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Distributed Ledger Technology (DLT) and Blockchains

Dmytro Pichugin

Attorney at Law / Managing Partner

October 24, 2018 Legal Alert

Distributed Ledger Technology (DLT) and Blockchains

Digital innovations have garnered a great deal of attention across the Globe due to their unstoppable progress, streaming development, practical and effective use in different industries of our everyday life or/and business. One of such innovation – Distributed Ledger Technology (hereunder DLT) which could fundamentally change the various sectors, making them more reliable, safe and useful.
In nutshell, DLT could be explained as a process where distributed ledgers use the computers/nodes to record, share and synchronize all transactions in the respective electronic ledgers (decentralized data keep).

For instance, Blockchain organizes data into building blocks and enable recording peer-to-peer interactions of transfers without a need for a centralized control or coordinating organization, which are chained between each other in an append mode (only add without any possibility to remove).
The DLT has started to obtain some form due to the fact that this technology is still nascent and difficult in implementation.
Nevertheless, the European Parliament has published its Resolution of 3 October 2018 on distributed ledger technologies and blockchains: building trust with disintermediation (2017/2772(RSP)) (the Resolution), which has clarified benefits from use of this technology and blockchain in everyday life of both citizens and Member States of the European Union (EU).
This Resolution has provided general recommendations, some clarification as well as brought some uncertainty concerning the DLT and Blockchain:
1. Clarification and recommendations:
• The DLT and Blockchains “… [is] a tool that promotes the empowerment of citizens by giving them the opportunity to control their own data and decide what data to share in the ledger”. • The DLT “… promotes the pseudonymisation of users but not their anonymization”. • The DLT “… [introduce] a framework of transparency, reduce corruption, detect tax evasion, allow the tracking of unlawful payments, facilitate anti-money laundering policies, and detect misappropriation of assets”. • The DLT “… ensure the integrity of data, and the ability to provide a tamper-evident audit trail permits new models of public administration and helps bring about improved safety”. • One of the most important things is that the regulatory approach concerning the DLT implementation should be “… innovation-friendly and based on the principle of technology neutrality…”.
2. Uncertainty and disadvantages:
• The DLT and Blockchains have “… the risks and problems of the technology” that “are not yet completely known”. • For instance, using the DLT you cannot remove data due to the fact that the technology is based on the chained building blocks system with exclusively append mode. In other words, no data could be deleted after inputted in the system which is against the “Right to be forgotten”.
As a result, the European Parliament has provided the blockchain developers and users with a clarification of a possible positive approach about the consequences and steps of the DLT implementation in the EU. Nevertheless, it could be stated that even the European Parliament has no clear idea how correctly implement this system due to its technological and legal complexity.

  • Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.

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