Blockchain: integration with the “new legal world”

Intro.

Social and technological changes inevitably lead to the need to redefine the vision of the world and the rules that underlie it. More than any other social science, law is required to quickly adapt to the needs of humans by redefining its vocabulary in order to not diminish its demand for meaning and adequacy in relation to concrete and current issues.

This need is even stronger at a time when innovations connected to technologies with a big leap forward in the digitalization process seem to bypass the rules of law and not find an easy legal placement.

It is logical to imagine that every new technology arises from solved human needs and at the same time creates additional needs, requiring innovative solutions.

Law is not only about rules but also definitions, and if the definition is increasingly linked to living law, then the rule must necessarily do so as well, where digital technology contributes to defining value criteria and increasingly directs private and public decisions.

So why should we be surprised if the legal world is increasingly following the digital world? Personally, I am amazed at the opposite: how can a legal expert ignore the objective and concrete implications that new technologies also have on common legal issues, both in civil and criminal matters?

New technologies: a matter of legal advice.

Well, if there must be a “new legal world”, it is normal and correct that in the areas where a law firm offers advice, there should be those that the client unconsciously knows well because they relate to his daily way of interacting with reality, along with what interests and what is not yet fully understood.

There are two ways to approach the issue, both “user-friendly”, meaning that they put the client as the user at the center:

provide advice on the law of New Technology; provide an application as an additional, useful, and smart service for the client, based on those same new technologies.

Along with all the possibilities that have opened up for a law firm in this new, wide and varied digital world, I believe that it is absolutely interesting and necessary to focus, study, and consider what blockchain technology allows us and could allow us to do in this regard.

Can blockchain technology be independent of the law?

Blockchain

Blockchain technology is a new paradigm that is disrupting systems, which is why it requires particular attention from lawyers and the law. Without going into technical details, I will limit myself to starting from the nodal and fundamental point of blockchain technology to begin a practical-legal reflection.

The term blockchain is a literal translation of “chain of blocks” in Italian. It is a continuous list of interconnected records protected with cryptography tools, which is a type of encrypted writing that makes the data contained in it illegible to unauthorized persons. It is a technology that creates a database for managing transactions that can be shared among multiple nodes in a network. The structure is such that each transaction that occurs on the network must be validated by the network itself. Each “block” is a kind of archive that contains the history of a series of transactions that can only be modified with the approval of the network nodes.

In essence, it is a large, open, and distributed ledger capable of fixing and recording transactions that occur between two parties securely through a peer-to-peer network that is responsible for validating new blocks via a protocol. The “Decentralized Ledger” system represented by the blockchain is, in fact, made up of many “satellites” that relate to each other without a central subject. It is also “distributed,” meaning there is no center, and the management logic is based on trust among all participants.

Legal regulation of blockchain

Does this mean that this technology can be independent of legal regulation? No, on the contrary, with the Simplification Decree published in the Official Gazette in February 2019, the Italian legislator, among the first in Europe, tried to give a framework and discipline to the phenomenon by providing legislative definitions of blockchain and smart contracts.

Blockchain technologies are defined as “information technology and protocols that use a shared, distributed, replicable, simultaneously accessible, architecturally decentralized ledger on cryptographic bases, capable of registering, validating, updating, and storing data both in clear and further protected by cryptography, verifiable by each participant, unalterable, and unmodifiable.”

Smart contracts, on the other hand, are defined as “a computer program that operates on distributed ledger-based technologies and whose execution automatically binds two or more parties based on effects predefined by themselves.”

The Simplification Decree also specified that documents stored through blockchain registers would have the same legal value as documents with electronic time-stamping validation, provided that the technology used for storage in registers conforms to the technical specifications identified by the Agency for Digital Italy (AgID).

Main obstacles to evolution

Italy is at the forefront of financing the study of this technology, and the Ministry of Economic Development (MISE) shows a lot of attention (1) to the solutions provided to our SMEs and Italian companies in terms of competitiveness.

