Splitchain: the legal and technological strands of blockchain
Abstract
Blockchain technology is used to authorise digital transactions between two parties without the need for third party verification. It is described as 'trustless' because its very design replaces the need for an intermediary to authenticate a transaction. Blockchain technology itself creates immutable records that evidence 'truth'. However, this paper argues that blockchain's 'truth' remains incomplete, and risks being a misleading technology, without a 'splitchain' conceptualisation that exposes its legal components. Transactions on blockchain platforms - using digital 'tokens' - are technology-driven transactions that give rise to legal rights and obligations. In this sense, blockchain comprises a chain that is 'split' into two strands: a set of technological rules and a set of legal rules. The objective of splitchain is to illustrate these rules working together, like a double helix, to complete the 'truth' of a transaction deserving of trust and acceptance in the wider economy.1
Introduction
This paper introduces 'splitchain' as a new concept through which to consider blockchain technology and its use cases. The primary purpose of splitchain is to help strengthen blockchain technology's commercialisation prospects and engender confidence in the wider global economy. It seeks to do so by anchoring blockchain technology, and its various use cases, within a relevant legal framework. While there may be various barriers to the wider adoption of blockchain technology and digital assets, such as cryptocurrency and non-fungible tokens (NFTs), a limited understanding of the technology itself and the real-world legal context in which it is being developed, has generated misconceptions, volatility and risk to creators, collaborators, investors and consumers. It is an environment that threatens to undermine the benefits that new and innovative technology can deliver to our global economy. The purpose of this paper is to examine this environment more closely and to propose a means of anticipating, managing and resolving the most significant risks by applying a splitchain lens.
To fully appreciate the advantages of a splitchain conceptualisation of blockchain, there is a need for foundational blockchain knowledge. Blockchain knowledge is currently concentrated in the minds of few, comprising developers, creators, crypto-native investors and academics.
1 This paper was produced with the intention of bringing clarity to complexity around blockchain technology and the law. I gratefully acknowledge the contribution of Julian Challingsworth in reviewing earlier versions of this paper, Philip Fitzgerald for logo design and for the support and sound boarding of ideas with valued colleagues at Lander & Rogers.