Blockchain and crypto

OUTLINE

● Introduction
● Understanding Blockchain
Technology
● Understanding Cryptocurrency
● Practical Applications for Lawyers
and the Legal Industry
● Examples
Introduction
 Overview of
blockchain and
cryptocurrency
 Blockchain

Blockchain is a decentralized, distributed ledger technology that enables

secure and transparent transactions without the need for a central
authority.
 Cryptocurrency
● Cryptocurrency is a digital or virtual currency that uses encryption
techniques to secure and verify transactions and to control the creation
of new units.
● It is based on blockchain technology and provides a secure and
decentralized way of conducting transactions without the need for
intermediaries.
 Importance for
lawyers and legal
industry
 Why this tech is important for lawyers?

● Disrupt traditional legal practices and the way transactions are

conducted. Examples:
○ Smart Contracts
○ Initial Coin Offerings (ICOs)
○ Intellectual Property (IP) law
○ Criminal law and investigations

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 Why this tech is important for lawyers?

● Improve the security and efficiency of transactions:

○ Immutable Record-Keeping
○ Digital Identity Verification
○ Secure Payment Transactions

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Understanding
Blockchain
Definition and Explanation
of Blockchain Technology
 Blocks in a chain
● The blockchain is a data structure where transactions or data are stored.
● Each block in the chain contains a unique piece of data or information.
● These blocks combine into a complete chain, and work like a giant digital
ledger.

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 How Blockchain
Technology Works
https://medium.com/@ipspecialist/how-blockchain-technology-works-e6109c033034
Key Features

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ey_Features_of_Blockchain
 Key Features

● Immutability:
○ Immutability is the quality of not
being able to be altered or modified.
○ Any records that have been
validated are final and cannot be
altered.

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 Key Features

● Decentralized:
○ In a blockchain, there isn’t a single
individual or organization
overseeing the framework.
○ This key feature of the blockchain
benefits us so that we can
immediately access the system
via the web and put our assets
https://www.cbinsights.com/research/what-is-blockchain-technology/
there because it doesn’t need any
regulating body or third party.
 Key Features

● Security:
○ No single node can alter any
blockchain properties or records for
their benefit.
○ An additional layer of protection is
provided for the system using
encryption via hashing and
cryptography.

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 Key Features

● Distributed Ledgers:
○ A distributed ledger like blockchain will typically
give you all the details about a transaction and
the parties involved.
○ A blockchain database is stored on every node
on its network and is immutable, open-source,
and transparent.

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 Key Features

● Consensus Algorithms:
○ Consensus in a blockchain is the
process by which a network of mutually
distrusted nodes reaches an agreement
on the global state of the chain of
blocks.
○ Consensus allows all of the network
nodes to follow the same rules to
validate transactions and add new
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blocks to the chain.
 Key Features

● Faster Settlement:
○ Banking makes great use of blockchain.
○ No need for identity verification with each visit
of a bank.
○ For instance, Ripple assists hundreds of
banks around the world in real-time
settlements.
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Types of blockchain
 Public Blockchain

● Open and decentralized network that is accessible to anyone.

● Anyone can participate in the network, and anyone can access the
data stored on the blockchain.
● Examples:
○ Bitcoin
○ Ethereum

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 Private Blockchain

● Closed network that is accessible only to authorized participants.

● Private blockchains are typically used by organizations for internal
purposes, such as supply chain management, or for creating their own
cryptocurrencies.
● Examples:
○ Hyperledger Fabric
○ Corda
○ Quorum

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 Consortium Blockchain

● Hybrid of the public and private blockchains.

● It is a permissioned network, meaning that participants must be
authorized to join.
● Examples:
○ R3 Corda
○ Ethereum Enterprise Alliance (EEA)
Real-world applications
of blockchain
technology
 Supply chain management
Blockchain technology can be used to create a secure and transparent supply
chain, allowing companies to track products from the source to the end
consumer.

https://www.getdor.com/blog/2021/08/03/benefits-of-blockchain-in-retail/
 Customer data analysis
The customer data stored in blockchain systems are secure and encrypted. This
means it will give your customers more trust in sharing their information with you.

https://www.getdor.com/blog/2021/08/03/benefits-of-blockchain-in-retail/
 Healthcare
Blockchain technology can be used to create a secure and transparent healthcare
system, allowing patients to have control over their medical data and giving doctors
access to accurate and up-to-date medical records.

