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Blockchain technology

Blockchain – many people have heard this word. It is mainly associated with Bitcoin or, more generally, with cryptocurrency (read more). Despite its growing popularity, few people know what this technology is about. This is mainly because it is still rarely used in everyday life, although its popularity is constantly growing.

What is blockchain?

Blockchain, as the name suggests, is a block of chains, or more precisely – a block of data chains. It was first used and described by a group of researchers as early as in 1991. It is defined as a decentralised and distributed database which stores and transmits information via the interconnected network of computers (peer-to-peer). Each “block” stores a certain amount of information, i.e. transactions between network users (data), and is secured by special cryptographic solutions. Cryptographic solutions used in blockchain technology can be compared to a fingerprint or electronic signature identifying a specific block of data. The confirmation of the data stored there is secured by the so-called hash, i.e. the identifier of a given block. Any change of data will result in a change of the identifier itself.
This is to ensure that the network is secure, stable and unchangeable.

Each block has its hash and a reference to the previous one, i.e. the hash of the previous block, which forms a kind of chain. The first block of the chain, the so-called Genesis Block, is the exception. For obvious reasons, this block does not contain the code of its predecessor. Therefore, any change of data will be easily detectable as the uniformity of the chain will be affected. Hacking or tampering with the information stored there is almost impossible as every network user can check the correctness and integrity of the chain in real time. Moreover, the blocks that were tampered with will be automatically rejected by all other network nodes.

Development of blockchain technology in the European Union

The need to develop and introduce innovations based on blockchain technology has also been recognised by the European Economic and Social Committee, an EU advisory body which issues opinions on EU matters addressed to the European Commission, the EU Council and the European Parliament. The opinion “Blockchain and the EU single market: what next?” (own-initiative opinion) (OJ C 47, 2020, p. 17) is one of several opinions issued by that body. It points out that the use of blockchain technology can bring a positive change in many sectors of society and introduce values, such as trust, transparency, democracy and security. Ultimately, it can help to develop new socio-economic models, thus supporting the social innovation needed to meet challenges that we are facing today. At the same time, it is recognised that this technology has benefits for society as it contributes to reaching the objectives of sustainable development, empowers citizens, stimulates entrepreneurship and innovation, and improves mobility and cross-border opportunities for businesses, while increasing transparency for the consumers. It can also reduce tax evasion and corruption and contribute to the development of both private and public services.

The EU institutions have already taken some steps to support the development of blockchain technology. In 2017, the European Parliamentary Research Service published a report “How blockchain technology could change our lives” and in 2018, the European Commission opened the EU Blockchain Observatory & Forum. Their goal is to maintain Europe’s position as a world leader in this technology by facilitating and developing innovations. In April 2018, the EC and 21 Member States (currently 27, including Poland) agreed to sign a declaration for the creation of the European Blockchain Partnership and cooperation in the establishment of the European Blockchain Services Infrastructure that will support the delivery of cross-border digital public services with the highest standards of security and privacy.

This technology is becoming increasingly popular. It is used by most cryptocurrencies. In Ukraine, it has solved the problem of corruption in public procurement. In Georgia, it is used as a land register. There is speculation about the possibility of using blockchain to keep medical records, in notarial services to replace notarial deeds, or in the tax matters. It is safe to say that it is currently the safest form of data storage.

 

Aleksandra Bętkowska, lawyer
Michał Korszla, attorney-at-law

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