You’ve heard the name, but what is it? Attorney Stephanie Tible answers some FAQs on blockchain.
The Law Firm of Mallari Fiel Brillante Ronquillo
So, what is “blockchain”?
Well, simply put, it’s a distributed ledger, maintained on a peer-to-peer network, that uses cryptography to secure transactions. It may either be “permissionless/public”(i.e. anyone can join) or “permissioned/private” (i.e. membership is restricted; participating parties must be known to each other).
Is it the same as Bitcoin?
No, it is not synonymous with the very popular (some might say notorious!) Bitcoin, which is a cryptocurrency. Blockchain is a distributed ledger that tracks and records transactions, which may involve assets other than cryptocurrencies.
How relevant is blockchain technology now?
Its importance is growing. Industries, such as finance, insurance, health, and legal, among others, are beginning to make use of it. Blockchain technology fosters trust, accountability, and transparency – factors that individuals and business entities consider in their daily transactions – while potentially decreasing transaction costs by doing away with a middleman, a centralized authority, or a trusted third party. This means that parties on a network may securely transact directly with each other.
In what ways can blockchain be used in the legal industry?
Well, traditionally, parties execute a written contract containing the terms and conditions of their agreement. With blockchain, however, parties may enter into what computer scientist Nick Szabo calls a “smart contract”, an agreement that contains self-executing clauses, and facilitates, verifies, or enforces the negotiation of a legal contract. This set-up may lessen the possibility of litigation since blockchain ensures that the participating parties must first accomplish their side of the obligation (e.g. Party A will only get his/her payment upon providing X service to Party B. If Party A reneges on his/her obligation, Party B’s funds revert to or remain with him/her.)
And then there’s Property Rights. Immutability is one of the important features of blockchain. Once a transaction is recorded therein, the data remains on the block and is shared among all participants. Thus, ownership of property and all transactions made in relation thereto may be recorded in the blockchain. Any changes made will be easily verifiable. So with respect to real property, disputes may be reduced. As to intellectual property rights, determining a certain product’s authenticity may be done by referring to the blockchain.
So, what does the Philippine government say about blockchain technology?
The Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC) are the regulatory agencies whose stance holds relevance with respect to blockchain technology and cryptocurrencies. Said agencies seem to be open to new innovation and are in constant dialogue with key players. On the other hand, the Bureau of Internal Revenue (BIR) appears to be silent (at least as of this posting) on the specific tax consequences of blockchain transactions.
Whatever the situation now, there will undoubtedly be more to say on the subject in the months and years to come. Watch this space!