1.2 Purpose and Structure
Against the above background, the central purpose of this chapter is to analytically
examine how the blockchain technology and its extended application of the smart
contract apply to bills of lading and identify the pros and cons. An auxiliary purpose
is to look at the concept of the smart contract as an extended application of
blockchain technology to bills of lading. Following the introduction, there is a
relatively detailed discussion of the features of blockchain and its extended application to smart contracts assuming that the bill of lading as it prevails in the current
milieu of maritime commerce can be considered to be such a contract. The discussion leads into an examination of the pros and cons of such envisaged development
to determine the legal viability of introducing the blockchain concept to the functional use of the bill of lading. As the discussion unfolds, it will become apparent that
there are several facets to the application of blockchain technology in terms of legal
issues and legal consequences. In conclusion, the veracity of the application of
blockchain to bills of lading will be commentated on highlighting the flaws and
whether and to what extent, the existing legal framework may be altered to accommodate the infusion of the blockchain methodology to bills of lading.
2 Concept of Blockchain Technology
2.1 Definition and Nature
There is no established definition of the term but it can be described simply as a
decentralized peer-to-peer ledger of securely-stored transactions.
8 In that sentence,
“ledger” means a simple database capable of storing information on transactions. A
decentralized ledger means that such information is stored with multiple copies on
numerous computers connected to a common network without central authority,
controlling party, or single server. Each computer in that common network is called a
“node” and network is formulated when all nodes operate under the same set of
rules, namely, the protocol embodied in computer code. The expression “peer-topeer” implies that all nodes are connected via the internet and they communicate
directly rather than through a centralized authority, or intermediary. The traditional
transaction system is centralized with a controlling body recording, validating and
authenticating all transactions. There is only one ledger and it is under the control of
the central body, be it a bank, government or other intermediary. By contrast, in the
decentralized network, every node holds a synchronized ledger.
Notably, those transactions may involve many varieties of value such as currency
(money, stocks or bonds), proof of ownership of assets, tangible (goods, property or
energy) and intangible (votes, identity, ideas or personal data). Value in the
8 Iansiti and Lakhani (2017).
416
H. Liu
Against the above background, the central purpose of this chapter is to analytically
examine how the blockchain technology and its extended application of the smart
contract apply to bills of lading and identify the pros and cons. An auxiliary purpose
is to look at the concept of the smart contract as an extended application of
blockchain technology to bills of lading. Following the introduction, there is a
relatively detailed discussion of the features of blockchain and its extended application to smart contracts assuming that the bill of lading as it prevails in the current
milieu of maritime commerce can be considered to be such a contract. The discussion leads into an examination of the pros and cons of such envisaged development
to determine the legal viability of introducing the blockchain concept to the functional use of the bill of lading. As the discussion unfolds, it will become apparent that
there are several facets to the application of blockchain technology in terms of legal
issues and legal consequences. In conclusion, the veracity of the application of
blockchain to bills of lading will be commentated on highlighting the flaws and
whether and to what extent, the existing legal framework may be altered to accommodate the infusion of the blockchain methodology to bills of lading.
2 Concept of Blockchain Technology
2.1 Definition and Nature
There is no established definition of the term but it can be described simply as a
decentralized peer-to-peer ledger of securely-stored transactions.
8 In that sentence,
“ledger” means a simple database capable of storing information on transactions. A
decentralized ledger means that such information is stored with multiple copies on
numerous computers connected to a common network without central authority,
controlling party, or single server. Each computer in that common network is called a
“node” and network is formulated when all nodes operate under the same set of
rules, namely, the protocol embodied in computer code. The expression “peer-topeer” implies that all nodes are connected via the internet and they communicate
directly rather than through a centralized authority, or intermediary. The traditional
transaction system is centralized with a controlling body recording, validating and
authenticating all transactions. There is only one ledger and it is under the control of
the central body, be it a bank, government or other intermediary. By contrast, in the
decentralized network, every node holds a synchronized ledger.
Notably, those transactions may involve many varieties of value such as currency
(money, stocks or bonds), proof of ownership of assets, tangible (goods, property or
energy) and intangible (votes, identity, ideas or personal data). Value in the
8 Iansiti and Lakhani (2017).
416
H. Liu