Blockchain and blockchain technology have captured the imagination of the world. It is being used increasingly more in business and has found its way into the legal profession as well. Blockchain as such has immense potential and can certainly be extremely beneficial. However, since it is such a dynamic, innovative, and recent development, there is a need for regulation of this phenomenon. Regulation will bring more clarity, protection, and assurance. One of the main objectives of a blockchain, however, is to move away from centralised control, so the issue of regulation is a sensitive and complex one. Regulators and policymakers find it difficult to maintain the balance between effective regulation and allowing blockchain to fulfil its potential.
TopIntroduction
Blockchain and blockchain technology has opened up a whole new world - a world of possibilities for business and law. Businesses and law firms are increasingly looking at utilising this technology and some have already implemented it.
Andries Verschelden, a partner at Armanino, an accounting and business consultancy firm in the United States, when referring to blockchain, goes as far as to say “what if someone told you that a new technology would significantly impact every law firm within the next 10 years - and would influence how your firm gets paid, the types of services it offers, and everything in between?” (Verschelden, 2019, para. 1).
Verschelden (2019) is referring to smart contracts, automated security and payments via digital assets, which are all examples how blockchain technology will feature prominently in the legal industry.
Whether one agrees with such bold statements or not, the fact remains, blockchain and blockchain technology is here to stay, in the same manner as social media. Social media has changed the way the world does business, and while it is difficult to say whether blockchain will have such a far-reaching influence, suffice to say it will definitely have a significant influence in business and law.
Africa is no exception to the influence of blockchain and many countries on the continent have considered the use of it. It has the potential to change the way people do business and practice law, and because of that it is vital that the legal sector acknowledges blockchain and blockchain technology, and provide measures aimed at regulating this potentially powerful market driver.
With a focus on the African continent and specifically South Africa, this chapter provides an overview of blockchain, explaining how the technology works and what opportunities it provides in business and law. It concludes with a discussion on how blockchain should be regulated.
TopDefinition Of Blockchain
There is no consensus as to what the exact definition of blockchain is. It has been described as similar to a bookkeeping system which securely and reliably captures and stores data on a network in a sophisticated manner (Cuccuru, 2017). On a very basic level, it offers various and wide-spread recorded information wherein the parties to the blockchain can then share this information (Rajput, Singh, Khurana, Bansal, & Shreshtha, 2019). Once the data is captured, it will never be erased or removed and the blockchain then has “an explicit and clear record of each and every exchange whenever created” (Rajput et al., 2019, p. 909). So this data structure or list of transactions are all put together in blocks and then cryptographically secured and linked together on a specific chain, hence the name blockchain (Crosby, Pattanayak, Verma, & Kalyanaraman, 2016). Technology such as this has the advantage in that it is regarded as tamper-resistant and can provide immutable records of transactions (Crosby et al., 2016).
Not all blockchain constructions are the same. On a very basic level, a distinction is made between different kinds of blockchains, as for instance, permissioned and permission-less blockchains (Mattila, 2016). With regard to the permissioned blockchain, the implication is that the participants in the specific network are known and that they can be trusted to act honestly, so co-operation is assumed and incentives to ensure co-operation are not introduced. On the other hand, permission-less blockchains offer complete open access to everyone and the participants do not need to first attain permission to join the network. The participants are also not known to each other and trust is established from using game-theoretical incentives (Bürer, de Lapparent, Pallotta, Capezzali, & Carpita, 2019).