The purpose of this article is to find out what exactly are Blockchain Technology (BT) and Smart Contracts; and whether this technology can improve or reinforce other areas of law in the future. This technology is a hot topic around the world these days,[1] with multiple industries exploring their possibilities[2] and new blockchain use cases emerging almost every day.[3] This article aims to contribute to the body of knowledge of smart contracts within blockchain technology.

Introduction
Disruptive technologies such as Blockchain and the Internet of Things will have a profound impact in the way we live and work. They will require rapid adaptation in our workplaces- Shri Narendra Modi, Hon’ble Prime Minister of India[4]

The first major use of BT occurred with the creation of Bitcoin, which is the digital crypto-currency[5] proposed by a mysterious programmer or a group of programmers,[6] using the alias Satoshi Nakamoto.[7] Satoshi articulated his notion of the world's first decentralized digital currency [8] without any interference of trusted third party.[9]

His model was based on BT instead of a trusted third party. Following the widespread awareness that the Bitcoin currency was built on an absolute and secure technology, the possible applications of BT began to be developed by various other fields of law.[10]Despite the social, legal, regulatory and technological tasks faced by this unique technology, the promise of an automatic, decentralized trust-worthy, effective and efficient IP protection, and management system deliver a substantial incentive to overcome such tasks and make the integration of BT into these fields a reality.[11]

Blockchain and Smart Contracts- A Two Way relationship

What is Blockchain Technology and How Does it Work?

It is significant to distinguish cryptocurrency from blockchain, which is the fundamental technology that makes cryptocurrency possible.[12] The term ‘Blockchain’ can be described as a decentralized, encrypted, immutable, and an open ledger’ of information that facilitates the process of recording and tracking transactions, and which is exchanged and verified on a peer-to-peer network.[13]

In its literal sense, the term can be understood as a chain of blocks, where every block in the chain contains the information related to a different number of transactions.[14] The most distinctive feature of BT is that it does not require the involvement of a trusted third party (for example, banks, financial intermediary, middleman, etc.) for transfers of value because the BT provides the transacting parties with a cryptographic proof of authenticity and assures them with the validity and security of the transactions.[15]

Whereas in a traditional database, transactions are often centralized and controlled by the third-party organization, but with blockchain BT, every node in the system has the ability to cryptographically check and authenticate any transaction. Instead of having to trust the centralized authority, relying on the blockchain, BT is more beneficial because they are able to create and uphold trust by relying on cryptographical proof in a consensus method.

This feature removes the want for the involvement of a trusted third party in such transactions and is the main point of difference from (and improvement on) systems using traditional databases. This unique facet of BT eradicates the security-related issues, which are associated with traditional central databases or ledgers.[16] The technological developments offered by blockchain promise wide ranges of use in a variety of segments and legal areas, including Intellectual Property (IP) law.

What are Smart Contracts?

Smart contracts... guarantee a very, very specific set of outcomes. There’s never any confusion and there’s never any need for litigation.- Jeff Garzik, owner of blockchain services Bloq[17]

In layman terms, one can describe Smart contracts that help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman a decentralized system). The best way to describe smart contracts is to compare the technology to a vending machine. Usually, you would go to a lawyer or notary, pay them and wait while you get the document.

With smart contracts, you simply deposit a bitcoin in the ATM (i.e. the general ledger) and your escrow, driver's license or whatever falls into your account. More so, smart contracts not only define the rules and penalties around an agreement in the same way as a traditional contract but they also automatically enforce those obligations. If you are looking for a more detailed procedure for smart contracts, please check out our blockchain courses on smart contracts. An appealing feature of blockchain technology is smart contracts. A smart contract is basically a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties.

It considers developments in smart contracts that run on the Blockchain (or Distributed Ledger Technology) to understand how BT can make smart contracts more useful to businesses and society, and what the challenges and limitations ahead are.[18]Smart contracts permitted through BT will be extremely useful for the licensing of IPRs and related contractual covenants;[19] as these contracts can help with self-monitoring terms, real-time payment and keeping immutable evidence of their execution, etc.[20] The management of IPRs will be streamlined since the information about the right-holders and the potential users will be available on a verifiable basis in real-time.[21]

There are a number of blockchain platforms that are already showing their outlooks and perspectives for managing IPR’s. For instance, companies like UJO (a decentralized music system) that creates a transparent and distributed ledger of rights using BT and automates expenses using smart contracts. Such Companies like these allow their users to use BT to validate the existence and exclusivity of their creation while giving them the opportunity to enter into smart contracts in order to authorize their creations.[22]

Conclusion:
In today’s time, one of the most contentious innovations is Blockchain, substituting trust with math-based security to a large extent. It is described as an open distributed ledger of information, which is not backed by any central authority. It is famous and has gained much attention due to its decentralized, distributed and immutable features. BT is a newly emerging tool that has great potential in a real-time that could change the functioning of the world, including its application to cater to the needs of Smart Contracts around the world, without the involvement of any trusted third party.

