BLOCKCHAIN: LEGAL CHALLENGES AND FUTURE APPLICATION BUSINESS BREAKFAST CLUB HARRY HOANG AND SHANEEL PARIKH • 11.05.2018
BLOCKHAIN, DLT AND SMART CONTRACTS
BLOCKCHAIN • Lis List of of rec ecords or or tr transactions th that ar are e dig igitally li linked an and sec secured in in blo locks • For orm of of Dis istributed Le Ledger • Dis istinction between Dis istributed Le Ledger an and Blo lockchain
DISTRIBUTED LEDGER TECHNOLOGY • A dis istributed led ledger r is is a a dig igital rec ecord of of tr tran ansactions (or (or an any y data) a) th that is is shared instantaneously across a network of participants or “nodes” Imagesource: P. Baran, "On distributed communications networks", IEEE Trans. on Communication Systems , vol. CS-12, pp. 1-9, March 1964.
BLOCKCHAIN • Accurate and immutable record of the history of the entire ledger Image source: Coding is Love. 2018. Build your first blockchain with nodeJS - Coding is Love . [ONLINE] Available at: https://codingislove.com/simple-blockchain-javascript/..
BLOCKCHAIN KEY FE FEATURES 1. 1. Nea ear rea eal-time: real-time settlement of recorded transactions 2. 2. Peer-to to-peer r netw twork rk log logic: widely accessible 3. 3. Dis istributed Le Ledger: constantly updated for every network node (no single- point-of-failure) 4. 4. Cen ensorship Resistant once a transaction is made and paid for, cannot be stopped 5. 5. Irr Irreversibility y reduces risks of double spending, fraud, abuse and manipulation
BLOCKCHAIN Image source:Seoul Space: Startup Incubator. Coworking Hub. IT Blog. Localization Agency.. 2018. Streami Looks to Bring Bitcoin to the Korean Banking System – Seoul Space: Startup Incubator. Coworking Hub. IT Blog. Localization Agency. . [ONLINE] Available at: http://seoulspace.com/2016/09/12/streami_looks_to_bring_bitcoin_to_the_korean_banking_system/..
SMART CONTRACTS • A smart contract is a set of coded instructions embedded into a block that self-perform when certain criteria are met.
GOVERNANCE OF BLOCK CHAIN ENTITIES
PRIVATE NETWORK VS PUBLIC NETWORK Priv rivate Network Public lic Network rk • • Permissioned network Permission-less • • Participants known and trusted Anyone can access database, store copy and modify • Legal obligations imposed on • owner Legal obligations uncertain
DECENTRALISED AUTONOMOUS ORGANISATIONS (DAO) • DAO’s are an entirely autonomous organisation existing in cyberspace • Operate purely on blockchain technology and embedded smart contracts • Remove traditional governance model; no company officers, no shareholders agreement or articles of association • Allow anyone with an an internet connection to become an owner and manager of a business
DECENTRALISED AUTONOMOUS ORGANISATIONS (DAO) Holders THE DAO Contractors Curators Blockchain and Smart Contracts
IMPLEMENTATION OF BLOCKCHAIN
USES OF BLOCKCHAIN AUSTRALIAN STOCK EXCHANGE • Replacement of CHESS system » CHESS system performs the processes of clearing, settlement, asset registration and some other post trade services which are critical to the functioning of the market. » 27 April 2018, ASX released public consultation paper » Intended roll-out date of new system - quar arter 4 2020
USES OF BLOCKCHAIN EVERLEDGER • Securely tracks and records the authenticated provenance of diamonds from the mine to the store. Image source: Everledger Diamond Platform. 2018. Everledger Diamond Platform . [ONLINE] Available at: https://diamonds.everledger.io/.
USES OF BLOCKCHAIN POTENTIAL LE LEGAL USE SES • Intellectual property database Image source: WSU Ventures | Protecting Intellectual Property (IP)/Patents . 2018. WSU Ventures | Protecting Intellectual Property (IP)/Patents . [ONLINE] Available at: http://www.wsuventures.org/get- started/protecting-intellectual-property-ippatents.
LEGAL ISSUES WITH BLOCKCHAIN
SMART CONTRACTS ISS ISSUES FOR CONSIDERATION • ‘code is the contract’ smart contracts; identifiable or unfair terms? • how we determine an individual’s capacity to enter into the contract? • how do we incorporate contractual principles that require subjective analysis or that are decided on a case by case basis? » Eg, Force majeure, frustration, duress, undue influence • how do we accommodate rights arising “off the chain”? » Eg, equitable ownership, voidable transactions
DATA PROTECTION ISS ISSUES FOR CONSIDERATION • Privacy Act 1988 • Notifiable Data Breaches Scheme • Australian Privacy Principal 8 – Disclosure to overseas entities » embed model clauses into smart contracts • Australian Privacy Principal 11 – destroying personal information » amend privacy policy
LITIGATION ISS ISSUES FOR CONSIDERATION • Spread of blockchain participants • Which laws will apply? • Dispute resolution via blockchain members? • Pre-determined jurisdiction clause
HARRY HOANG Tailored Accounts
THANK YOU THE NEXT BUSINESS BREAKFAST CLUB IS ON 8 JUNE 2018.
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