Did You Know That Blockchains Can Help You, Too?

Blockchain technology has been popular in the news over the last few months. Surging popularity and prices of blockchain-based cryptocurrencies, such as Bitcoin, have been leading financial headlines across the globe. Over the last few years, cryptocurrencies have gained the support from institutional investors, such as big banks and public facing billionaires including Elon Musk and Mark Cuban. Additionally, companies, such as Square and PayPal, have begun integrating cryptocurrencies into their products as a method of paying for goods and services.

But the blockchain is so much more than just Bitcoin. In short, the power of the blockchain is based on a ledger of transactions that is distributed, stored, and maintained among multiple computing nodes of a blockchain network. In a basic setup, each time that a user of a blockchain network intends to perform a group of transactions, a group of corresponding transaction entries are stored in a new, standalone block that is propagated to and thus replicated on computing nodes of the blockchain network. Once the block is received by each computing node, each respective computing node independently executes verification software to ensure that the received block is consistent across the blockchain and can be added to the blockchain. If a consensus is reached among the computing nodes according to a consensus algorithm, a block is then added to the local copy of the blockchain on each computing node. The added block includes a reference to (and thus is chained to) the previous blocks in the blockchain and a cryptographic signature that is based on metadata (e.g., a hash representing the current state)) of the previous block. Therefore, any attempt to alter, add, or delete a block in the blockchain affects the verification of all subsequent blocks and thus would hardly succeed, especially when the block is early in the blockchain. Overall, this framework ensures the integrity of the blockchain by making it largely immutable and auditable.

There are several blockchain platforms which power blockchain technology to enable the development of blockchain applications. For example, enterprise cloud services providers, such as Amazon, provide managed blockchain services using their powerful cloud-computing resources. Such blockchain services make it easy to join public blockchain networks by creating nodes in such blockchain networks or create and manage scalable private blockchain networks using proprietary software or open-source frameworks, such as Hyperledger Fabric and Ethereum.

Some blockchain networks, such as ones offered by Ethereum, provide enhanced functionality referred to as “smart contracts”. Smart contracts use blockchain technology to capture, validate, and enforce agreed-upon terms between multiple parties. A smart contract can define rules, like a regular contract, and automatically enforce them via programming code of functions. Specifically, the functions are automatically executed when associated conditions are met. Users can interact with a smart contract by submitting transactions to the corresponding blockchain network, which may cause executing a function defined on the smart contract and ultimately enforcing the smart contract without further human intermediaries. Therefore, the terms of the contract and records of related transactions exist across a distributed, decentralized blockchain, being generally trackable and irreversible. A good analogy is a vending machine. With any typical vending machine, a user provides money and a snack selection as input, and if the conditions are satisfied by the inputs, the vending machine provides the selected snack as output.

In addition to smart contracts, the desirable features of blockchain technology lend themselves to many uses. In the agriculture and food industries, a supply chain from farmers growing crops to customers consuming agricultural products can clearly benefit. A blockchain can help track the flow of goods and services and improve the transparency and efficiency of the processes1. In the entertainment industry, online music theft, fraud rates for digital tickets, and online advertising fraud cost companies billions of dollars annually. Blockchain technology provides transparency to digital transactions and delivers newfound trust to media, entertainment and advertising by tracing the access of copyrighted work or other digital data that is designed for single or other restricted use2. In the pharmaceutical and healthcare industries, issues surrounding health data — including interoperability, transparency, accuracy, and regulatory compliance — cut across all participants in the ecosystems. By managing relevant data including patient records, drug information, and government regulations, blockchain technology can provide faster access to trusted information (under appropriate access control) across multiple stakeholders while facilitating compliance with applicable rules3. In the public sector, blockchain technology can similarly improve the management of and trust in governmental processes, such as criminal prosecution and election voting4.

The excitement surrounding blockchain technology has led to a rush in patent application filings related to blockchain technology. Several areas of blockchain technology are ripe for patenting. A first area is related to building the blocks of a blockchain. This area includes techniques for improved hashing in building the digital signature, and enhanced speed in block creation and propagation of blocks to computing nodes of a blockchain network. A second area is related to consensus. This area includes techniques for more efficient consensus algorithms that solve speed and efficiency problems related to existing consensus algorithms, such as Proof of Work (PoW) and Proof of Stake (PoS). A third area is on the blockchain ecosystem level. This area includes performing efficient searches of a blockchain, integrating smart contracts with existing industries, and mechanisms for quickly and efficiently deploying computing nodes of a blockchain network.

As discussed above, the largely immutable and auditable nature of a blockchain can effectively facilitate the management of digital data and complex workflows. Therefore, the possibilities of new application and the opportunities for innovation abound. On the other hand, not every blockchain innovation is ready for patent protection. Some blockchain-based inventions will encounter difficulties meeting subject matter eligibility requirements and some will find difficulty being distinguished from existing technologies. Let us help you develop blockchain-based technologies to improve your products and services or identify and navigate any potential legal issues to ensure your blockchain inventions are being strongly protected.

Disclaimer: This article is purely a public resource of general information that is intended, but not guaranteed, to be correct and complete. It is not intended to be a source of solicitation or legal advice and is for informational and entertainment purposes only. The information is not intended to create, and receipt does not constitute, an attorney-client relationship. The laws of different jurisdictions may be implicated, and facts and circumstances can vary widely. Therefore, the reader should not rely or act upon any information in this article, but should instead seek legal counsel for individualized legal advice. For more information, please contact a firm attorney through www.hickmanbecker.com.

1 See, for example: https://www.ibm.com/blockchain/solutions/food-trust.
2 See, for example, https://www.vezt.co/.
3 See, for example, https://medicalchain.com/en/.
4 See, for example, https://www.agora.vote/.