Bitcoin gets plenty of attention—much of it skeptical—as a means to buy and sell good and services beyond traditional forms of currency. However, the underlying technology behind Bitcoin and other blockchains has enormous potential in a wide range of fields.
Womble Bond Dickinson launched its first International Innovation Week as a combined transatlantic firm on March 19 with a session on "Demystifying Cryptocurrency and Blockchain". The firm-wide videoconference session was hosted by Legal Director Malcolm Dowden and attorney Stephen Middlebrook. Attorney Steve Clinton in Silicon Valley opened the session.
Middlebrook explained that Bitcoin is decentralized cryptocurrency, meaning it is not controlled by any bank or government. Instead, Bitcoin exists on thousands of databases across the internet. Its decentralized nature means hacking one database doesn't threaten the security of the entire currency.
However, there are potential red flags with Bitcoin, Middlebrook said. "Bitcoin is extremely volatile in its value," he said, noting that the price of Bitcoin fluctuated from approximately $1,200 to $20,000 and back down to $9,000 in the span of a few months. "Something that volatile doesn't make a good currency," he said.
Also, Dowden said the amount of energy needed to operate Bitcoin is massive—perhaps more than required to power some European nations. This environmental impact alone may make it unsustainable.
But the underlying blockchain technology has a number of greater applications, and developers are working to address the problems of Bitcoin. For example, Dowden said subsequent blockchain models, such as Ethereum, have moved from Bitcoin's proof-of-work to a proof-of-stake algorithm, which requires far less computing energy.
"Bitcoin is absolutely the headline issue," Dowden said. "But Bitcoin does not tell the story of blockchain as it is developing."
He explained the blockchain are "just a series of electronic containers." Each container contains an asset plus the identity of the owner, and as each transaction is made, a new block is added to the chain. Thus, a blockchain creates a verified timeline of the asset, Dowden said.
Such a system could be tremendously beneficial in, for example, cross-border trade. A blockchain could securely track and verify the movement of goods across a border. Or it could be used in making state benefits payments, verifying the eligibility of the recipients as payments are made.
Womble Bond Dickinson will host a number of events on innovative technology, evolving business practices and new ways to engage clients during International Innovation Week, which runs from March 19-23.
Malcolm Dowden is a commercial and regulatory lawyer with extensive experience of contractual regulatory and legislative drafting in the UK and other common law jurisdictions. Since qualifying in 1994, Malcolm has advised commercial, government and public sector bodies on a wide range of issues affecting electronic communications, transport, infrastructure and other development projects. He is a regular contributor to legal and professional journals, with recent articles focusing on smart cities and on the commercial impact of the "internet of things," blockchain technology, dynamic procurement, and smart contracts.
Steve Middlebrook has an extensive background in emerging payment technologies, prepaid and stored value products, mobile payments, web-based financial services, virtual currency and distributed ledger technology. His prior experience includes being General Counsel at two FinTech companies, and a decade's service at the US Department of the Treasury. He also served as an advisor to the Uniform Law Commission (ULC) committee which drafted the Uniform Regulation of Virtual Currency Businesses Act. The Uniform Act was recently approved by the ULC and is now being considered for adoption by a number of states.
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