Blockchain provides an online database, or “digital ledger”, of transactions that everyone on a network can see. The network must all approve an exchange before it can be confirmed and documented
Blockchain technology provides irrefutable and unchangeable evidence that the data (transaction) recorded in a block existed at a particular point in time.
Blockchain explained …
Blockchain technology uses complex multi nodal computing technology to provide irrefutable timestamped proof of the existence of the data within a “block”. Each block is linked to its predecessor and successor by unique numbers (Hashes) derived through the application of significant computing power. That “work” is performed by the nodes and derives the “nonce”, a random number that when combined with the timestamp and the two Root Hashes makes each block unique.
Opportunities of Blockchain Technology
- Third party intermediaries (e.g. banks) are not required to verify transactions entered onto the blockchain – blockchain ‘miners’ (nodes) verify each transaction in accordance with underlying blockchain code.
- Blockchain provides a fast, reliable, immutable and traceable record of assets and transactions in real time at reduced cost.
- Blockchain is secure – to be ‘hacked’, every block would need to be targeted by the hacker – this is not economically feasible.
- Blockchains can be ‘public’ or ‘private’.
- Software programs can be implemented over the underlying infrastructure of the blockchain (e.g. smart contracts).
Issues and Uses
- A ‘smart contract’ is not a legal contract – but could potentially operate in conjunction with a traditional ‘legal’ contract.
- Blockchain transactions avoid application of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
- Privacy implications – data on a ‘public’ blockchain can be viewed by anyone who is ‘permissioned’ on the blockchain network.
- Blockchain may require or create a new sphere of regulation that sits parallel with the existing legal system.
- Purchasers put at greater risk if they do not assess underlying code of smart contract before entering into it.
- Create cryptocurrencies that replace traditional currency (e.g. Bitcoin) currently in use.
- Provide settlement facility for securities transactions (see ASX project with Digital Asset Holdings).
- Financial Instruments (e.g. derivatives).
- Conditional payment arrangements/escrow arrangements.
- Simple contracts involving a transfer of an asset for money.
- Replacement Lands Title Office (e.g. Swedish Government’s project with ChromaWay).