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 Voting Systems

Blockchain technology can be used to create a secure and transparent

voting system, ensuring that votes are counted accurately and cannot be
tampered with.
 Real Estate

Blockchain technology can be used to create a transparent and secure

real estate market, allowing buyers and sellers to conduct transactions
without the need for intermediaries.
Understanding
Cryptocurrency
Definition and explanation
of cryptocurrency
 Definition
● Cryptocurrency is a digital or virtual currency that uses cryptography for security and operates
independently of a central bank.
● It is decentralized and allows for peer-to-peer transactions without the need for intermediaries
like banks.
● Cryptocurrencies are based on blockchain technology and are created through a process called
mining, which involves solving complex mathematical algorithms.
 Types of
cryptocurrency
 Bitcoin

● Peer-to-peer payment network that

facilitates seamless cross-border
transactions.
● Running on a decentralized blockchain.
● Bitcoin allows direct transactions
between users without third-party
involvement.
● The most important aspect of Bitcoin is
that it maintains the anonymity of those
sending and receiving money.
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 Ethereum
● Decentralized applications can be
created and launched using Ethereum.
● Peer-to-peer payments are possible
using Ethereum, like Bitcoin.
● Facilitates smart contracts for a range of
purposes; smart contracts are automated
digital contracts that self-execute when
all predefined conditions are met.
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 Bitcoin Vs Ethereum
● Data attached to transactions on the
Ethereum network might be executable code,
whereas data attached to transactions on the
Bitcoin network is solely used to record
transaction details.
● New blocks on the Bitcoin network take about
10 minutes to be added, accounting for the
mining process. On Ethereum, the average
block time is around 15 seconds.
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How cryptocurrency
transactions work
 Crypto Transaction

A cryptocurrency transaction is a transfer

of information made between blockchain
addresses.

https://www.bitstamp.net/learn/crypto-101
 Transaction Essentials

● A combination of a private and

public key is used to sign and
authorize a transaction.
● Miners include transactions in data
blocks by solving proof of work
puzzles.
● Nodes validate transactions and
blocks and keep a record of the https://www.euromoney.com/learning/blockchain-explained/how-trans
actions-get-into-the-blockchain
entire blockchain.
Legal and regulatory
considerations for
cryptocurrency
 Legal and Regulatory considerations

● Jurisdictional Issues: Cryptocurrency is a global phenomenon, and its decentralized nature makes it
difficult for any one jurisdiction to regulate. However, many countries have started developing their own
regulations to address the use and exchange of cryptocurrencies.
 Legal and Regulatory considerations

● Taxation: The tax treatment of cryptocurrency is still being debated and varies by jurisdiction. In the
United States, for example, the Internal Revenue Service (IRS) has ruled that cryptocurrency should
be treated as property for tax purposes.
 Legal and Regulatory considerations
● Anti-Money Laundering (AML) and Know Your Customer (KYC): Many countries have
implemented AML and KYC regulations for cryptocurrency exchanges and other businesses dealing in
cryptocurrencies. These regulations aim to prevent money laundering and the financing of terrorist
activities.

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 Legal and Regulatory considerations
● Consumer Protection: Cryptocurrency is still a relatively new technology, and many consumers may
not fully understand the risks and potential pitfalls of using and investing in it. Regulators are working
to ensure that consumers are protected from fraud and other abuses in the cryptocurrency market.
Practical
Applications
Smart contracts
 Definition

● Applications that can be called upon to be executed when certain conditions are
met.
● Exchange money, property, shares, assets, or anything else that is digitally
representable.
● Cut the costs and services of a middleman.

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 How do smart contracts work?

● Smart contracts run on “if this, then that” logic.

● If certain conditions are met, then the smart

contract executes the agreement.

● If the conditions are not met, then the smart

contract does not execute the agreement. https://www.flaticon.com/
 What are smart contracts used for?

