Four levels of blockchain technology and legal profession

As a new network information technology, blockchain has appeared frequently in our field of vision recently, becoming a hot word for innovation and development alongside cloud computing, big data, artificial intelligence, virtual reality, etc. Based on the brief review of the technical principles and development history of blockchain in my work "A Brief History of Blockchain Technology", this article will attempt to fully present the four levels of blockchain technology related to the legal profession, namely, blockchain as basic common sense for case handling, as evidence and identification standards, as the underlying technology of information systems, and as a new model of legal work.

1. Blockchain as basic knowledge in case handling

In the next three to five years, blockchain technology will be widely used in all aspects of production and life, and basic knowledge about blockchain will become common knowledge in our society. Therefore, understanding what blockchain is will become an essential skill like knowing English and being able to operate a computer today. Therefore, for legal professionals trying to gain a foothold in the fierce competition in the future, its importance is self-evident.

Some people think this is alarmist, blockchain is just one of many innovative technologies, there is no need to attach too much importance to it, but the potential of blockchain technology to create the "next generation Internet" is unquestionable. Once the time is ripe for technological evolution, the "信息互联网" can quickly evolve into the "价值互联网". When the cost of traditional fraud and evil rises sharply, the concepts of law-abiding and crime will become different: when blockchain enters the financial field, if SWIFT (Society for Worldwide Interbank Financial Telecommunication) does not change the current high-cost and low-efficiency situation, people will definitely seek cross-border settlement solutions created by blockchain; when blockchain is combined with the economy, it will create a real sharing economy that surpasses Uber and Airbnb, such as a private electricity sharing network; and when blockchain is combined with politics, it will enter a new realm. The issuance of legal digital currency based on blockchain will completely curb the abuse of central banks, and political elections based on blockchain will no longer have room for cheating... What will happen in that era, we cannot imagine specifically, but it is clear that it will be very different from now. The legal profession is of course also in the tide of history. The author can only do his best to provide some scene references about blockchain for current legal professionals:

1. For today's legal professionals, we must first understand that blockchain-based digital currencies (such as Bitcoin) are valuable, but they are not physical coins, but virtual currencies, and they are specific virtual digital currencies. A newspaper has reported a case where someone took out a metal "Bitcoin" and sold it on the street, and asked the buyer to check the online price of several thousand yuan each, claiming that they were in a hurry to sell it at a low price, and some greedy people were deceived; it is not enough to just understand that it is not a physical coin. Some fraud criminals will also use test coins (such as coins produced based on the Bitcoin test network) and private chain coins (such as coins generated by recompiling the Bitcoin program source code after changing a few parameters. Although it is also called "bitcoin", it is actually a copycat coin that looks similar in appearance) as commodities for sale. These fraudulent methods are exactly the same as those used to sell physical coins, and they all deceive victims who have only a superficial understanding of new things.

2. Secondly, blockchain and digital currency are likely to become props for new crimes.匿名性of digital currency will facilitate traditional crimes, such as underground network transactions like the "Silk Road", smuggling, and money laundering; the technical characteristics of digital currency can easily become a bluff for pyramid schemes. In March this year, the "Darkcoin" fraud case handled by Xuzhou Quanshan Court was a pyramid scheme in the name of Darkcoin, and had nothing to do with the real Darkcoin; the value transmission function of blockchain makes it common for thefts to use public facilities or technical means to steal other people's computing resources for "mining" and obtain digital currency benefits. For example, in 2014, the media revealed that an American scholar used a scientific research supercomputer to mine privately. In 2013, the author also saw a technician from a government computer room posting in English on the bitcointalk forum, asking for an ordinary appearance. The computer room is actually a construction plan for Bitcoin mining machines. In addition, various mining Trojans implanted in web pages and software will quietly steal users' computer resources for mining. Recently, Xunlei's "Kankan Video" is such a case. It will secretly mine Ethereum on computers with the program installed. In addition, it takes advantage of most people's lack of understanding of technology and spreads rumors. Although the technology is indeed poor, some people are "outside the poem" and use short-term market panic to short the currency price and manipulate the market to make huge profits. Since blockchain protocols and smart contracts are relatively complex codes, people cannot understand them all by their own abilities and can only trust technical experts. Some people don't even read them at all and blindly follow the instructions of technical experts. Once the technical experts have bad intentions, it is really easy to do evil (although the theft of The DAO was not caused by technical experts, it was because the technical experts neglected to leave loopholes in the program that were exploited by hackers, and most of the investors who participated in the ICO could not understand the code at all). Blockchain and digital currency are a double-edged sword. Legal professionals must have a pair of wise eyes to distinguish right from wrong.

