Splitchain: the legal and technological strands of blockchain

Navigating emerging digital technologies can seem like negotiating multiple new and separate worlds that do not interact ─ meta and physical, public and private, virtual versus physical, centralised and de-centralised, permissioned and permissionless. But these new worlds remain very much subject to, and bound by, existing laws. These new worlds exist in the real world; more than that, they need to work together despite the complexity and new digital language that blockchain requires us to master.

The concept of 'splitchain' attempts to wrestle complexity into simplicity and to encourage thinking beyond unhelpful binaries. Splitchain denotes a split structure that is co-dependent. Like two strands of DNA forming a double helix, there are two strands to blockchain, creating a splitchain: a strand of blockchain technology and a strand of legal rights and obligations, ideally working in parallel to achieve a single objective. One side represents 'internal' technology-based rules, while the other represents 'external' legal rules; one is written in the language of computer code, the other is written in the language of the law; one is on-chain, the other is off-chain (or a hybrid of on- and off-chain).

Moreover, splitchain is intended to illustrate and refine the interaction between the technological and legal aspects relevant to blockchain technology and its use cases, whereby the technological and legal strands intertwine to create a whole and one that is enforceable at law and engenders trust. A splitchain analysis will foresee that the characteristics of a particular use case are either a commodity, security, derivative, game of skill or chance and can be developed and marketed accordingly. So important is this legal categorisation process, that proceeding without it may lead to sunk costs which, in the blockchain space, are far from insignificant.