● Stores information about an application, such as membership

records.
● Makes agreements between users, like leases, trades or bets.
● Smart contracts can also store insurance policies, assets, personal
information, medical records, etc.
● Smart contracts can be entire computer programs stored and
executed on distributed networks.
 Impact of smart contracts on the legal industry

● Smart contracts are self-executing contracts with the

terms of the agreement between buyer and seller
being directly written into lines of code.
● Streamlining and automating contract execution.
● Improve the accuracy of contracts and reduce the
likelihood of disputes.
● Open up new opportunities for lawyers to specialize in
DAO (Decentralized Autonomous Organization)
formation and governance.
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 Use cases of smart contracts in the legal industry
● Property Applications
● Legal agreements
● Supply chain management
● Intellectual property rights
● Identity verification
● Insurance

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 Legal considerations for smart contracts

● Data Privacy
● Contract Validity
● Liability
● Regulation
● Dispute Resolution

https://blog.ipleaders.in/legal-issues-involved-e-contracts/
Initial coin offerings
(ICOs)
 Definition

● An Initial Coin Offering (ICO) is a popular way of

raising funds for cryptocurrency-related
startups.

● An ICO is the first time a new cryptocurrency is

offered for sale.

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 How ICOs work

● The team presents their project in a

whitepaper.
● The ICO is launched and coins are sold to
the public.
● Gathered funds allow the project to enter its
main development stage.
● Development is complete and the coins
become useful and potentially valuable.

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 Regulatory considerations for ICOs

● Some countries, such as China and South Korea,

have banned ICOs.
● Other countries, such as Switzerland and
Singapore, have developed regulatory frameworks
specifically for ICOs
● In the United States, ICO issuers must comply with
registration requirements and disclose information
to investors, just like companies that issue stocks
or bonds.
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 Legal and ethical issues surrounding ICOs

● Regulatory compliance
● Investor protection
● Transparency
● Use of funds
● Reputation
● Money laundering and terrorist financing

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 Best practices for conducting ICOs

● Transparency.
● Compliance.
● Security.
● Communication.
● Use of funds.
● Team expertise.
● Timing.

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NFTs
 Definition and explanation

● Non-fungible tokens, often referred to

as NFTs, are blockchain-based tokens
that each represent a unique asset like
a piece of art, digital content, or media.
● An NFT can be thought of as an
irrevocable digital certificate of
ownership and authenticity for a given
asset, whether digital or physical.

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 How NFTs work

● When an NFT is created, it is given a unique

identifier stored on the blockchain.
● Once an NFT is created, it can be bought, sold,
or traded on various marketplaces or platforms
that support NFTs.
● The ownership and authenticity of NFTs are
verified through the blockchain, making them
tamper-proof and transparent

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 Use cases of NFTs in intellectual property law

● Art and Collectibles.

● Licensing and Royalties.
● Domain Names.
● Gaming and Virtual Worlds.

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 Real-world examples of NFT in intellectual property law

● Art: In March 2021, a digital artwork by Beeple sold for $69 million at auction.
The artwork was sold as an NFT, making it the most expensive NFT ever sold.

https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million
 Real-world examples of NFT in intellectual property law

● Collectibles: In 2021, a set of nine CryptoPunk NFTs sold for $16.9 million at
auction.

https://www.cryptotimes.io/cryptopunks-nfts-sold-at-christies-auction/
 Real-world examples of NFT in intellectual property law

● Virtual real estate: In 2021, A plot of virtual real estate in

crypto-powered metaverse Decentraland has sold for a record $2.43
million in cryptocurrency.

https://decrypt.co/86921/decentraland-virtual-land-plot-sells-record-2-
43-million
 Legal and regulatory considerations for NFTs

● Intellectual property rights.

● Securities laws.
● Money laundering and Know Your Customer
(KYC) regulations.
● Taxation.
● Consumer protection.

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 Best practices for creating and managing NFTs

● Ensuring ownership and authenticity.

● Compliance with legal and regulatory
frameworks.
● Ensuring clear terms and conditions.
● Secure storage and management.
● Continuous monitoring and evaluation.

