Blockchain, a decentralised ledger system introduced alongside the more well known Bitcoin back in 2009, is gaining attention ten years on.
With the potential to improve the usability, security and capabilities of current internet infrastructure, the concept of blockchain – what it is, what it stands for and what it means to the way we understand the world, are going to be huge in 2019.
With technology continuing to impact the Australian legal system, it’s important to be aware of the potential effects, both positive and negative, of blockchain.
Although not a new concept, blockchain has already shown its potential benefits in Australian courts thanks to its usability, security, and capabilities compared to current internet infrastructure.
According to the experts from Southern Coast Lawyers “the rapidly emerging technology of blockchain is presenting major challenges across virtually every legal jurisdiction in the world, including Australia.”
So if you’re interested in understanding the impact and effect of blockchain, here’s what you need to know.
What is Blockchain?
Blockchain is an IT system that offers secure digital records of assets and transactions.
People are generally most familiar with the use of blockchain in relation to cryptocurrency – for example, Bitcoin is the first decentralised, permanent, worldwide ledger of records to ever exist.
As wonderful as that may sound, it does pose some sensitive challenges for the Australian legal system across property law, commercial law, family law and more.
Impact #1 – Speedy Uptake
One of the major issues when it comes to blockchain and the Australian legal framework is that of its expansion. The rise of blockchain has happened so rapidly that the legal system has struggled to keep up. Legislative amendments and additions take time and considerable planning before their integration into a legal framework.
The speed at which blockchain and its related applications burst onto the Australia scene took many by surprise, including legislators, and has resulted in a scramble to ensure sufficient laws are in place to provide adequate protection.
Opinions are split with some arguing that we are still struggling to keep up with the demand that blockchain places on the law, due to its exponential growth. While others believe that, at least for the time being, sufficient protection is being provided.
Impact #2 – Security
With the introduction of blockchain came the big issue of security – is it secure?
Can the law protect you if you use any technology which utilises blockchain?
Is your information safe and is your data secure?
As with any technology there always lies possible mishaps which may occur, however the Australian legal system just didn’t have adequate legislative provisions to cover all the possibilities presented by blockchain and its constituents.
This put a spotlight on the gaps that our legal framework presented when it came to data security, and ensured the best people possible attacked the problem head first.
Impact #3 – Creation of a New Asset Class
Another situation that arose from blockchain is the creation of a new asset class of social capital. In short, blockchain altered social responsibility from a cost to a tradable asset.
Not only did this become attractive for a corporation to support sustainable causes, but the legal framework Australia held couldn’t keep up with a change like that, resulting in changes needed to happen which we’re seeing currently.
Impact #4 – Smart Contracts
With the introduction of blockchain came the introduction of smart contracts – a whole new type of contract which Australian legal practitioners hadn’t really seen before.
Smart contracts are computer protocols which digitally facilitate, enforce or verify the negotiation of performance of a contract. The big thing about smart contracts is they allow credible transactions to occur without third parties, which places doubt on some areas of Australian law when it comes to contractual rights and obligations.
The benefits of smart contracts are outlined by the legal experts at Drink Driving Defence Sydney who say, “the parties to a smart contract are anonymous and the option contract they enter into is written as code into the blockchain, but is in the public ledger. As you can see, this falls way outside how a ‘normal’ contract is facilitated and how the parties would regularly act, so current legislation didn’t offer sufficient protection.”
As a result there has been an overhaul of current legislative provisions for adequate coverage.
Impact #5 – Ownership
As stated by the Australian Digital Transformation Agency sector of the Australian Government:
“The governance of the blockchain networks deals with the rules, practices and processes by which the blockchain network is directed and controlled. A common misconception is that blockchain networks are systems without control and ownership. The phrase “no one controls a blockchain!” is often exclaimed.”
The notion of blockchain and what it encapsulates means a system ‘above the law’ to a lot of people, but that isn’t the case.
Although blockchain indeed has control and ownership at its core, the Australian legal system was in desperate need to change its parameters when it came to what constituted ownership in a tech-run landscape.
The introduction of blockchain and its associated transactions, such as smart contracts, enabled a change in perception which, in turn, resulted in various legal framework amendments to cover tech-heavy arrangements.
Where does the Australian Legal System Go From Here?
All of the above points have created a need for the adaption, evolution and expansion of current regulatory frameworks to encompass everything that blockchain is and stands for.
The Australian legal system was well overdue for an overhaul, and the introduction of blockchain to the world stage gave it the kick it needed to make some changes.
In saying this, with the ever-rapid evolution that technology lives by there may be more changes to come. For the time being however, the regulatory systems that the Australian legal system currently have are considerably more well-equipped than they were to deal with blockchain and all its varied implementations, and will continue to incorporate timely and well-placed additions to relevant legislation frameworks when the time comes.
