Blockchain: The Next Big Shift in the Technological Paradigm
Technological change has followed a predictable path over the past fifty years or so. Microchips and devices have become smaller, more processes have been automated, life has become more convenient.
Since the beginning of 2020, we have witnessed rapid growth, not to mention the massive introduction of technologies into our daily lives. As we adapt to the long-term period of social distancing, the paradigm in which technologies are developing has been reversed, and each member of society has had to quickly find new technological solutions to perform tasks that were previously taken for granted.
In the next decade, technologies will move from automation and the replacement of manual labor, to the replacement of routine cognitive work, and the blockchain will become the key engine of the “fourth industrial revolution”.
The paradigm shift towards the “fourth industrial revolution” was first postulated by Klaus Schwab in a 2015 article published in the journal Foreign Affairs, and refers to the evolution of our way of life, work and relationships with each other, which was made possible by outstanding technological advances.
According to Schwab, these achievements unite the physical, digital and biological worlds. The social distancing measures needed to respond to the global pandemic have accelerated this fourth industrial revolution.
Why Blockchain Will Grow Over the Next Decade
Blockchain will affect all aspects of your life, including how you work and buy goods from clothing to food. On everything.
Simply put, the blockchain involves recording information in such a way as to create trust in the recorded data. Blockchain is proof that you have something digital-whether it’s Bitcoin or your personal medical card. It proves that you are the owner of any digital information stored in a distributed, decentralized public registry.
Initially, the blockchain was created together with Bitcoin. Since its creation, it has gone far beyond cryptocurrencies and is growing exponentially. It is estimated that blockchain technology has been adopted by more than one third of the world’s companies.
We are already living in a digital universe. We no longer go to video rental centers to rent movies, and very few of us have DVDs. Instead, we use Netflix, Hulu, and Amazon Prime to watch our shows and movies. We order all kinds of products online. Blockchain has become indispensable because it allows us to own our digital goods, assets and data.
The blockchain can be trusted as a source of truth. Suppose some information (data) was included in the blockchain sometime in the past, but the data may be incorrect. The records in the blockchain are immutable and provide an unchangeable footprint. The error can be corrected only by adding another block to the chain with the consent of all participants. Blockchain records tangible and intangible assets in a network of peer-to-peer nodes that use the same software, algorithms and cryptography to maintain records.
Currently, there are two types of blockchain: without permissions (public) and allowed (private). Participants use pseudonyms to protect their identity using unauthorized blockchains, and there is no identification of participants. On the other hand, the allowed blockchains are protected by access rights. Participants are authenticated, and the superuser can manage the network. Blockchains without permissions are considered more reliable due to the principle of consensus.
The technology currently provides many applications, including tokenization to protect confidential data, an immutable timestamp, asset transfer through a payment channel, and simplification of smart contracts. Today, it is used to increase the efficiency of more processes by replacing components or providing a completely new blockchain service. The most famous example of its use is cryptocurrency, but its possible applications are still being investigated in many industries.
Why Companies Integrate Blockchain Solutions
By 2023, the global blockchain market should reach more than $ 20 billion, which indicates how quickly companies are expected to make decisions based on blockchains. All the most famous and influential companies around the world have already turned their attention to this innovation. Tech giants like Apple, Microsoft, Google, Amazon are investing billions in powerful technologies. And Wall Street wants it too. What makes blockchain so attractive for business?
First of all, it reduces operating costs, eliminating the need for centralized management. Eliminating intermediaries is crucial for business, as it reduces costs and the number of points of contact, increasing the efficiency and growth of the company. What could be better in the eyes of a business leader? It is estimated that the introduction of the technology will save more than 100-150 billion dollars by 2025. The introduction of blockchain will reduce the costs of personnel, support, operations, IT, data leaks and much more.
In addition to efficiency and security, it allows you to perform transactions in seconds, not in days. The speed of the transaction is especially important for international exchanges.
Despite the many advantages of blockchain, it is extremely important that we understand the legal consequences, risks and opportunities that its use provides.
Legal issues to keep an eye on
Stakeholders in these solutions will need to ensure that their products comply with a legal and regulatory framework that was not conceived with this technology in mind. From the point of view of commercial law, smart contracts should be considered for negotiation, execution and administration in the blockchain, and in a legal and compatible manner.
First of all, it is necessary to solve the problem of responsibility. What should I do if the contract was drawn up incorrectly? What if this does not lead to the achievement of the intentions of the parties? The parties must also agree on the applicable law, jurisdiction, good governance, dispute resolution, confidentiality and much more.
There are public policy issues that should be taken into account when developing new laws, rules and regulations. For example, unauthorized blockchains can be used for illegal purposes, such as money laundering or circumvention of competition laws.
Also, participants may be subjected to irresponsible actions on the part of “miners” who create new blocks. Unfortunately, there are currently no legal remedies to combat unscrupulous miners.
Possible solutions
Lawyers and technologists reflect on these problems, and discuss several solutions. One of the possible solutions is a hybrid of permitted and unauthorized blockchains.
Some transactions require the intervention of a responsible party, for example, when the “Know your Customer”rules apply. All participants of blockchains and smart contracts in which data is exchanged are data controllers. This means that participants must comply with all data protection requirements.
Another consideration is what is included in the chain or what, instead, is included in the smart contract and outside the chain. Although it is possible to include provisions on liability, jurisdiction and other legal aspects in a smart contract, this leaves no room for interpretation, since it is based on conditions. The best solution may be to store the real contract off-chain, but linked to it using a hash-safe value for additional confidence.
Constant pressure from regulators to obtain more data with trends such as controlled free trade, increased border security and accreditation of economic operators leads to higher regulatory compliance costs. This means that the parties conducting global trade need higher transparency and security of the supply chain. It requires data that is both high-quality and secure, as well as trade compliance systems that can handle electronic data exchange.
There are many parties involved in world trade, in addition to the buyer and seller, for example, customs and regulatory authorities, financial institutions, shippers, brokers and insurers. Multiple data exchange takes place between these participants, which makes it possible to implement a blockchain for launching and recording invoices, bills of lading and compliance with customs rules.
Welcome to the future
As blockchain technology develops, global trade supply chains will increasingly use this technology, while the authorities will monitor transactions and compliance with customs declarations, payment of duties and sanctions rules.
In addition, combining the blockchain with The Internet of Things (IoT), will give manufacturers the opportunity to track products, manage risks in distribution networks and demonstrate good corporate governance.
Although no one can predict what the future will be like, it seems obvious that blockchain will play an important role in it.