What blockchain technology can actually do
Blockchain – devilish stuff or is there more behind it? Sometimes the reputation of the new technology has suffered. Developments in the legislature are now eliminating initial doubts. Whoever understands the Blockchain as an instrument opens up completely new ways of investing capital. A trio of experts explains what these look like.
Let’s start with the basics: No technology that has been invented so far has been used by mankind exclusively for good purposes. The basic principle of Blockchain is a method of creating security between people, institutions and companies, even if they initially neither know nor trust each other. What this technology is used for is therefore – like so much else – the responsibility of the users. The sum of all block chains already consumes as much energy in one year as the whole of Ireland. So there are many aspects to consider, but more on that later.
Explanation of terms
The block chain is decentralized. The block chain is complete. Because it is stored decentrally on computers. This eliminates the need for centralized data storage by an authority of any kind, such as the land registry. The network of computers involved automatically issues the authorization for the transaction (Smart Contract), provided that the new transaction added meets the specifications. Manipulations are usually noticed immediately. Transactions are then rejected.
If one wanted to manipulate the block chain “securely”, one would have to manipulate and own at least 51 percent of all networked computers – that is almost unthinkable. Without authority, however, according to today’s legal standards it is questionable whether contracts are always legally concluded, according to the concerns of lawyers. Today’s block chain is driven by turbo-capitalism: More capital buys more computing power, generates more power, creates more capital and so on.
The block chain is, to describe it metaphorically, a decentralized journal, commonly known as a notebook (= block), simultaneously and unchangeably updated by all participants. When a notebook is full, a mathematical procedure is used to create a new notebook that is appended to the previous ones: this creates a chain of blocks. If you are more deeply interested in the origin and the mathematical logic behind it, or in the underlying algorithms, please refer to the relevant technical literature. The so-called wallet is the place of custody for block chain-based deeds of ownership, so-called tokens of all kinds. We will come to possible forms later.
Current status of the legal consideration
Currently, there are only a few European countries that have implemented an effective law to regulate digital crypto assets: Malta and the Principality of Liechtenstein.
But one should not underestimate the situation in Germany. In fact, the legislative process for this is already well advanced and has already reached the final phase of the draft bill.
This draft for the electronic Securities Act (eWeG) has – as of July 23, 2020 – various highly interesting implications: Electronic securities will be expressly elevated by law to the status of a “thing according to §90 BGB”.
In addition, the draft law keeps the question of the technological basis open by clearly referring to “block chain or comparable distributed ledger technologies”.
Furthermore, the draft bill is explicitly “initially limited to the area of electronic bearer bonds”, but leaves open the option of extending it to stock markets and other capital investments. Whether it will also apply to the “tokenized real assets” in the area of alternative investments, as described below, and if so, when, is not clear from the draft.
Ideas of application
What can the block chain be used for? First of all, it can be used for documentation of any kind: Be it to document the provenance of a collector’s item without any doubt and unaltered. Be it, with a view to autonomous driving in the future, to document the communication with other vehicles of all kinds and the actions of the drivers. Or whether it is simply to keep a logbook for the tax office, to record accident data or to document the maintenance history of special machines.
Patent rights, certificates of authenticity and proof of ownership for shares in capital investments or valuables can also be documented in this way.