Technology that saves time and money

Blockchain will foster the infinite trust that is the basis of every transaction. Blockchain will make transactions cheaper and save people time. 
Blockchain technology comprises individual blocks of program code that are encrypted, authenticated by a large number of approvers and dependent on the content of all preceding blocks. The entire blockchain is like a database stored in a decentralised way on a large number of computers that are synchronised with each other. As a result, the blockchain system fosters transparency, security and efficiency. 

In today’s world, intermediaries (banks, clearing houses, notaries, etc.) are required to execute and provide trust in transactions. Blockchain technology will provide precisely these functions, which means that we will no longer need intermediaries.

The nature of this technology enables the original to exist in the digital world; prior to this, the main problem was that it was impossible to distinguish between the original and the copy in the digital world. This opens the door to the digitalisation of assets that exist in the real world and to the implementation of a variety of transactions with those digital assets. These characteristics have led many to say that blockchain technology constitutes the ‘internet of value’, in contrast to the existing ‘internet of information’. It appears that this technology will, in the future, overhaul many social and economic relations.

Blockchain has achieved its first great practical use with the Bitcoin cryptocurrency, which uses blockchain technology to keep records of the number of bitcoins held by an individual and to transfer bitcoins between currency-holders. In recent years, this technology has begun to develop in such a way that it enables more complex code to be written into a blockchain, enabling much more than simply the entry of data on cryptocurrency quantities and the number of transactions.

Use of blockchain in business
Blockchain technology will have an impact on business, particularly by allowing certain processes to be automated, which will speed up work and make it cheaper. Transactions will be conducted directly with end-users, without the need for intermediaries. All this means that there will be significantly more transactions, which will stimulate the economy. 

Through the issuing and sale of cryptocoins (initial coin offering or ICO), blockchain technology enables start-up funds to be collected for the development of products based on that technology. This is a new way of collecting funding. It opens up numerous legal questions and brings risks (or rewards) for investors, at the same time providing entrepreneurs with more straightforward access to global funding sources.

Enterprises will be able to use blockchain technology itself in the form of ‘smart contracts’ in particular; these are comprised of computer code written into a blockchain that automatically discharges obligations and exercises rights without the involvement of the parties, thereby reducing the need for trust in the implementation of a contract between the parties. 

With the help of blockchain, enterprises will be able to digitise tangible (vehicles, real estate, art works, etc.) and intangible (information, health data, identity, etc.) assets; they will thus be able to hold them digitally in a simple, efficient and safe manner. This technology also facilitates the development of a completely new type of organisation, the decentralised autonomous organisation (DAO), comprised of computer code managed by coin-owners with voting rights contracted automatically by computer code.

Key problem of this technology
The main problem facing blockchain technology is that existing legislation is not aligned with it and that any assessment of blockchain relations using existing legislation brings uncertainty. European institutions believe that the technology is not yet ready for legal regulation, as any legislation at this stage could hinder its further development without, at the same time, providing adequate regulation of social relations. Nevertheless, there are some activities under way that will lead, in the future, to adequate legal regulation.

Author: Aljaž Jadek, lawyer at the Jadek & Pensa d.o.o. law firm