According to a recent study by the Organization for Economic Co-operation and Development (OECD), the main obstacles to the adoption of Blockchain/DLT technology in Italy are as follows:

• Regulatory uncertainty;
• Lack of information and awareness;
• Access to financing;
• Shortage of skills and talents.

The main and potential characteristic offered by this technology is, in fact, to reduce, in some cases even drastically, the cost of trust necessary for the completion of a transaction, understood as an exchange of information or value, while guaranteeing certainty of its execution.

In those contexts where the cost of trust is a significant component of transaction costs, these technologies can reduce inefficiencies and simplify levels of intermediation. Moreover, the reduction in the cost of trust can make the execution of micro-value exchanges economically viable between two actors, creating the basis for the development of new business models.

Blockchain impact on law firms.

– Plagiarism

This technology can revolutionize not only the way in which businesses and individuals interact with each other but also how they interact with professionals and law firms that provide them with specific services and expertise in these technologies.

The law firm has increasingly faced cases of plagiarism, especially of digital works, which authors have shared on the web, leading to an exponential increase in notoriety, but later being reused for commercial purposes on the other side of the world to their exclusive detriment.

– Copyright law

Blockchain technology could make a significant contribution in the field of copyright/ownership rights. Each time a song is reproduced or an artwork is sold, all those who should receive revenue could instantly receive it credited by knowing the “history” of that work or that musical piece.

It will become an interesting tool to support provenance for tracking the history of works of art and ingenuity and their management, without excluding authenticity verification.

– Agreements, contracts, patents, and similar

Certifications receive validation from all stakeholders (artists, collectors, galleries, museums, insurers, transportation, etc.), and the various steps could be recorded incorruptibly on the blockchain, protecting security and privacy.

Agreements, contracts, emails, and everything that follows art creation or ingenuity and creativity could also be validated. With this method, a story, a flow of actions, is generated, each of which is coded, and the identity of the work is also fixed by the history of the actions and their path, which are a component of the value of the work itself and the artist.

In addition, it could obviously provide a certain date of use in the field of trademarks-patents together with the law registries.

In general law, the new legal world will be called, thanks to smart contracts or the internet of things, to harmonize language, semantics, and legal rules with computer language since in a few years, there will be billions of intelligent and autonomous objects that will have to exchange money and data with each other.

In this perspective, blockchain technology could lead to facilitating the circular economy and simplifying charity projects.

– Criminal Proceedings

In the context of criminal proceedings, well-established case law holds that a copy of digital documents (e.g. video or audio files) must be extracted in a manner that ensures its identity with the original and its immutability.

In accordance with the principles that are increasingly consolidating in relation to the forensic acquisition of digital evidence, an “image copy” should be created that reproduces the duplicated data (3) in the same conditions in which it was at the time of its acquisition.

Following these principles, copies of audio files of a telephone interception, accompanied by their respective “hash codes,” which consist of alphanumeric sequences representative of the original files and their copies, have been regularly deemed admissible as evidence in criminal proceedings.

This is where blockchain technology comes in to generate hash codes as certification and validation of the data, as it is capable of certifying the insertion history of the data it stores, as its data is associated with the date (and time, minute, and second) it was received.

Personal conclusions

The applications are truly numerous, and even law firms approaching blockchain technology can gradually study its positive applications and regulate instead the more problematic and controversial implications, especially regarding privacy, data tracking, and the right to be forgotten.

This study believes in this and by choosing Affidaty as a partner, it hopes to be able to pursue a blockchain technology project that is “user-friendly,” scalable in the future, and oriented towards the growth of legal services and utilities.

1 https://www.mise.gov.it/index.php/it/consultazione-blockchain
2 Taken from “Proposals for the Italian Strategy on Shared Ledger and Blockchain Technologies – Summary for Public Consultation”
3 See Cass. Pen., Sez. Un., 20 July 2017, n. 40963; Cass. Pen., 31 October 2017, n. 53810.
4 Cass. Pen., 10 May 2019, n. 38009.