IP Review Autumn 2017

New kid on the block Over the past few years a new buzzword has entered the public consciousness: Blockchain. This rapidly developing technology has the potential to alter radically the way that business is done in a huge range of sectors. Blockchain 10 IP review autumn 2017 At its heart, a blockchain is a distributed digital ledger for storing an effectively immutable record of data. At first, this may seem insignificant: something that only accountants and bankers would be interested in. However, many commentators believe that the transparent, decentralised nature of blockchain has the potential to revolutionise the global economy, changing the world of data management and trust in the same way that the internet revolutionised the sharing of information in the 1990s. What is blockchain? To understand blockchain and its potential, it is worth first considering how traditional transactions and ledgers work. Transactions typically require trust between the parties to the transaction. For example, when transferring ownership of a house, the buyer must trust that the seller owns the house and the seller must trust that the buyer is properly paying for the house. To facilitate trust, transactions are typically verified by a trusted central authority, such as a bank or government, and recorded in a centrally controlled ledger (such as a land registry, a bank account, etc). The accuracy and trustworthiness of the ledger is dependent on it being controlled by the trusted central authority. However, there are a number of shortcomings to the traditional model. What if the trusted central authority turns out not to be trustworthy? What if transactional speed is essential and the delays and red-tape of central authority verification are intolerable? What if there is no central authority that is trustworthy? Blockchain has the potential to overcome these problems by using a distributed ledger to cut intermediaries out of the transaction process and enable trustworthy, peer- to-peer transactions to take place. A distributed ledger is one that has no central control. Anyone may see its contents, post transactions to be added to it, verify its contents and verify new transactions before they are added to the ledger. By utilising complex cryptographic processes, it is almost impossible to alter the historical content of a blockchain, and new transactions may be verified by participants to the blockchain using a “consensus mechanism” before they are added to the blockchain. Consequently, control and authentication may be reliably removed from a central authority and distributed to all of the participants to the blockchain.