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Legal reality and Prospect of blockchain application

Time : 09/01/2022 Author : fkogjr Click : + -
        Blockchain technology has been developed for more than 10 years and has experienced some ups and downs; On the other hand, the application prospect of blockchain technology is broad, and countries around the world are actively laying out. Since Satoshi Nakamoto published his paper on bitcoin in 2008 and founded bitcoin at the beginning of the next year, the application of cryptocurrency and the blockchain technology it relies on has brought broad application prospects to the world and also brought many commercial and legal challenges. At the end of last year, the highest level of the central government clearly put the development of blockchain technology on the important agenda for the first time, which has attracted wide attention from the society. In fact, Chinese enterprises have already laid out in the blockchain field. As the name implies, blockchain is formally called "block + Chain". This chain is a chain data structure that links blocks in chronological order.
 
        This block is the current transaction and data information, plus a hash value (a function value in cryptography) and then the previous block is the relevant data and information formed by the previous transaction, which constitutes all the contents of this block and can be transferred to the next block. It can be seen that each block will contain the data and information of all previous transactions. Technically speaking, the blockchain contains a database storage system with multiple technologies and different levels of operation. Key technologies include P2P peer-to-peer network technology, distributed data storage, asymmetric encryption information, programmed consensus algorithm, etc. From the perspective of the architecture pyramid, it can be understood that the blockchain technology and application include six levels. From the bottom up, first, the data layer includes distributed data, then the network layer includes the networking mechanism and propagation mechanism of data, and then the consensus layer is on the network layer. A programmable consensus algorithm is developed to formulate the propagation mechanism and rules.
 
        These three layers are the necessary technologies of the blockchain. We usually say that the so-called blockchain application does not necessarily include all six levels of technologies and applications, but at least includes the data layer, the network layer and the consensus layer. The application of bitcoin and Ethereum is a platform running on the public chain and needs to encourage everyone to participate. Therefore, it will provide some incentive mechanisms, namely, the incentive layer, which gives you certain rewards. This is the unique blockchain level on the public chain. Many platforms can also be built on the blockchain to carry out applications in various scenarios. Some algorithms will be developed, i.e. programming conventions will automatically execute relevant instructions, which is the smart contract layer.
 
        Various applications, i.e. application layers, are formed based on smart contracts. First of all, the landmark time point for the application of blockchain was at the end of 2008. Nakamoto released a white paper on the use of bitcoin. In January 2009, he created the first initial bitcoin block. After that, different participants continued to create blocks one by one, which continues to this day. Bitcoin is a very creative and great application. It does not belong to any organization or individual. Everyone can participate in it, earn bitcoin or trade bitcoin through consensus and mining. The maintenance of the whole system is a spontaneous system. It is still in operation, and the system has not been down for more than ten years, and there has been no destructive crash. It is completely maintained by itself. From this point of view, it is a great creation and experiment.
 
        With the gradual development of bitcoin, many bitcoin trading applications and platforms have been generated. The next milestone application is Ethereum in 2015. The bitcoin platform is a closed system. There are no other applications on bitcoin. The creation of Ethereum also uses the underlying technology of the blockchain, but it has built an open-source platform that all the public can participate in. On this platform, smart contracts are used to build various applications. The platform of Ethereum also issued its own currency, namely, Ethereum. After bitcoin, there have been many ICO projects and many other different currencies.
 
        Then in the next stage, with the development of the application of ICO, a lot of financial fraud occurred. Therefore, in 2018, the US Securities Regulatory Commission issued regulatory rules for the issuance of securities related to ICO, which is STO, securitiestokenoffering. At the same time, the issuance of stable coins and the application of baas have also appeared. Baas provides services on the blockchain platform. By 2019, the central banks of many countries are studying the central bank's legal digital currency, CBDC. There are also many de financialization and defi applications. There was another event in 2019, which was Libra. Of course, it has not been officially released yet. Although it was rejected at present, its discussion and exploration are still in progress.
 
        In practice, when we often discuss the legal issues related to the blockchain, we actually discuss some technical features of the public chain. In fact, the blockchain itself contains two types, one is the public chain and the other is the license chain. The license chain is divided into the private chain and the alliance chain. Public chain, as its name implies, is open to the public without the threshold of participants. This is the concept of public chain. The public chain is creatively decentralized, so that everyone can participate, but it does not need any centralized supervision, centralized institutions or companies, and it can also be a very successful operation platform. This is a revolutionary thinking and innovation of blockchain. However, without the decentralized characteristics of the public chain, a closed blockchain platform can also be operated on the license chain.
 
