Column

The Need for Blockchain Evidence Legislation

Nobody wanted to die. The life extension project raised millions with names of famous scientists and promises of ground-breaking research. Trustees earmarked the bulk of the money as a prize to the first researcher who solved the telomerase enzyme problem.

On the morning of January 2, 2020, two independent groups announced successful telomerase enhancement formulas. One was from Atlanta, and the other one from Singapore. The group that proved it was the first to record the formula would get $50 million to continue its research. Peer-reviewed publication was not relevant as both completed it at the same time. The only factor the trustees considered was who reduced the formula to writing first.

By 2020, the bitcoin blockchain was widely used as the most reliable proof of publication of anything. How? Remember that a true blockchain is like putting a classified in the New York Times in the 80s. Once it’s out, you can’t take it back. Also, if you published a classified on Monday and then a correction with a reference to the Monday ad on Tuesday, that would be conclusive proof that you corrected your ad. Back in the day, once in the hands of millions of readers, the New York Times was a powerful decentralized proof-of-publication platform.

Today, the bitcoin blockchain works in the same way. Every transaction you post on the blockchain has a small field for arbitrary text. It’s too small for a classified or even for a tweet but it’s big enough to fit a hash.

What is a hash?

Every electronic document—a word file, a pdf, an email, an audio recording, an image—has a unique signature known as a hash. If you have a hash and an electronic file, you can easily verify that the hash belongs to the file. (The hash is not part of the file but rather a fixed string that software can compute once you feed the file to it. All hashes are the same length regardless of the size of the file they represent.)

There is not enough room in a blockchain transaction to fit the winning formula from the imaginary competition I started this essay with. But there is definitely enough room to fit its hash.

The two groups of scientists would have to follow the following steps to stake their precedence of publication:

  1. Reduce the formula to an electronic record.
  2. Generate the hash of the record.
  3. Create a bitcoin transaction record.
  4. Add the hash to the appropriate field of the transaction record.
  5. Post the transaction to the bitcoin network.

The network will add the transaction to a block and add the block to the blockchain on thousands of copies of the blockchain spread across the world like a New York Times issue in 1984.

Every bitcoin transaction is timestamped so the precedence of publication will be self-evident. But even if there were no timestamps, the chain will show which link comes first.

This is a rough picture of how you prove precedence of publication with the bitcoin blockchain. Imagine the possibilities: protecting knowledge from bogus IP claims, catching bad contractors, tracking product quality and so on.

The problem is that this proof of precedence is only proof by the authority of logic, common sense, and some technical knowledge of blockchain. This is not proof, without more, by the standard of law—in particular because technical knowledge is involved and because no one owns the bitcoin blockchain.

Sometimes, when you need technical knowledge to draw conclusions from facts the court will expect a properly qualified expert to help the court. This is an expensive and unpredictable exercise. Also, in general, the classic legal proof requires a witness, which is also expensive and unpredictable.

Legislatures have sometimes intervened and streamlined evidence standards in some limited cases of public importance. For example, a business record exception allows you to put business records into evidence not through a witness who actually created the record but through a corporate representative who can show that the record was created in the ordinary course of business. This is an exception to the normal hearsay rule.

Another exception is official or public records and certificates. (You may or may not have these exceptions in your jurisdiction—there is no legal advice in this essay.)

So when a certain type of records is a common, well-understood and essential part of life in a society, and the public has an interest in a streamlined, single, and reliable approach to admitting this type of records into evidence in court, the legislature will sometimes create an exception for these records, and usually from the hearsay rule.

Imagine having to argue a hearsay exception for invoices or tracking down the long departed invoice clerk in every case. Most cases don’t turn on authenticity of invoices anyway and the cost of conventional proof of records is sometimes prohibitive. I am not even talking about the array of different results in different hearsay cases heard by different judges. There is a good reason for legislative evidence shortcuts.

The business record exception is probably not helpful in proving the effect of bitcoin transactions and their contents because no one owns or control the bitcoin network so no one can speak for it. (Although lawyers have been known to stretch things.)

But there is probably no two opinions about the internal workings of predominant blockchains such as bitcoin and ethereum. Why force litigants to prove the mechanics every time or search for the non-existent custodian of the blockchain?

Include the basic facts I set out above in a compact blockchain admissibility code and add it to your jurisdiction’s evidence statute. You will unlock a gold mine of unprecedented business applications of blockchain and earn a cutting-edge technology reputation for your jurisdiction. Just follow these two guidelines:

  1. Not all blockchains are created equal. Yes, name the specific blockchain in the statute or its regulations. It should be a sufficiently common, public, and decentralized protocol. At the very minimum name the bitcoin blockchain.
  2. In addition to prohibiting the requirement for expert evidence to prove blockchain transactions, create a hearsay exception for the named blockchain akin to a public registry or certificate exception.

Private blockchain litigation is coming. Legislatures should act now rather than wait for parties with different budgets, judges, facts, and lawyers work out their own unreconcilable standards.

Start the discussion!

Leave a Reply

(Your email address will not be published or distributed)