Voice over:
Welcome to The News Sessions from Mishcon de Reya, hosted by Hayley Geffin. A conversation on key legal matters that affect you and your business.
The News Sessions Podcast with Hayley Geffin.
Hayley Geffin
Hello, I am Hayley Geffin and you are listening to The News Sessions from Mishcon de Reya where we take a look at a key area of law hitting the headlines. Today we are talking about blockchain. What is Blockchain? And why should we care? Well it might just be the future of transactions and let’s face it, we all make a lot of those.
The earliest ledgers can apparently be traced back to 4000 BC in ancient Mesopotamia. Does this mean blockchain is actually not a new-fangled concept at all? Here to discuss is real estate lawyer, Nick Kirby, IP lawyer Ann Rose and Corporate lawyer, Tom Grogan. All from Mishcon de Reya. So Tom here’s a challenge for you, explain blockchain in less than 60 seconds.
Tom Grogan
I guess blockchain in simple terms is a ledger, a way of recording and auditing transactions and tracking ownership of a thing from time to time
Hayley Geffin
Yeah.
Ann Rose
It could be anything, it could be a creative asset such as rights to a song, it could be a stock trade, it could be a property title and every time something moves from one place on the register to another, it is time stamped and publicly recorded.
Nick Kirby
But why do you need that instead of what we’ve got currently? What’s the difference between what you’ve just described and what we do currently?
Tom Grogan
I guess that’s the inherent problem with digital assets versus physical assets. In the real world so to speak we know there is a thing because we can see it. You can’t copy a piece of paper without visibly seeing there are now two pieces of paper whereas if you have a digital asset and you can select it, you can copy and paste and you can send it to all your friends. Mark Andrewson who is like a very prominent American investor and wrote some of the earliest computer browsers probably said it best when he says that blockchain and other DLT forms – Distributed Leisure Technology forms – for that matter give us for the very first time a way of tracking digital assets so that we can be confident that a transfer has taken place, that no one can challenge the legitimacy of that transfer and that that transfer can be safe and secure. So it is creating safety and security.
Hayley Geffin
So in that way it is something that we need since we have all gone digital and you know, everything is online, it’s something that was borne out of a need rather than an invention that has been bolted on?
Tom Grogan
Yeah I think that’s, I think that’s fair.
Ann Rose
Yeah and I think one of the really exciting things about it is process integrity and one of the things behind that as well is this concept of public and private keys. So to explain bitcoin simply, if I was to send…
Hayley Geffin
Yes please.
Ann Rose
…a message to Nick say, and I had used my private key and that would ensure that he knew that that message emanated from me and I would encrypt it with my private key and then Nick would have a public key that is known to everyone, so imagine that like an email address that everyone would know and I’d send it to him and then for him to be able to read it he would almost use like a log-in, almost like your log-in to your mail account and that would enable him to be able to read it using his private key and to de-crypt it.
Nick Kirby
I think some of the point of blockchain is to remove third parties from this idea of transacting digitally. So we don’t need a trusted third party to sit in the way of us transacting so if I want to send you digital currency, I can send you digital currency and I don’t need to send it via a bank for example, that’s the point isn’t it?
Tom Grogan
And I guess that all ties back to Hayley’s introduction when she talks about 4000 BC, the origination of ledgers in ancient Mesopotamia. Back then they used to have a clay scripture or a tablet or a rock where they would record ownership of grain in a village and to know who owned what grain they went to the big stone or the tablet or whatever and they read it and what that tablet said went and it worked. It worked for the majority of time.
Hayley Geffin
Just now it is on a different tablet?
Tom Grogan
Exactly and then society has got more complex and we realise that actually what if someone tampers with that tablet or what if someone acts nefariously in some way and so we started to trust these third party intermediaries. So think now, how do I know how much money I’ve got in my bank account? I trust a bank to monitor that for me and that again, it works the majority of the time. What about the few times that it doesn’t? What about if we disagree with what that ledger says. What if as we have seen a number of times that single point of failure, that intermediary be it a bank or a social media network or whatever, what if their systems go down? We don’t have access to our data and no one knows what is going on. This way we distribute the ledger so rather than everybody referring to a single copy held by a third party, everyone holds a copy of it and because everyone holds a copy of it and can see it at any point, they have faith in it and they trust it.
Hayley Geffin
So if we use banks as the example in terms of how disruptive it will be, from what you have just said that sounds like you know, there may be banks quaking in their boots if they are not required to perform that role anymore? Or am I being a bit anarchic in that suggestion?
