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May 14, 2018

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A Brief History of Blockchain


While many have invested in bitcoin, few really understand the underlying blockchain technology, which
could be ‘the largest technological expansion since the Internet.’

By Lewis Popovski and George Soussou, Patterson Belknap Webb & Tyler

When Bitcoin entered the


market in 2009, the value of
one bitcoin was $.06 and few
noticed. When the price of one
bitcoin rose above $19,000
in December 2017, it and its
underlying “blockchain” tech-
nology became the newest
buzzwords and took the world
by storm. Just adopting the
word “blockchain” seemingly
created value. For example,
when Long Island Iced Tea, a
company that sells beverages,
changed its name to Long
Blockchain Corp. in 2017,
The Beginning Peer Electronic Cash System,”
its stock price rose almost
300 percent in one day even It is widely believed that which hypothesized a direct
though it had yet to actually the first implementation of online payment from one
be involved with blockchain. modern day blockchain tech- party to another without the
While many have invested in nology came from Satoshi use of an intermediary third-
bitcoin, few really understand Nakamoto. In 2008, a person party. The paper described
the underlying blockchain or group of people identi- “an electronic payment sys-
technology, where it came fied as Nakamoto published tem based on cryptographic
from, and where it is going. a paper, “Bitcoin: A Peer-to- proof instead of trust.”
May 14, 2018

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The paper sought to solve a pointer to the immediately has the coin it has offered to
the problem of double spend- previous transaction, as well the seller for the widget. The
ing. That is, the very nature of as information on the transac- verification may entail looking
digital currency allows it to be tions themselves. In this way, at the latest transaction of the
easily duplicated and spent each node has access to all buyer’s account to make sure
more than once. The resulting previous blocks down to the it holds sufficient funds for
uncertainty was fatal to the first block of the chain called the purchase. The sequence
adoption of the technology. the “genesis” block. The time of transactions is recorded
The Nakamoto paper solved stamp gives each block an in an immutable record, i.e.,
this problem by linking every immutable temporal position a blockchain, by forcing the
transaction to the transaction in the chain. nodes in the network to com-
preceding it in a tamper-resis- A hypothetical transaction pete in solving a mathemati-
tant manner. The tamper- exemplifies the way block- cal problem for the right to
resistant manner described chain works. In the context of add the next block of trans-
by Nakamoto was the public a sales contract, a seller agrees actions to the chain, linking
ledger. With this ledger, a net- to sell a widget to a buyer for the winner’s new block to the
work can examine the trans- one “coin.” In a network of previous block, restarting the
action history of an electronic computers, one node (buyer) competition to add the next
coin that a user submits for broadcasts code that will auto- block each time a solution
payment, and can confirm that matically deduct one coin from is found, and rejecting any
the coin has not already been the buyer’s account and add it attempt to insert or replace
spent, thereby preventing the to the seller’s account as soon blocks earlier in the chain. As
“double spending” problem. as the seller ships a widget to such, the buyer cannot spend
Blockchain is a type of data- the buyer. A smart contract is the coin he has provided to
base that is duplicated on born. That is, the execution the seller again, as everyone
many computers or “nodes.” part of a contact was reduced in the system knows the buyer
All of the nodes have the same to code that is implemented no longer has the asset.
information on them. This by computers and verified by The Evolution
is vital to the success of the a community of computers While blockchain initially
blockchain technology. The before it is immutably added garnered interest because of
information is stored in, as the to the database. As soon as the its ability to be anonymous,
name implies, blocks. Each widget is shipped, the smart such as in the case with cryp-
block can contain multiple contract is executed. The tocurrencies like Bitcoin, the
transactions, with each trans- other nodes receive the trans- real appeal of the technology
action having a unique refer- action and turn to verify it by may be due to the complete
ence number, a time stamp, ensuring that the buyer in fact transparency afforded by it.
May 14, 2018

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Indeed, many have found that might have been different to solve the most impor-
the underlying blockchain with blockchain technology. tant problems in healthcare.”
technology has applications She had a home in Honduras Blocktix utilizes “Ethereum-
in an ever increasing number and was in possession of the based blockchain [to provide]
of applications in nearly every official title to the land; how- a simple and secure solution
industry. ever, the Property Institute to distribute counterfeit-proof
For example, in 2013, Ethe- had paperwork stating that event tickets as well as facili-
reum introduced blockchain another person owned the tate trustless [peer-to-peer]
in the form of “a decentral- land. A judge signed an evic- transfers of ownership.” Fol-
ized platform that runs smart tion order, and by the time low My Vote is attempting to
contracts.” It explained that Izaguirre proved her case, her “build a secure online voting
blockchain “enables develop- home was gone. If Ms. Izagu- platform that will allow for
ers to create markets, store irre’s deed was recorded with greater election transparency”
registries of debts or prom- blockchain, no one could sub- using blockchain technology.
ises, move funds in accor- sequently claim ownership of Blockchain can become use-
dance with instructions given her land. Consider also the ful in any field that includes
long in the past (like a will or application to letters of credit. transactions, which is to say
a futures contract) and many Banks often issue letters of that blockchain can become
other things that have not credit to serve as a guarantee useful in every field. And
been invented yet, all without for a payment to be made once while it may never reach that
a middleman or counterparty certain conditions are met. potential, we could be witness-
risk.” While Bitcoin is simply a Using blockchain technology, ing the largest technological
currency, Ethereum “is a ledger the need for the bank as an expansion since the Internet.
technology that companies are intermediary in such a trans-
using to build new programs.” action would be removed. Lewis Popovski is a partner
It is one of the first expansions Blockchain technology has at Patterson Belknap Webb
of blockchain technology out- evolved and migrated into & Tyler LLP, where he focuses
side of currency. these fields and continues on intellectual property litiga-
The Future to grow. It has moved into tion. George Soussou is an
The Economist recently told healthcare, with companies associate at the firm, where
the story of Mariana Catalina like Hashed Health “leverag- he also focuses on intellectual
Izaguirre, and how her life ing blockchain technologies property litigation.

Originally published on Corporate Counsel. Reprinted with permission from the May 14, 2018 edition of Legaltech News. © 2018 ALM Media Properties, LLC. All rights reserved.
Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com. #010-05-18-04

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