? • No smart contracts have been litigated, yet • Enforcement is unclear – If the contract does not perform as anticipated how can the contract be enforced? • Jurisdictional recognition is unclear – The smart contract is decentralized, people and companies are not decentralized • How is data input into the blockchain validated?
- 11. 3. Legal Considerations marshallip.com | 11 Concerns for Civic Tech: • Who controls/administers a Civic Tech blockchain? A Civic Tech smart contract? • How can you ensure equitable access for all citizens to any Civic Tech blockchain?
- 12. Thank you © 2017 Marshall, Gerstein & Borun LLP. All rights reserved. This presentation is intended to be informative and should not be construed as legal advice for any specific fact situation. Readers/viewers should not act upon the information presented without consulting professional legal counsel.