Since 2009, with Bitcoin relying on BT, a number of Blockchain-based solutions have evolved.[23] Though Blockchain has enormous potential to offer, there are some drawbacks in terms of data security and privacy, network size, speed, growth and transaction rates. With the advent of blockchain, smart contracts have become one of the most sought-after technologies because of the high customizability they add to transactions. Smart contracts are gaining increasing popularity in both public and private domains as they enable peer-to-peer operation on public blockchains and have the potential to improve efficiency and transparency in business collaborations.

However, the current form of smart contracts is still limited in their ability to full fill all expectations. We believe the future development should mainly focus on improving the semantics of smart contracts, their integration with existing procedures, as well as their usability, acceptance, and legality. If smart contracts can be made to work with enhanced security, legality and flexibility, we can foresee a wider adoption of smart contracts.

It can be concluded that BT has reached mass awareness if not mass acceptance. The innovation of every technology comes with few legal and regulatory issues, therefore, it is very important to comprehend the new technology in the well-timed and suitable regulatory framework is established so that the entire world does not miss out on a gigantic opportunity’.[24]

End-Notes:

1. Birgit Clark, Blockchain and IP Law: A Match Made in Crypto Heaven? (Wipo.int, February 2018) accessed 24 August 2019
2. Ashley Lannquist, Blockchain in Enterprise: How Companies are Using Blockchain Today (Medium, 19 January 2018) accessed 24 August 2019
3. LINDA Pawczuk, Deloitte’s 2019 Global Blockchain Survey (Deloitte.com, 2019) accessed 24 August 2019
4. Shipa S Ranipeta, PM Modi launches Nasscom Future Skills platform to upskill 2 mn youth in new tech (The news minute, 19 February 2019) accessed 4 September 2019
5. Junyao Wang and others, A Summary of Research on Blockchain in the Field of Intellectual Property [2019] 147 Procedia Computer Science 191-197
6. Joshua J Doguet, The Nature of the Form: Legal and Regulatory Issues Surrounding the Bitcoin Digital Currency System [2013] 73(4) Louisiana Law Review 1120
7. Jerry Brito and Andrea Castillo, Bitcoin: A Primer for Policymakers (Mercatus Center at George Mason University 2016) 3
8. Kehan Zhou, A Currency You Cant See: Bitcoin And Its Impacts On Our Society (Wesleyan.edu, April2015)accessed 24 July 2018
9. Dominic Frisby, BITCOIN THE FUTURE OF MONEY? (Unbound 2014) xxiv
10. George Cornel Dumitrescu, Bitcoin – A Brief Analysis of the Advantages and Disadvantages [2017] 5(2) Global Economic Observer; Bucharest 63
11. Junyao Wang and others, A Summary of Research on Blockchain in the Field of Intellectual Property [2019] 147 Procedia Computer Science 191-197
12. DandaB Rawat, Blockchain: Emerging Applications and Use Cases (Arxiv.org, 28 April 2019) accessed 31 August 2019
13. Michael Crosby, BlockChain Technology Beyond Bitcoin (Berkeley.edu, 16 October 2015) accessed 31 August 2019
14. Yli-Huumo J, Ko D, Choi S, Park S, Smolander K (2016) Where Is Current Research on Blockchain Technology?A Systematic Review. PLoS ONE 11(10): e0163477. https://doi.org/10.1371/journal.pone.0163477
15. Sigrid Seibold, Consensus Immutable agreement for the Internet of value (Assets.kpmg, June 2016) accessed 31 August 2019
16. Danda Rawat and Kayhan Zrar Ghafoor, Smart Cities Cybersecurity and Privacy (1st edn, Elsevier 2018)
17. Ameer Rosic, Smart Contracts: The Blockchain Technology That Will Replace Lawyers (Block geeks, 2017) accessed 13 February 2020
18. Alharby, Maher and Aad van Moorsel. Blockchain-based Smart Contracts: A Systematic Mapping Study. ArXiv abs/1710.06372 (2017): n. pag.
19. Vincenzo Morabito, Business Innovation Through Blockchain ( 2017) 101 - 124
20. Francois Oustry, Blockchain based solutions for intellectual property management (Medium, 21 May) accessed 4 September 2019
21. Quillhash, Protect intellectual property rights using blockchain (Quillhash blog, 8 July 2019) accessed 4 September 2019
22. Alexander Attar, The Ujo Platform: A Decentralized Music Ecosystem (UJO, 3 July)accessed 2 September 2019
23. Dylan Yaga, Blockchain Technology Overview (Nvlpubs.nist.gov, October 2018)accessed 4 September 2019
24. Nishith M Desai, Bitcoins- A Global Perspective Indian Legal and Tax Considerations (Zebpay.com, April 2015)accessed 04 September 2019