        The license chain, as the name implies, means that the participants need authorization and license, and those who need some threshold, participate in the application of the platform according to certain rules and qualification requirements. Private chain is usually a blockchain platform built by enterprises themselves. Alliance chain refers to a blockchain platform built by some enterprises or organizations according to certain rules. The difference between the license chain and the public chain is that the license chain is centralized. Although it includes decentralized distributed nodes, there are still centralized nodes to operate and supervise. Public chain 1.0, bitcoin is the earliest application, and it is a separate ecological platform. The top-level application is bitcoin, and it does not carry other applications. The feature is to prove the contribution of participants by workload, that is, to earn bitcoin through mining.
 
        The consensus mechanism is the proof of work, pow. The efficiency of this mechanism is relatively slow, because it requires huge computing power to earn bitcoin, and the design is almost 10 minutes per block; Bitcoin is also a thing with limited reserves. So far, it has not been dug up, but it is an asset with a total cap. Ethereum is a typical application of public chain 2.0. Its creativity lies in an open source platform on which many applications can be built, called DAPP and distributedapp. DAPP can use different smart contracts to generate various applications. In terms of the mechanism setting of consensus, other consensus mechanisms are also developed, such as POS, proof of rights, or dpos, authorized proof of rights, and so on.
 
        These different consensus mechanisms have improved the application efficiency. Some applications may not even mine, and some applications still need to mine; In addition, there will be great improvement in carrying capacity, operation speed and efficiency. Public chain 3.0 and public chain 2.0 are technically in the same strain, but have made great progress in consensus mechanism, application scenario enrichment and technology expansion. Many applications are being developed and various digital currencies are being issued on the public chain. The license chain is a blockchain platform built by an enterprise or an alliance chain. Therefore, on the one hand, the private chain and the alliance chain have the common characteristics of the blockchain, such as non tamperability and distributed storage, but the biggest difference between it and the public chain is centralization.
 
        Therefore, in the sense of legal supervision, I think the private chain and alliance chain are closer to the traditional Internet supervision mechanism. It can only use the blockchain in technical tools. In summary, blockchain is widely used, and there are various applications from micro to macro. As the blockchain technology itself has strong financial and value transmission attributes, in the long run, it will become a technology application that subverts production relations in our economic and social life. Of course, at present, because legal supervision needs to be updated and tracked at any time, it is still in the stage of gradual exploration. Our traditional Internet is the information internet. What does it mean? That is to say, the current Internet mainly transmits various kinds of data and information content, but the blockchain can directly generate value on the Internet and directly transmit value by applying its unique technology.
 
        What is the difference? For example, the application platform of the public chain can directly generate digital currency, and then the currency will be completely online, circulated and transmitted online. Traditional Internet applications, including financial Internet applications such as Alipay and wechat payment, are essentially information transfer, such as payment from account a to account B, which transfers the account cash information of the bank corresponding to account a, or the cash stored in Alipay yu'e Bao, the assets equivalent to cash, and so on, and then transfers them to the bank account and electronic money behind account B, So it is still the information content to be transmitted. Unlike the blockchain, it has a technical feature that is not available in the traditional Internet. It is called "double pending", so it can directly transfer digital assets.
 
        In other words, blockchain technology avoids that one currency / value can be used to purchase two services at the same time, or that one currency can be used repeatedly, which can directly transfer value. Therefore, blockchain has special value in the financial field and various fields of related securities, including data deposit, evidence deposit and asset registration. In the long run, blockchain ensures the transmission of value on the Internet. At present, China and the United States are the two main players in the development of blockchain. Of course, when we mention digital currency, we will also mention some other countries. They will also be relatively advanced in the recognition and transaction of financial use of digital currency. However, as far as the development and application of blockchain technology is concerned, China and the United States are mainly involved.
 
        For example, from 2008 to the past ten years, basically, blockchain technology mainly came from China, followed by the United States. In recent 2019, Chinese companies applied for 63% of blockchain technology patents, 19% in the United States, and about 7% in Japan. Because China does not support the circulation and issuance of digital currency, most Chinese enterprises focus on the application of centralized blockchain technology. In the financial sector, especially in many financial applications on the public chain, the United States will develop more. Sort out the basic framework of domestic legislation, and distinguish the legislative situation of digital currency related and non digital currency related. For digital currency and its application, this chapter also introduces its classification, sorts out several concepts, and the current regulatory situation in China.
 
        We will sort out the general situation of other countries, only briefly mention other countries, mainly introduce the legislation and regulation of the United States, and then introduce the sto (ICO) of the United States. It focuses on sorting out the six most challenging areas for the legal system: data security / privacy protection, jurisdiction / international cooperation, currency / Finance / insurance / Securities / financial property system, property rights system, contract law system and company law system. In this lecture, we invited Lawyer Chen Jie, a partner of JUNHE law firm, to share the legal reality and Prospect of blockchain application. This sharing will combine the application of blockchain technology to sort out some basic information about the existing legislation and practice of domestic and foreign legislation, as well as several areas that I personally think have challenges to the legal system.
 
        
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