Peer to Peer Magazine

25 WWW.ILTANET.ORG by Beau Mersereau of Fish & Richardson P.C. and Mark Manoukian of Kegler, Brown, Hill & Rier Blockchains and the Legal Vertical In 2008, an individual using the alias Satoshi Nakomoto published a paper defining bitcoin, a cryptocurrency that combines: Mathematically timestamped, serialized hashes as they are recorded in a single growing chain, known as a blockchain The small size of the blockchain The availability of a global peer network to publicly record and bear vast, incorruptible witness to the bitcoin blockchain, all to create a digital currency Developing the blockchain was evolutionary, but developing a blockchain to create a stateless digital currency was revolutionary. A Gamble Pays Off The bitcoin proposal was an all-or-nothing gambit. The logic behind the blockchain is unassailable, but currencies have been historically built on faith in governments and institutions, not the laws of mathematics. Would the world accept not just the new idea of a blockchain, but of blockchain as money? It is hard to imagine a more extreme test by which to measure the validity and acceptance of the blockchain. Nevertheless, bitcoin and the blockchain were big hits. To be fair, there could be others who have a claim on the idea or logic of a blockchain. Shortly before the Nakamoto paper was published, PEDDal submied an idea to the United States Patent and Trademark Office that resembles a blockchain. However, PEDDal's solution is proprietary and not distributed across a peer network, so it lacks the critical quality of decentralization. As for the eponymous Satoshi Nakamoto, we are still uncertain who he is. Rumors continue to swirl, but it makes no difference, except perhaps to redditors and the folks who write the questions for Jeopardy. The Trust Protocol A blockchain is a ledger or distributed database that is almost impossible to modify once information is recorded and agreed to by the peers participating. Blockchains are built on verifiable trust. Once a modification to the blockchain has been published and accepted by enough peers (nodes), it can't be easily modified. Every transaction is verified and agreed upon by all other nodes. It is similar to having thousands of notaries verifying the transaction and recording it into a ledger. Where We Stand The definition of the blockchain under bitcoin was published under an open-source license –– anyone can create other solutions built on a blockchain. In a stunning display of limited imagination, several parties took to the internet to create more cryptocurrencies like bitcoin. The most notable blockchain alternative is Ethereum, which trades in units of "Ether." In January 2016, a number of international investment banks collaborated on a proof-of-concept to use Ether to reconcile trades. It was a smashing success. Where We Are Going A blockchain can be used for anything that needs to be tracked or recorded. Forget about bitcoin, it is just one of many uses for blockchains. Distributed ledgers of stuff is the way of the future. Imagine code that maintains a contract or license agreement automatically. When specific conditions are met, such as an increase in the number of users, a payment is made automatically to the soware publisher. Blockchains could eliminate the need for banks, governments and other trusted institutions. While this is unlikely, what's for certain is blockchains will be a part of our future. P2P 1 2 3 EXTRAS Blockchains and the Legal Vertical

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