Tom Grogan
I think it changes the role rather than eliminates the role. The origins of blockchain and DLT in bitcoin is very much the death to the banks and we can run the world and the economy without the banks. The financial services sector is the biggest investor in this technology.
Hayley Geffin
I see.
Ann Rose
I also think as well going on that it can change as well. Countries where people are unbanked but most of them have phones, you know, they can use their mobile phone and coupled with this technology if you were say a farmer and you wanted to be able to have a digital record to show that you were supplying a certain amount of crops every single month and you could use this and have this as a digital record and other people on the supply chain could back you up and support you and say yes you know, we validate this and we agree that you are supplying a certain amount of crops each month and then that would also increase your credibility, reduce your risk score and actually enable financiers to be able to give you some money to be able to help you in your future projects that you might want to do and it would actually enable individuals to be able to get money coming in to help with their projects. I think as well that is an area as well where it can really assist in growth.
Hayley Geffin
And I suppose in that way it’s pretty democratic if we are talking about unbanked people, that’s you know, a very large proportion of parts of the world…
Ann Rose
Absolutely.
Hayley Geffin
…that may not have had this facility that now can. That’s super exciting.
Ann Rose
Yeah I think it is very exciting.
Hayley Geffin
Can any of you tell me about a real world example that is something that we all know about where blockchain is used?
Nick Kirby
I can jump in here with an example which we got involved in recently. It’s a proof of contact and it’s to do with transferring residential property, so something that lots of people know about. We spent a long time trying to think about what we should get involved in when it came to blockchain, we really wanted to do something that was a proper real life use case where blockchain could have an impact on a significant number of people. So we worked with the Land Registry to help digitalise the flow of buying and selling residential property and to do that we used blockchain. I mean it was something the Land Registry are really excited about, they really want to drive and understand how blockchain might change and transform that buy/sell journey. It’s something the Governments really obsessed about making it better, the time that it takes to transact property has been getting longer and longer and not shorter and shorter which is strange in this digital era when things have been getting faster – certainly buying and selling goods has been getting faster so yeah we used blockchain to effectively enable a much faster journey from when a seller decided to sell their property and transfer a token that was recorded on a ledger, transfer that token to their lawyer and that was passed around and the various people that get involved in buying and selling a piece of real estate until we were able to transfer the property immediately and have registration happen on the same day that their property was completed.
Hayley Geffin
So that is very much a real world example in that it is someone who sold their house and someone who bought that house?
Nick Kirby
Yep correct, exactly. It was just a proof of concept but it was very much a real life example. Something that the Land Registry really want to push forward. They’ve openly said that in the next 2 years they want that to happen in real life, they want transactions to start to happen using blockchain because that proof of concept, the seller – there was a really nice quote from the seller about how much better it was it than the normal journey and they had just done it – and so they are really keen to use something like DLT to significantly speed up buying and selling property.
Hayley Geffin
Okay. If we look ahead to the future, perhaps homes are being bought and sold using blockchain. Where else do you think there will be a key change in terms of blockchain’s use and the fact that you know, we’ll look back and think ‘oh wasn’t it ridiculous we used to do it a different way’?
Tom Grogan
I guess I question whether or not that eventuality will ever happen. I am not sure everyone will need to know what blockchain is or why blockchain is or how it works. How many men on the street or women on the street can explain what TCIP is? Very few.
Hayley Geffin
Not me.
Ann Rose
Yeah.
Nick Kirby
Not me.
Tom Grogan
Well, and yet they are comfortable using the internet every day and they are comfortable using the protocols that underpin the internet and make it secure and make it safe and make it work. I see block chain as… at the moment it is this new-fangled thing that everyone feels like they should know about and feels that they should understand. My hope is that in 10 years’ time my mum still doesn’t know what blockchain is and yet she is comfortable enough trading her personal data via a platform that just so happens to be underpinned by a blockchain.
Hayley Geffin
And has a real benefit to that user without them needing to get really nosey how it works.
Tom Grogan
Absolutely. People don’t and arguably shouldn’t care about technology, they care about solutions and how it makes their life easier and that’s where I think we will see blockchain.
Nick Kirby
Yeah one of the things that I think is exciting about it is not necessarily the technology itself but what the enablement of change, so it really seems to have driven people to really think creatively about how stuff works, how it can be done and as you say, like blockchain is not necessarily always the answer but I think it’s driven so much change in mentality about how we can innovate and change the way we do things that I think that’s one of the exciting things about it.
Ann Rose
Oh yeah, absolutely. I think as well at one point you know, everyone was talking about blockchain and you know, they felt as though this would help them and you know, but you still have to have a use case and there is that example of that company, Long Island Iced Tea and it changed its name to Long Island Blockchain Corporation and no one knows why but it worked and their share price rose by 289%...
