Understanding Blockchain Technology And The Law

Blockchain as the name suggests is literally a chain of innumerable blocks arranged chronologically, but not in the conventional sense of these words. ‘Blocks’ as used in this frame of reference is “the digital information” which is stored in “a public database”, i.e., ‘Chain’. This blockchain technology is sometimes referred to as Distributed Ledger Technology, where by virtue of decentralization and cryptographic hashing, the archives of any digital chattel are made unchangeable and transparent. Such a feature can be better understood with a simple analogy of a Google Document.

When a document is created and shared among a group of people, the document is said to be distributed instead of being copied or transferred. In doing so a decentralized distribution chain is created and everyone gains access to the document at the same time. Here, the modifications to the document are made in real-time, thus making it transparent and leaving no one behind awaiting the changes to be made by some party.

In order to realize the true meaning of Blockchain technology, one needs to be well versed with its structure. The indispensable components making up blockchain technology are:


Blocks – A chain is built up of several blocks and each block comprises of three fundamental elements, namely,

  1. The data stored in the block.
  2. Nonce, which is a 32- bit whole number. Once a block is created the nonce is spawned randomly, which further generates a block header hash.
  3. A 256-bit number fused to the nonce is the hash. It must start with a huge number of zeroes.

Miners – These are responsible for the creation of blocks in the chain. Such a process of block creation is known as Mining. This task of mining is not easy especially on a large chain as each block in the chain possesses its own unique nonce and hash besides citing the hash of the previous block in the chain. Peculiar software is used by these miners for solving the implausible, complex math problems of finding a nonce that generates an accepted hash.

To alter or change any block in the chain, re-mining is required, and that too not just of the block concerned but each block that comes after. It is for this reason that it’s extremely difficult to fiddle with blockchain technology.


Nodes – On successful mining of a block the change is accepted by all if the nodes on the network. Nodes are electronic devices that maintain copies of the blockchain and keep the networks functioning. Thereby eliminating control in the hands of anyone computer or organization. An exclusive copy of the blockchain is kept with each node and any newly mined block must be algorithmically approved in order for the chain to be updated, trusted and verified.

By integrating public information with a system of checks-and-balances, blockchain preserves the integrity and promotes trust among its users.

Origin of blockchain technology

Blockchain technology is a recently developed technology, yet its roots can be traced back to 1991 when the first work on a cryptographically secured chains of blocks was described by Stuart Haber and W. Scott Stornetta.


They wanted to implement a system where document timestamps could not be tampered with. It was this person (or a group of people) known as Satoshi Nakamoto who conceived the first blockchain in 2008.

The blockchain design was improved by Nakamoto, where a Hashcash like a method to timestamp blocks without requiring them to be signed by a trusted party and introducing a difficulty parameter to stabilize the rate with which blocks are added to the chain was used.

Blockchain Technology and the Law

It was in 2017 that Lawyers grew fond of the blockchain technology drastically. It is believed that the legal industry was one of the fastest-growing sectors to join the Wall Street Blockchain Alliance.


“Blockchain could be used as a ‘spine’ to oversee the entire legal industry, develop more coherent systems, dwindle the cost of legal services, and ensure the legal services needed by the people.”

Blockchain technology making the legal industry more efficient:

Frauds relating to the property are considered one of the most conspicuous problems in India. The most accepted way of committing such fraud is to hold the property in someone else’s name, i.e., “Benami property”. Following problems can be solved by incorporating blockchain technology:

  1. The problem of ‘double sending’ is addressed by blockchain. It helps to make the digital assets difficult to clone.
  2. Blockchain makes digital information near to impossible to manipulate. Each block has its own exclusive fingerprint popularly known as “hash”, along with references to the hash of the previous block. Any sort of attempt to alter or tamper with the information contained in the block will cause a chain reaction to begin which can freeze up the whole chain, thereby making blockchain tamper-proof.

Security – Huge Legal firms are often preyed upon by hackers since they have so much of sensitive data. When such data is stored in a private blockchain, it becomes decentralized, thereby making it impossible for hackers to assail a centralized source.

The blocks are placed linearly and chronologically. Since each block possesses a hash of its own along with the hash of the previous block, it becomes impossible for the hacker to alter the information contained therein.


Smart contracts – The inception of smart contracts in the legal field could help make the contracting process more efficient. The need for middlemen is struck out with the use of smart contracts, directly connecting two parties with each other.

These contracts can be helpful in Real estate registration, Commercial transactions, Artist Royalties, Rendered services, Contracts demanding a transactional lawyer etc.

Making legal field accessible – Lawyers can use blockchain technology to the maximum advantage to modernize and unravel transactional work. An excessive amount of time which is spent preparing, personalizing and maintaining standard law documents can be reduced by using scripted text, smart contracts and automated contract management. Additionally, blockchain brings about a reform while accessing the justice system by eliminating consumer complexity and reducing massive legal fees.


Bringing automation to the legal industry – Lawyers spend majority of their time executing administrative tasks, transferring information, updating client trust ledgers, etc. Excessive manual labour can be cut down thereby accelerating legal proceedings by incorporating blockchain technology.

Regulations regarding Blockchain around the world

USA – US Government has been very generous in respect of cryptocurrency industry yet it has not made any sort of effort regarding blockchain-related business models. There being no particular regulations concerning blockchain technology, a Blockchain Working Group was inaugurated by the Federal Trade Commission (FTC) in order to put a check on the illegal and fraudulent schemes arising in the marketplace from time to time.

Belarus – First nation to come up with a legal framework for the regulation of the blockchain industry. A “Digital Economy Development Ordinance” came to effect in March 2018 which focused on the blockchain and cryptocurrency-related innovations. Another law was enacted to prevent terrorism financing, money laundering, and propagation of weapons of mass destruction by means of any blockchain-related activities.


Malta – Another country to have huge faith in the potential of blockchain technology and thus enacted the following:

  1. Malta Digital Innovation Authority Act (MDIA), and
  2. Innovative Technology Arrangement and Services Act (ITAS).

Gibraltar – It’s among those nations which welcomed blockchain technology with open arms. The Gibraltar Financial Services Commission (GFSC) is responsible for regulating the country’s distributed ledger technology.

Present scenario regarding Blockchain in India

At the moment, the Government of India has been speculative about creating a framework regarding the regulation of blockchain and cryptocurrency in India. The Government is quiet on whether it wants to regulate or ban cryptocurrency in India.


However, there has been a draft in progress which aimed at banning cryptocurrency use except those issued by the states. “The government is weighing whether the virtual currencies can be regulated by the Reserve Bank of India. A framework for the regulation will be decided upon after deliberations with the central bank.”

The Government of India has been pondering on the Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019 for a while now. The drafting was done by the interministerial committee (IMC) trusted with the duty to study all aspects of cryptocurrencies and providing recommendations for the country. The crypto-community reckons that the bill is inadequate and has been crusading for the government to reassess the IMC recommendations. The bill has not been introduced yet.

It was apprehended that a complete ban would not only be difficult to implement but also undermine cryptocurrency trading. However, if the government tries to regulate it, it can keep a check as to the use of the technology for illicit activities.


This article is written by Niyati Upadhyay, 4th, B.A. LL.B. at Allahabad University.

Also Read – Will Change In IT Laws Improve Air Quality?

Law Corner

Leave a Comment