Thought Leadership and Industry Trends
Blockchain Impacts More Than Cryptocurrency: Are You Ready?
Blockchain has been in the news for several years but typically it has been in the context of discussions about Bitcoin and other cryptocurrencies. However, cryptocurrencies are just one way that blockchain can be used. The blockchain concept can be applied to many types of transactions which has major implications for creating, storing and managing data.
Blockchain is defined as a distributed database of transactions. It is a “distributed ledger” that gets stored in a distributed network. In simple terms, think of it as an Excel spreadsheet that is copied a million times across a global network, but the network updates the spreadsheet so that everyone agrees to the changes (this is called consensus).
“Consensus” is among the chief benefits of blockchain. No one person can make an unauthorized change to the blockchain. Changes must be accepted by the entire network which makes hacking blockchain unlikely. Despite this benefit, the technology raises interesting questions that will need to be addressed as companies find more uses for blockchain. These questions include:
- Can we trust a blockchain network? When the Internet first started, no one trusted it. But as it evolved, it became increasingly “centralized.” We “trust” the Internet because there are only a handful of major ISPs, there is an organization that controls domain names and other global standards have also been established. The paradox of blockchain is that we can trust it because it isn’t centralized. This is because everyone must agree (reach consensus) before a change is made.
- Is it possible to govern or regulate a blockchain? Although we may be able to govern the individuals who make up a blockchain network, eventually the whole becomes greater than the sum of its parts and governance becomes difficult. Every transaction in the blockchain has an anonymous address associated with it, so it can be difficult to determine who that transaction belonged to and then regulate it. To date, the focus of governments has been to regulate the transaction or asset (e.g. Bitcoin), but not the blockchain itself.
- How can we reconcile conflicting laws or public policies? Blockchain wants to be “immutable” – that is, transactions are forever. However, privacy laws like GDPR are giving citizens the right to tell companies to delete their information. How do you reconcile “immutability” with the new “right to be erased or forgotten”?
- What does blockchain mean for eDiscovery? Blockchain represents a new way to store data or transactions and when litigation arises, that information will need to be identified, collected and processed. How will that be done, while still honoring Rule 1 of the Federal Rules of Civil Procedure – to secure the just, speedy, and inexpensive determination of every action and proceeding?
Blockchain is being used by all types of organizations to protect data, improve security, and facilitate the management and transfer of data and assets. However, it is now going even further by allowing parties to create automated smart contracts. Essentially, a smart contract is an electronic or digital agreement which is incorporated into a computer program that allows the agreement to be automatically triggered by certain events without the need for human intervention. Originally, smart contracts were created to allow anyone wanting to buy cryptocurrency to purchase it directly without the use of a broker. However, smart contracts can be used for virtually all agreements. The problem is that this may alter the landscape of what we think of as normal contractual agreements between parties and will continue to raise the issues discussed above.
As organizations develop more uses for blockchain, these concerns will become increasingly important. In future posts, we will discuss these issues and how they will impact the future of eDiscovery.
CDS’ team of experts can help you plan for the future of eDiscovery today. Contact us to schedule an eDiscovery assessment.
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