I’m willing to bet that most readers of this blog have heard of Bitcoin. But I’m not sure how many know about the technology it’s based on, called blockchain. If you haven’t heard of blockchain, now’s the time to learn, since it has the potential to be the most transformative technology since the internet.

I’m going to be writing more about blockchain and the unique trade-secrets issues facing the many companies rushing to develop applications and other technology based on blockchain. But first, I want to give a primer for those who haven’t heard of it.

Blockchain is essentially a database that is distributed among a large number of computers on a network. Each computer with access to the blockchain has an identical copy of the database. Here’s a simple example to explain how it works, from this explanatory post that compares blockchain to a “record book”: 

To be clear, this isn’t just one record book stored in a central location that is shared by many. There are thousands of copies of this record book, stored on computers all around the world, both home computers and business servers – hence the term “decentralised”. This record book can be used to record many kinds of things, however I’ll use sending and receiving money as the primary example, as it’s the most common one right now.

When John wants to send money to Sue, a new line item is created detailing that transaction. This line item then gets sent off to hundreds of other computers who have a copy of the record. Those computers confirm that this transaction is authorised, and ultimately they agree (or disagree) that everything about the transaction is legitimate before giving that line item a tick of approval. It has to match up perfectly on every copy of the record.

Each transaction, here John sending money to Sue, is a “block,” which when added to all the prior blocks forms a kind of “chain.” Hence, blockchain.

Since each computer with access to the blockchain has an identical copy of the database, fraudulent transactions are nearly impossible. If any one computer has a blockchain entry that all of the others don’t recognize, that entry is rejected. Entries are only added if all of the computers with access to the database agree. 

The first “app” based on blockchain is Bitcoin, a cryptocurrancy. You can watch a short video that explains Bitcoin here. Bitcoin was the first truly digital currency, which allowed the transfer of money without the need for any centralized institution like a bank. Now there are a number of cryptocurrancies with names like Ether and litecoin. 

But blockchain’s potential goes far beyond currencies. It can be used to streamline, simplify, and secure a wide variety of transactions, such as supply-chain management, digitial voting, collecting taxes, and recording real estate transfers and ownership. Essentially, any transaction involving value could be conducted—and improved—on the blockchain. Some think that the entire worldwide financial system will eventually move to blockchain — and I agree. Additionally, developers are using a blockchain platform called Etherium (which also underpins the Ether cryptocurrancy) to create “smart contracts” — essentially programming code that is capable of executing or enforcing contractual terms. This is a powerful, but complicated, concept that I will discuss in more detail in a future post.

Companies large and small are racing to develop new “apps” based on blockchain technologies.  This entire industry is essentially in the research-and-development phase, which means that trade-secrets issues abound. These companies can benefit from tech-savvy lawyers who understand how to protect this rapidly developing information. 

This post is a very basic introduction to blockchain. I’m fascinated by the technology and see virtually limitless potential. If you want to learn more, I’d recommend The Internet of Money, an excellent book by Andreas M. Antonopoulos. And stay tuned — I intend to explore the intersection of blockchain and trade secrets here at Protecting Trade Secrets.

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