Blockchain & Law. Introduction. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.

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1 Blockchain & Law Introduction Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com

2 Table of Contents I. What is Blockchain? IntroducAon How does blockchain works? Blockchain s characterisacs Blockchain v2.0 = Ethereum Focus on smart contracts Summary II. Use cases of blockchain III. Blockchain and the law Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 2

3 I. What is Blockchain? Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 3

Introduction Blockchain = big, free and open account books, that anybody can read, on which everybody can write, but whose wriangs are immutable and that you cannot destroy (Jean-Paul Delahaye).

4 Introduction Blockchain = big, free and open account books, that anybody can read, on which everybody can write, but whose wriangs are immutable and that you cannot destroy (Jean-Paul Delahaye). Contemporaneous analogy : excel table with the same characterisacs. Technology for iden8fica8on and transmission of informa8on. The blockchain contains the history of all the exchanges that have taken place between users since its creaaon. The oldest (2009) and most well-known blockchain : Bitcoin. It primarily allows for the exchange of bitoins between users (cryptocurrency). Ethereum is a new blockchain technology with a strong momentum, because it allows for the execuaon of smart contracts on the blockchain. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 4

How does the Blockchain work? (1/2) Blockchain is literally a chain of blocks, filled with data; blocks are a congregate of transacaons sent by user of the blockchain (e.g.: X send Y to Z).

Thanks to this work, the database is gradually filled and duplicated, and consistent transacaons are processed. TransacAons that are not validated by the nodes are rejected.

5 How does the Blockchain work? (1/2) Blockchain is literally a chain of blocks, filled with data; blocks are a congregate of transacaons sent by user of the blockchain (e.g.: X send Y to Z). It works with a network of computers (called «nodes»), which par8cipates to the Blockchain. Nodes bring their compuang power, their bandwidth and disk space to the network. Thanks to this work, the database is gradually filled and duplicated, and consistent transacaons are processed. TransacAons that are not validated by the nodes are rejected. The nodes are compensated for their paracipaaon through the grant of a cryptocurrency, a virtual assets. There are several, the most famous being Bitcoin (BTC) and ether (ETH). Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 5

block with cryptographic techniques The block is Amestamped and added to the blockchain, to which

6 How does the Blockchain work? (2/2) A conducts a transacaon with B TransacAons are grouped in a block The nodes validate the block with cryptographic techniques The block is Amestamped and added to the blockchain, to which every user has access B receives the transacaon from A Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 6

7 Blockchain v2.0 = Ethereum Ethereum = a blockchain upon which is added a virtual machine layer (EVM = Ethereum Virtual Machine). Ethereum allows programming in form of digital «contracts», called «smart contracts», acaons that are performed automaacally on the blockchain. Blockchain = Excel table, smart contracts = macros. Users can send instruc8ons to the blockchain, that are executed automaacally an publicly on the blockchain Other compeang projects using Smart Contracts : HyperLedger, Tezos. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 7

8 Focus on smart contracts InstrucAons automaacally executed on blockchain, taking into account all the condiaons and limitaaons that had been defined into the code. Examples: Transposi8on of exis8ng contracts Complex projects: CreaAon of a token (or virtual assets) Sefng up a decentralized financing plagorm, CreaAng a decentralized autonomous organizaaon (DAO). dapps, decentralized applicaaons. The contract on Blockchain has all its advantages: security, immutability, transparency, reliability Not really a contract Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 8

9 Blockchain potential Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 9

Blockchain limitations General understanding is a strong blocker Technical fundamentals Iden8ty: public blockchains are pseudonymous Regula8ons: The lack of regulaaon is a blocker, paracularly in the

10 Blockchain limitations General understanding is a strong blocker Technical fundamentals Iden8ty: public blockchains are pseudonymous Regula8ons: The lack of regulaaon is a blocker, paracularly in the FS sector Governance: Governance of the public blockchains is largely misunderstood Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 10

11 Public or private blockchain? Public Private Characteris8cs Open, public and accessible Private and accessible only to selected paracipants Opera8on / Consensus Incen8ve to par8cipate Immutability Operated by unknown individuals. trust is created by the anonymous actors collaboraang to make the blockchain work Economic, through the cryptocurrency Guaranteed by the great number of actors, and the fact that nobody can change the content arbitrarily. Operated by specified actors, collaboraang with a specific objecave Common objecave (cost efficiency notably) Has to be guaranteed by trusted actors. Some actors can change the content of the blockchain (administrators) Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 11

12 II. Law and Blockchain Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 12

UK and Singapore created specific "sandbox" regimes French iniaaaves with respect to the use of blockchain as a proof of ownership The US IRS

13 Relationship between Law and Blockchain technology There is no blockchain law! "Code is Law : transacaons always run as they were programmed to Proof of Concept trials are conducted most frequently in the finance sector. UK and Singapore created specific "sandbox" regimes French iniaaaves with respect to the use of blockchain as a proof of ownership The US IRS issued a John Doe summons to Coinbase ExisAng law applies to aspects of blockchain but new law needed Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 13

14 What is a smart contract code or law? A smart contract IS NOT per se a contract it is code: immutable, executed by the blockchain (analogy: Excel formula) Smart legal contracts a term used by lawyers refers to a specific use case of smart contract code using blockchain to combine code and legal contracts an enhanced form of contract. How would this look in pracace? Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 14

Different use cases pose different legal

Private blockchains pose specific quesaons

15 Different use cases pose different legal questions 1. Cryptocurrencies. 2. Smart-contracts & complex use cases 3. Blockchain used as a register / proof of existence / proof of transfer 4. Private blockchains. Private blockchains pose specific quesaons as they involve paraes that agree on using a specific support. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 15

etc. RegulaAons applicable in specific sectors (finance, privacy, health, IP, etc.).

16 Legal issues Iden8ty Territoriality: which law will apply? Regulatory, conformity of the use cases with : RegulaAons applicable to contract with an uninformed individual : consumer, KYC rules, securiaes law, etc. RegulaAons applicable in specific sectors (finance, privacy, health, IP, etc.). Legal formalism and legal enforcement Liability / Contract law / Tort law Tax: Who pays taxes on income generated on blockchain and how? How is this income qualified? Which state can tax? Etc. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 16

17 Questions? Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Paris / Shanghai / Silicon Valley / fieldfisher.com 17

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