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Criminal law and
investigations
 How blockchain and cryptocurrency are used in criminal
activities

● Money laundering: Cryptocurrencies can

be used to hide the source of illicit funds
and make them untraceable.

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 How blockchain and cryptocurrency are used in criminal
activities

● Ransomware attacks: Ransomware

attacks involve encrypting a victim's files
and demanding a ransom payment in
exchange for the decryption key.

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 How blockchain and cryptocurrency are used in criminal
activities
● Dark web marketplaces:
Cryptocurrencies are often used to buy
and sell illegal goods and services on the
dark web.

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 How blockchain and cryptocurrency are used in criminal
activities
● Ponzi schemes and
investment scams: Criminals
can use cryptocurrencies to
perpetrate Ponzi schemes and
investment scams, where they
promise high returns on
investments but fail to deliver.

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 Real-world examples

The Silk Road: infamous online

black market, allowed users to buy
and sell illegal drugs and other
illicit goods using Bitcoin.

https://www.forbes.com
 Real-world examples

● The WannaCry ransomware

attack: infected more than
200,000 computers in over 150
countries. The attackers
demanded Bitcoin payments in
exchange for unlocking the
encrypted files.

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 Real-world examples

OneCoin scheme: which raised billions of dollars from investors but was
eventually exposed as a Ponzi scheme.

https://www.leaprate.com
 Real-world examples
The case of Alexander Vinnik, who was accused of laundering $4 billion in
Bitcoin through his cryptocurrency exchange.

https://cointelegraph.com/news
 Best practices for preventing and responding to blockchain
and cryptocurrency-related crimes
● Education and awareness:
Educating employees and
stakeholders about the potential
risks associated with blockchain and
cryptocurrency is essential.

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 Best practices for preventing and responding to blockchain
and cryptocurrency-related crimes
● Strong security measures:
Implementing strong security measures,
such as multi-factor authentication,
encryption, and regular software
updates, can help prevent unauthorized
access and cyberattacks.

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 Best practices for preventing and responding to blockchain
and cryptocurrency-related crimes
● Compliance with regulations: Companies
should ensure that they are compliant with all
relevant regulations related to blockchain and
cryptocurrency, such as anti-money
laundering (AML) and know-your-customer
(KYC) regulations.

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 Best practices for preventing and responding to blockchain
and cryptocurrency-related crimes
● Collaboration with law enforcement:
Companies should have a plan in place to
collaborate with law enforcement in the event of a
blockchain or cryptocurrency-related crime. This
can involve sharing information and evidence, as
well as working together to recover lost funds.

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 Best practices for preventing and responding to blockchain
and cryptocurrency-related crimes
● Incident response plan: Companies
should have a well-defined incident
response plan in place to address
blockchain and cryptocurrency-related
security incidents. This should include
steps for containment, investigation, and
recovery.

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Real World
Example
Land registry on
Blockchain
 Challenges of Land Registration Process

● Historically, land registries were

based on paper documents,
which can be lost, destroyed,
falsified, or otherwise
manipulated.

https://medium.com/

● Example: selling an older

property in UK that hasn’t
previously been registered.
 Putting Land Registries on the Blockchain

● Implementation of a blockchain-based land

registry:
○ Enable the ownership documents to be recorded and
assigned to the owner’s user account.
○ If there are structural changes to the building, these can be
added to the blockchain.
○ If the property is sold, all the relevant documentation can
be transferred to the new owner.
○ Every transaction is traceable, timestamped, and
indisputable.
https://www.flaticon.com/
 New Potentials for Real Estate Ownership

● Tokenization and smart contracts unlock vast potential

for the ownership of real estate:
○ Fractional ownership of a building or piece of land.
○ Smart contract could distribute rental income between the shared
owners.
○ Blockchain-based voting could enable owners to make decisions
about the property
 Real world example
● Some countries are already turning to blockchain for land registration,
including Sweden and Ukraine.
● Sweden has been one of the early adopters of blockchain technology in the
land registry system.
● The blockchain is used to store information about property transactions,
including ownership records and mortgage details.
● The Swedish Land Registry has also partnered with a startup called
ChromaWay to develop a prototype for a blockchain-based land registry
system.