Splitchain: the legal and technological strands of blockchain

Blockchain technology is used to effect digital transactions without the need for third party verification or a centralised authority. Using its own software and cryptographic consensus system, such as proof-of-work or proof-of-stake, subscribed to by a network of peer-to-peer computers, blocks of information are created once consensus is reached between the majority of participating nodes.² The 'truth' of the information is achieved by virtue of the technology's specific rules and a decentralised, distributed ledger or database that has created and stores the information, duplicated across the network, according to its rules. If nodes validate false information, they are banned by the other nodes.

Blockchain technology, and specifically Bitcoin, was originally designed to solve the problem of double spending that a third-party verifier or intermediary has traditionally solved in the context of financial transfers.³ Since then, blockchain technology has been used in a range of contexts including two main sets of digital assets:

• fungible tokens - comprising multiple digital assets of equal value (like fiat currency); and
• non-fungible tokens - comprising unique digital assets, each with its own value.

In each case, the digital asset represents some 'store of value' that can be validated and transferred from one party to another.
However, blockchain technology or digital asset status alone cannot represent the whole 'truth' of a transaction and the enthusiastic embrace of blockchain technology on a one-dimensional level, that is assumed to sit 'above the law', or as a 'law unto itself', is prone to mislead and contribute to a volatile marketplace that breeds distrust despite blockchain's 'trustless' claim.