blockchain world is represented by “tokens”
9 which represent a particular asset or
utility which is usually placed on top of another blockchain. Tokens can represent
basically any assets that are tradeable; they range from commodities to loyalty points
to other cryptocurrencies.
10 There are two common categories; namely, “utility” and
“security” tokens. Utility tokens are essentially cryptocurrencies that are used for a
specific purpose, such as purchasing buying particular goods or services. A security
token often represents ownership in an underlying actual asset such as traditional
stocks and bonds.
11 Information regarding the transactions is securely stored by
using cryptography or other techniques to create secure and immutable records of
them.
12
In simplistic terms, how blockchain actually works can be illustrated as follows:
If, for example, A wishes to transact with B on a blockchain basis, A establishes a
transaction by first creating and then digitally signing it with a private key proving
A’s ownership. The transaction is then broadcast in the network for validation by
nodes based on the blockchain protocol. Once validated, the transaction is included
into a block which is propagated on to the network. The newly-created block
becomes a part of the ledger and is linked cryptographically to the immediately
previous block, leading to a chain of blocks. The linkage is the “hash” (explained
below) pointer.
13
The digital nature of the ledger signifies that blockchain transactions can be
linked to computational logic which in essence means they can be programmed.
Thus, users can set up algorithms and rules that instigate transactions between nodes
automatically.
14 Based on blockchain technology, parties can transact values or
assets without an intermediary. This removal of reliance on a third-party can serve
to establish business relationships between the parties involved who can agree to
deal directly with each other. Hence, a so-called “smart contract” (explained below)
can be devised in the manner of a computer code placed and operating on top of a
blockchain containing a set of parameters under which parties to the smart contract
agree to interact with each other. If and when the pre-determined parameters are
fulfilled, the agreement is automatically implemented.
9 Au and Power (2018), p. 8.
10 Aziz (2017).
11 McKeon (2018).
12 Kinthaert (2016).
13 Bashir (2018), pp. 23–24.
14 Iansiti and Lakhani (2017).
Blockchain and Bills of Lading: Legal Issues in Perspective
417
9 which represent a particular asset or
utility which is usually placed on top of another blockchain. Tokens can represent
basically any assets that are tradeable; they range from commodities to loyalty points
to other cryptocurrencies.
10 There are two common categories; namely, “utility” and
“security” tokens. Utility tokens are essentially cryptocurrencies that are used for a
specific purpose, such as purchasing buying particular goods or services. A security
token often represents ownership in an underlying actual asset such as traditional
stocks and bonds.
11 Information regarding the transactions is securely stored by
using cryptography or other techniques to create secure and immutable records of
them.
12
In simplistic terms, how blockchain actually works can be illustrated as follows:
If, for example, A wishes to transact with B on a blockchain basis, A establishes a
transaction by first creating and then digitally signing it with a private key proving
A’s ownership. The transaction is then broadcast in the network for validation by
nodes based on the blockchain protocol. Once validated, the transaction is included
into a block which is propagated on to the network. The newly-created block
becomes a part of the ledger and is linked cryptographically to the immediately
previous block, leading to a chain of blocks. The linkage is the “hash” (explained
below) pointer.
13
The digital nature of the ledger signifies that blockchain transactions can be
linked to computational logic which in essence means they can be programmed.
Thus, users can set up algorithms and rules that instigate transactions between nodes
automatically.
14 Based on blockchain technology, parties can transact values or
assets without an intermediary. This removal of reliance on a third-party can serve
to establish business relationships between the parties involved who can agree to
deal directly with each other. Hence, a so-called “smart contract” (explained below)
can be devised in the manner of a computer code placed and operating on top of a
blockchain containing a set of parameters under which parties to the smart contract
agree to interact with each other. If and when the pre-determined parameters are
fulfilled, the agreement is automatically implemented.
9 Au and Power (2018), p. 8.
10 Aziz (2017).
11 McKeon (2018).
12 Kinthaert (2016).
13 Bashir (2018), pp. 23–24.
14 Iansiti and Lakhani (2017).
Blockchain and Bills of Lading: Legal Issues in Perspective
417