- Ledger book, by edinburghcityofprint on Flickr
What we learned about the blockchain
..bitcoin implements a trust model of trust by computation. Trust in the network is ensured by requiring participants to demonstrate proof-of-work, by solving a computationally difficult problem. The cumulative computing power of thousands of participants, accumulated over time in a chain of increasing-difficulty proofs, ensures that no actor or even collection of actors can cheat, as they lack the computation to override the trust. As proof-of-work accumulates on the chain of highest difficulty (the blockchain), it becomes harder and harder to dispute. In bitcoin, a new proof-of-work is added every 10 minutes, with each subsequent proof making it exponentially more difficult to invalidate the previous results.
Here’s the most important effect of this new trust model of trust-by-computation: no one actor is trusted, and no one needs to be trusted. There is no central authority or trusted third party in a distributed consensus network. That fact opens up a completely new network model, as the network no longer needs to be closed, access-controlled or encrypted. Trust does not depend on excluding bad actors, as they cannot “fake” trust. They cannot pretend to be the trusted party, as there is none. They cannot steal the central keys as there are none. They cannot pull the levers of control at the core of the system, as there is no core and no levers of control.
Applications for blockchain
We were introduced to Ethereum. This is a public blockchain platform with programmable transaction functionality. It provides a decentralized virtual machine that can execute peer-to-peer contracts using a crypto asset (similar to a crypto currency like Bitcoin) called Ether. These smart contracts can negotiate rights, payments and the performance of services automatically.
Recordkeeping and the blockchain – key themes
We learned that while recordkeeping has a role to play in authentication, its critical value in the blockchain will be in the facilitating the management of data and process.
Blockchain generates and keeps metadata about people, rules and transactions. These are the records of blockchain. They may be supported by documents or other information that exist outside the chain, but the metadata is the core record and it will need management. So clearly the recordkeeping processes of appraisal, preservation and accessibility have a core role to play in the blockchain.
With distributed models, storage limitations and very long chains of replicated data, we will need capacity to for the implementation of appraisal requirements will need to be programmatically assigned and deployed. The development of these appraisal models and ensuring their deployment and automated application is a key issue that our profession can engage with.
We also need to be engaged in the definition of blockchain recordkeeping itself. In the design and evolution of smart contracts, where is recordkeeping required and how can it be deployed? If a contract operated this way today and another way tomorrow, how can recordkeeping best support this evolution so all parties in the contract are appropriately protected?
Some contracts will represent very significant transactions, the legal accountabilities and complexities of which will mean they need to be kept as records for long periods of time and maintain their accessibility over this time.
Real world challenges like maintaining the context around contact performance will be important too. Was there communication between the participants, attempts to negotiate or reschedule? Transactions occurring outside of the chain could impact on the performance of in-chain transactions and well designed recordkeeping can be a mechanism for building these connections.
A limitation that was identified is that recordkeepers are still often perceived as document managers or the custodians of superseded data. If we don’t have an active role in the design and management of the metadata- based records that will exist in applications like the blockchain however, data retention and management in the blockchain runs the risk of being subject to the same form of challenges that we see in other business systems today
So we still need to actively communicate that the knowledge of transaction, processes and accountability built by the recordkeeping profession over thousands of years, still has critical relevance.
By moving critical records such as registers and contracts to the blockchain, we are rewriting these transactions and these records. So much can be enabled through this transition, but we also want to ensure that nothing is lost. Key rights and entitlements are tied into this transition.
Lots of questions!
- In the blockchain we are separating data and metadata. How can we ensure the persistence of their bond where required?
- Registers and contracts have very long retention requirements and high levels of public interest. How do we ensure public accessibility where appropriate, or regulatory scrutiny where required?
- When will we get to a state of greater availability of appropriate encryption methods for those interested in recording transactions on the blockchain?
- What needs to occur to achieve legally acceptable and admissible smart contracts?
- How can we use blockchain based identity management to enable greater personal control over personal information?
Again, many thanks to our speakers and everyone who attended. We hope that events like this and others will spur more recordkeepers to engage with this game-changing technology and contribute their knowledge and expertise to its adoption in society.
Report by Kate Cumming and Cassie Findlay