Hayley Geffin
Wow.
Ann Rose
…and it didn’t last very long and then they were de-listed from Nazdaq a few months later.
Hayley Geffin
That’s interesting. And that actually leads me to one of my questions about whether or not it’s a fad. It sounds like the uses for it aren’t a fad but maybe the kind of media obsession including arguably this podcast, is not necessarily on the right tack?
Tom Grogan
I think what Ann says is right. The days in which saying something was a blockchain company meant that you would automatically raise ten times more money than if it were not a blockchain company. They're gone and good riddance. I think we are increasingly seeing blockchain move from being the sexy front end of a company, companies are describing themselves as blockchain companies to now they are companies that just so happen to utilise a bit of blockchain technology. We are seeing more and more clients and Governments as well who are looking to build platforms but in the back end is a DLT system or a DLT platform but on top of it they are building some really cool applications. The applications are what we care about and the Governments care about and the client’s care about. So is the fad over? Possibly. Blockchain is not going anywhere.
Ann Rose
And I also think people are starting to be more educated so I think you know, crypto and blockchain were originally being quite misunderstood and rather than you know, talking about them here and perpetuating the myths, I think people are starting to become a little bit more educated about how the technology works and you know, I mean I think it is quite a hard thing to understand and I don’t blame people, you know you’ve got these names like crypt graphic algorithms and hash functions and nodes and minors who verify transactions and all this is created by this…
Hayley Geffin
A different language essentially.
Ann Rose
…yeah, this mysterious person or persons called Satoshi Nakamoto. You know I don’t blame people for finding it tricky to understand.
Hayley Geffin
If you are a business owner, especially one, let’s use transactions because I think that is one of the clearest uses. Are there things that you should be exploring now? Is that how it works? Do you sort of go out and find your blockchain provision or is it going to be delivered to you in a different way?
Tom Grogan
Honestly, probably not. Most use cases for blockchain are relatively niche at the moment. I think it is fair to say. I think if I were talking to a Board of Directors or a CTO or a digital leader in the Government, we’d say you need to know about this because it’s going to disrupt the industry broadly and we run education sessions and education programmes for those people. Odds are the answer is going to be there might be something for you but probably not yet.
Hayley Geffin
Yeah.
Tom Grogan
Not always the case. Sometimes get on it right now but broadly I think it’s still a watching brief I think for most.
Nick Kirby
For me, it’s more it comes down to business change again so if you are interested in trying to use blockchain to solve a problem like, find out what that problem is first rather than immediately jumping…
Hayley Geffin
Yes.
Nick Kirby
…to blockchain.
Hayley Geffin
Rather than change your name from Cocktails to Blockchain.
Nick Kirby
Yeah. Yeah maybe do that as well.
Tom Grogan
What we found is that generally we will have conversations with clients and they will say we’ve got this problem, we want you to come in and tell us whether or not blockchain will fix it and sometimes we go in and blockchain could fix it and then we can help them. Probably 70% of the time we go in and they have got a problem and blockchain might be an answer but actually there are plenty of other technologies or none, even none technical solutions that may be better placed for them and then we can assist them with that. But if it can get us in the door and we can have the conversation we can understand the problem better then.
Hayley Geffin
Yeah and I guess you don’t know until you know so if you ask about blockchain’s application to your business you will find out.
Tom Grogan
Exactly.
Ann Rose
Exactly.
Hayley Geffin
Ann, is blockchain going to change the world?
Ann Rose
No, I don’t think so. But I do think it can help as I was saying earlier, it could change quite significantly how people who are in countries where you know, they don’t have access to, to finance and banks but they might have a mobile phone and combined with this technology it could completely transform their lives.
Hayley Geffin
So it could change their world if not the world.
Ann Rose
Exactly.
Tom Grogan
I was going to say, to play slightly devil’s advocate, yeah I think it will. I don’t think it is going to create a totally…
Hayley Geffin
We’ve got a full no and a full yes.
[Laughter from Ann]
Tom Grogan
…I don’t think it is going to create some utopian society where all of our problems are fixed and you know, we can’t imagine a world, how did we survive without blockchain? But it will make possible transactions or asset classes that could not have been transacted or traded before. It has the potential to allow us to realise our personal data as an asset, it has the potential to bank previously un-bankable citizens worldwide so will it fix the world? No. It could have a significant effect and a significant change I think.
Nick Kirby
I think some of those countries where they don’t necessarily have quite the same structure that we do, so Estonia for example, their Land Registry decided to put their register on the blockchain and that’s because they didn’t have 150 years of Land Registry behind them and so for them that was the natural solution to that particular problem. For us that doesn’t make sense so I think definitely pockets of the world will probably be changed along the way.
