Dec 5, 201609:13 PMLegal Login
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Tackling blockchain: What every business should know
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As if the pace of technological change isn’t fast enough, looming around the bend is a next-generation advancement that will change the way in which business transactions are conducted. It’s called blockchain technology and now is the time to consider its impact to your business.
Blockchain is a peer-to-peer transaction-ledger system, shared by parties participating in a collective network that enables the decentralized tracking and trading of anything of value — whether money, titles, business records, personal records, goods, or other assets. Blockchain facilitates movement and storage of assets securely and privately. Advocates claim that blockchain will improve business processes by increasing transparency, trust, integrity, and efficiency between unknown users and will minimize fraudulent actions.
The implications of blockchain are immense. According to a Nov. 7, 2016 New York Times commentary, “How Blockchain Will Change Your Life,” nearly 80% of banks are working on blockchain projects that will revolutionize the holding and transferring of financial assets. However, blockchain is much more than just a financial technology. It will have significant impacts in health care, insurance, manufacturing, and retail settings, as well.
To provide examples of its application, the consulting firm Accenture projects that financial institutions will use blockchain as a primary means to streamline intra-bank and cross-border transfers of funds. In markets without reliable payment systems, blockchain will become the standard payment and ledger system for sales.
In retail settings, Accenture forecasts that consumers will use blockchain to trace the origins of goods such as the seafood that they eat (from boat to plate) or the source of wool for the sweater that they purchase (to confirm the sheep were humanely treated). The implications for supply chains are transformative. Participants in the supply chain — from manufacturers to suppliers to retailers to customers — will use blockchain to trace a product’s journey from conception to purchase.
Equally impactful are the legal implications of this new technology. Among the many prevailing legal considerations, blockchain will serve as a platform for executing “smart contracts.” Smart contracts are legally binding agreements that have been self-executed by computers (not people) in accordance with predetermined software instructions. For example, a computer chip in manufacturing equipment on your shop floor may detect that a critical part is worn. Using blockchain, the chip may automatically execute a purchase order with your supplier for the replacement and delivery of a new part, all in accordance with predetermined self-executing contractual provisions, without human intervention.