Blockchain Technology: A New Approach to Provenance Presenter: Nelson M. Rosario Principal at Smolinski Rosario Law Adjunct Professor, Illinois Tech Chicago-Kent College of Law Visiting Professor, IE Law School Date: March 12, 2019

What is new here?

What is Blockchain?

The future?

The future? A scam?

The future? A scam? Magic Internet Money?

Blockchain technology is mainly about one key principle….

Blockchain technology is mainly about one key principle…. trust

Blockchain technology allows for a new way to manage trusted relationships without using a central counterparty

Now we can trust that information transacted on a network we do not trust has not been tampered with

IT ALL BEGINS WITH BITCOIN...

THE DOUBLE SPEND PROBLEM HOW CAN YOU BE SURE THAT THE DIGITAL MONEY YOU RECEIVED HASN’T ALREADY BEEN SPENT? TRADITIONALLY BANKS PROVIDED THE SOLUTION BITCOIN OFFERED A DECENTRALIZED SOLUTION

TRANSACTIONS ON THE BITCOIN NETWORK ARE PUBLIC TO EVERYONE IN THE NETWORK

ANYONE CAN VERIFY THAT FUNDS ON THE BITCOIN NETWORK HAVEN’T BEEN SPENT YET

BITCOIN RESULTS IN THE FIRST UNIQUE VERIFIABLE DIGITAL PROPERTY

PUT ANOTHER WAY NOW WE HAVE TRUE DIGITAL SCARCITY

BLOCKCHAIN APPLICATIONS THE BUILDING BLOCKS OF BLOCKCHAIN TECHNOLOGY NETWORKS+ LEDGERS + CRYPTOGRAPHY = BLOCKCHAIN APPLICATIONS

THE BUILDING BLOCKS OF BLOCKCHAIN TECHNOLOGY BY COMBINING THESE THREE TECHNOLOGIES AND ADDING SOME ECONOMIC INCENTIVES = BLOCKCHAIN APPLICATIONS

Networks: Centralized, peer-to-peer

A GROUP OF PEOPLE THAT SHARE INFORMATION AND RESOURCES

MUCH OF HUMAN HISTORY CONCERNS SCALING TRUST AND GROWING NETWORKS

SCALED HAS BEEN THROUGH THE USE OF COORDINATION TECHNOLOGY THE WAY TRUST HAS BEEN SCALED HAS BEEN THROUGH THE USE OF COORDINATION TECHNOLOGY

COORDINATION TECHNOLOGIES WRITING TELEGRAPH TELEPHONE THE INTERNET BLOCKCHAIN APPLICATIONS?

NETWORKS - TYPES

MOST BLOCKCHAIN NETWORKS ARE ORGANIZED AS DECENTRALIZED NETWORKS

MOST CRYPTOCURRENCY BLOCKCHAINS ARE PEER TO PEER NETWORKS

PEER-TO-PEER NETWORK

HOW SHOULD WE ORGANIZE INFORMATION ON THESE NETWORKS?

ONE WAY IS TO USE A LEDGER

Ledgers: centralized, distributed

LEDGERS ARE OLD AND STILL IN USE

LEDGERS - ISSUES LEDGERS CAN BE MAINTAINED BY A CENTRAL PARTY LEDGERS CAN BE MAINTAINED BY MULTIPLE PARTIES THAT THEN NEED TO RECONCILE THEIR LEDGERS

LEDGERS ALLOW PARTIES TO COME TO A CONSENSUS ON WHO OWNS WHAT

NOT ALL LEDGERS NEED BE CENTRALIZED OR RECONCILED

DISTRIBUTED LEDGERS ARE SHARED/REPLICATED LEDGERS

DISTRIBUTED LEDGERS TYPICALLY LEVERAGE PEER-TO-PEER NETWORKS

DISTRIBUTED LEDGERS IS HOW DOES INFORMATION GET ORDERED CORRECTLY? THE DIFFICULTY WITH DISTRIBUTED LEDGERS IS HOW DOES INFORMATION GET ORDERED CORRECTLY?

OR PUT ANOTHER WAY HOW DO WE COME TO CONSENSUS?

BYZANTINE GENERALS PROBLEM

WHAT ABOUT KEEPING THINGS SECRET?

Cryptography: encryption, decryption, hashing, digital signatures

CRYPTOGRAPHY IS ALL ABOUT SECRETS

CRYPTOGRAPHY IS AS OLD AS WRITING

MOST CRYPTOCURRENCY BLOCKCHAINS USE PUBLIC-KEY CRYPTOGRAPHY

THEY ALSO USE HASHING AND DIGITAL SIGNATURES

Great, now what?

Applications: blockchain, cryptocurrency, smart contracts, daos

Blockchain: A definition A blockchain is a tamper-evident censorship resistant append-only ledger of transaction data Note: There is no universally accepted definition of what a blockchain is

Two main flavors of blockchain Permissionless Anyone can join People come and go as they please Usually focused on unique crypto tokens, i.e. cryptocurrency Lots of questions concerning governance, scalability, legality, etc. Permissioned Much more strictly controlled Favored by large corporations Need permission to join, and/or view the information stored on the chain Far less questions concerning governance, scalability, legality, etc.

The distributed ledger can be represented as blocks of transactions that are linked together through cryptography

Example Blockchain Source: https://vitalflux.com/10-definitions-to-understand-blockchain-better/

Got a blockchain. What can you do?

Cryptocurrency - verifiably unique digital property Got a blockchain. What can you do? Cryptocurrency - verifiably unique digital property Smart Contracts - automated agreements that execute in a fault tolerant manner Distributed Autonomous Organizations (DAOs) - leaderless organizations?

CRYPTOCURRENCY: GENERALLY Cryptocurrency: A Definition “...limited entries in a database no one can change without fulfilling specific conditions.” GOOD WORKING DEFINITION CRYPTOCURRENCY RESULTED IN THE FIRST VERIFIABLE UNIQUE DIGITAL PROPERTY HERE THAT MEANS ENTRIES IN A DISTRIBUTED LEDGER STORED ON A DECENTRALIZED NETWORK

CRYPTOCURRENCY: GENERALLY CRYPTOCURRENCY COMES IN MANY DIFFERENT VARIETIES DIFFERENCES BETWEEN CRYPTOCURRENCY ARE CENTERED ON GOALS FOR THE CRYPTOCURRENCY PRIVACY LEVEL HASH ALGORITHM CONSENSUS MECHANISM

SMART CONTRACTS “A smart contract is a computerized transaction protocol that executes the terms of a contract.” - Nick Szabo SMART CONTRACTS IN THE BLOCKCHAIN WORLD ARE DISTRIBUTED

SMART CONTRACTS IN THE BLOCKCHAIN WORLD SMART CONTRACTS OFFER GUARANTEED EXECUTION IN A FAULT TOLERANT OPEN OFFERS GUARANTEED TO EXECUTE IF CERTAIN CONDITIONS ARE MET

Decentralized Autonomous Organizations Blockchain Cryptocurrency Smart Contracts Decentralized Autonomous Organizations

WHAT ABOUT PROVENANCE???

SOME APPROACHES

Potential Applications Land records Property registry Corporate voting Evidence production Caselaw tracking?

Thank you! Nelson M. Rosario | Principal - Smolinski Rosario Law, P.C. | Adjunct Professor - IIT Chicago-Kent College of Law Visiting Professor - IE Law School Firm: nelson@smoroslaw.com Twitter: @NelsonMRosario Blog: Crypto Caselaw Minute Personal: www.nelsonmrosario.com