Ann Rose
I also think as well like with the trend that you have at the moment with sustainability, certainly in the retail industry I think there could be quite a transformation where let’s say in, it could just be a few years’ time, it could be 20 years’ time but you go into a store and you can use your phone and you will scan a QR code and it will tell you okay that tuna you know, this is the sea it came from, you can see how long it was in the warehouse for, when it was distributed and then they might as well feed you with adverts or things as you actually go long but you could actually see this whole chain of information about the provenance of this item that you are buying and I think as well that might really start to take off, especially with this whole trend and towards people being more aware of their carbon footprint and where the sources of their products come from.
Hayley Geffin
Fascinating. So do you guys have any advice for people who want to know more but are feeling locked out, a bit lost, the language of technology is putting them off blockchain? Where should they go? What should they do?
Ann Rose
I think there is some really good free commercial think tanks out there with some great research on them. I particularly like Z/Yen. I think it’s got some really useful information out there for people and then there are also loads of books out there. I particularly like the ones which are blockchain and law related. [Laughter from Ann]
Hayley Geffin
I mean that was always going to happen.
Ann Rose
That’s me. So there is a great one as well by Michelle Think which is Blockchain Governance and Regulation and there is Primavera De Felippi who is also done one on blockchain and the law and she is also a fantastic artist as well which is her hidden talent as well as being a lawyer.
Hayley Geffin
Wow.
Ann Rose
Yeah.
Tom Grogan
I think if you’ve got some time and you are prepared to be a bit discerning and critical as to the quality of the source material, Reddit is excellent if you want to get lost down a complete rabbit hole.
Hayley Geffin
Interesting.
Tom Grogan
It’s a bit like the TKMaxx of, of the internet. [Laughter from Hayley]
Hayley Geffin
Of the internet.
Tom Grogan
In that you have to wade through plenty of things that may be are right, may be aren’t right but there are some gems in there and you can really I think sometimes the, the quality of commentary and discussion there is much more current than what you might find in sort of what we would usually consider to be mainstream sources of information.
Hayley Geffin
Cool. It seems to me that blockchain is fairly self-sufficient so what do we need you guys, the lawyers for?
Tom Grogan
I think there is a number of legal issues and questions and challenges that, that sort of come to the fore when you are talking blockchain or DLT and that goes to the way it fundamentally changes the way in which people interact. Our whole body of law is based on how we as human being interact with each other. So let’s think for a moment about assets. Under English law there are three classes of property; there’s real property which is like the building we are sitting in now, there’s a shows in possession which is a thing, you know if you can kick it, it’s a shows in possession and there is a shows in action, which is a right to enforce against something. Now what’s a token in blockchain sense? It’s clearly not real property, it’s not a building, you can’t kick it so it’s not a show in possession and there is no central issuer of it. So against who do I enforce my rights? That’s the topic of a, of a massive…
Ann Rose
Academic debate.
Tom Grogan
…academic debate at the moment.
Hayley Geffin
And goes to the novelty of blockchain, it hasn’t been considered by the law before.
Tom Grogan
Exactly so at the moment the UK jurisdiction task force is doing some great work and we have been contributing to the consultation there and chipping in there to figure out how does that work? Is the answer that we create a whole new class of property? Can we even do that, how do we do that? Or in actual fact do we just need to map our existing definitions and our existing concepts over to include it so that’s a very fundamental, probably the most fundamental legal question going on in the UK certainly. You’ve also got questions as to, we have smart contracts and you can’t see me on the screen but I am doing inverted commas, when I say smart contract.
Hayley Geffin
Bunny ears is the technical term.
Tom Grogan
Bunny ears, is that what’s it called? Smart contracts are neither smart nor are they contracts. They are self-executing, not self-enforcing and my understanding of basic jurisprudence at Uni is that a contract is something that is capable of being enforced if you don’t stick to it. Smart contracts don’t need to be enforced because they just happen and they are only as smart as the person who has coded them. Under English law, what if you disagree with the outcome of that smart contract? Or the smart contract doesn’t perform as was the intention of the parties for whatever reason? Presumably the fault of the coder. Is that legally enforceable? Again that’s a question that is being examined at the moment.
Hayley Geffin
Thank you, Ann, Nick and Tom. I feel like I am now on the beginning of my journey to understand more about blockchain.
I am Hayley Geffin and this is The News Sessions.
Voice over
The News Sessions in partnership with Mishcon de Reya. Find more of The News Sessions podcasts dealing with key legal matters on iTunes.