What is Blockchain?
A blockchain is a distributed database or ledger that is shared among the nodes of a computer network. It is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.
How it Works
Distributed ledger technology ("DLT") allows record keeping across multiple computers, known as "nodes". Nodes verify, approve, and store data within the ledger. The information stored in the ledger is organised into blocks, or groups of data. Each block can only hold a certain amount of information, so new blocks are continually added to the ledger, forming a chain, hence the term "blockchain". Each block has its own unique identifier, a cryptographic "hash". The block is encrypted, and the transaction record is permanent, protected from deletion, tampering, and revision.
Difference Between a Traditional Database and Blockchain Technology
- A blockchain collects information together in blocks that hold sets of data. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain.
- Blockchain stores data in blocks that are then linked together via cryptography.
- As new data comes in, it is entered into a fresh block. Once the block is filled with data, it is chained onto the previous block, which makes the data chained together in chronological order.
- The data entered is irreversible. This means that transactions are permanently recorded and viewable to anyone.
Legal Implications / Conclusion
There are many possible legal applications for blockchain. The Indian Contract Act, 1872 requires the existence of parties to a contract, whereas with the concept of smart contracts, the codes embedded in each block shall indicate the existence of an intention to contract with the other party. The terms of the contract, as outlined by the code, will form a chain of blocks, and further execution of a smart contract shall mean acceptance of the contract. While legal uses of blockchain are still being explored, a number of practical functions are already being utilised. Blockchain participants need to be aware of the legal ramifications of the solution they are using, including public law, private law, criminal law and financial and regulatory law. With upcoming practical implementation, blockchain will make business and government operations more accurate, efficient and secure.
Disclaimer: The content of this article is intended to provide general guidance on the subject matter. Specialist advice should be sought about your specific circumstances.