3. Again, we must know that the autonomy of blockchain is only its own autonomy, and security also has prerequisites. Many people who first come into contact with blockchain will wonder, since blockchain is said to be absolutely secure in a certain sense, why does the theft of digital currency still happen? Because security is based on the public-private key encryption system, and if the private key stored in the computer is not well kept, it is like you lose the key to the door lock, then no matter how strong the anti-theft door is, it can't stop the thief from unlocking it! Similarly, if you deposit digital currency in an exchange (or some "light wallet"), what you hold in the exchange's online system is just a number, and the real currency is stored in the digital wallet held by the exchange. If one day the exchange runs away with the wallet, your number in the trading system will have no meaning.

4. Finally, it should be noted that blockchain is a technology that allows value flow to be very flexible and value to be very deep. When law enforcement officers conduct a search, they may find a wallet file containing digital currency (equivalent to a private key) in the suspect's computer. At this time, on the one hand, we must be wary of the flexibility of its value flow. Perhaps his accomplices have copied the same wallet file somewhere else, thereby transferring the balance in his account; on the other hand, we must pay attention to the value hidden under the simple appearance of its digital currency. For example, 0.01 Bitcoin may only be worth a few dozen yuan, but it may be a "colored coin". Pay attention to its OP_RETURN or other accompanying information. Perhaps holding it means owning a villa or luxury car worth millions (smart assets), or shares of a company (smart equity); or it is based on a multi-signature (multisig) transaction, behind which may be some conditional, time-limited contracts and complex rights, such as intermediary guarantees, shared property, or the right to inherit a certain inheritance.

In his book "Blockchain Society", Professor Gong Ming described a scenario where a hacker deployed a smart contract on the blockchain network, offering a reward for murdering someone. When the killer kills the target person, the bounty is automatically transferred to the killer's account. If such a thing really happens one day, due to the anonymity of blockchain accounts, it will be difficult for the police to track down the true identity of the person offering the bounty and the killer. This will undoubtedly bring new challenges to the law, evidence, legislation and even legal theory. Before that, it is necessary to popularize basic knowledge of blockchain among legal professionals.

2. Blockchain as a standard of evidence and identification

Usually, we use "natural evidence", "anonymous", "unchangeable", "avoiding double spending", "decentralization" and so on to describe the characteristics of blockchain and digital currency. So, is the data stored on the blockchain authentic and reliable? Is it absolutely unchangeable and transactions absolutely impossible to "double spend"? After understanding the technical principles of blockchain, we know that all this is only relative. Blockchain data, like ordinary electronic evidence, needs to pass a set of strict identification standards to be screened before the data is qualified to become court evidence.

1. First of all, when we say that blockchain has the characteristic of "natural evidence storage", we are referring to the authenticity of the data on the chain. However, whether the data on the chain (bit world) corresponds to the real objective things (atomic world) and how accurate the correspondence is is not a guarantee that blockchain technology can provide. Therefore, when future appraisers make "appraisal opinions" on blockchain data, they can only describe the situation in the bit world, and cannot express opinions on the situation in the atomic world. For example, if A made a deposit on the blockchain on September 10, the appraiser cannot conclude that A is the inventor of the patent, but can only say that A stored the patent information on the blockchain on September 10. As for whether A is the patent owner, it still needs to be judged by the court in combination with other evidence.

2. Secondly, the "anonymity" of blockchain is not absolute. If expressed in English words, it is only pseudonymous , not anonymous . The former refers to the concealment of using pseudonyms instead of real names, while the latter is the real complete concealment. For example, when we use Bitcoin wallets, we see addresses similar to 1MGP1ZNBkxpcgLf2zF6WK48Nd8owfkoEFU. This is the user's pseudonym. The reason why it is not truly anonymous is that someone can still trace the source and find its owner through a series of actions such as transfers and transactions at the account address, or at least analyze some significant features of its owner in order to narrow the scope of the search (like the early Baidu Tieba, you can post without registering or even filling in a username. If you don't consider the record of the IP address, it is considered a real anonymity). In fact, on the one hand, there are already many projects working on KYC (Know Your Customer), especially some digital currency exchanges need to meet the compliance conditions of local policies and need to do big data analysis on transactions on the blockchain (there is reason to believe that there must be countless monitoring programs that are always watching the huge amount of Bitcoin in Satoshi Nakamoto's account. Once there is any movement, the true identity of this god can be discovered through its clues); on the other hand, it is precisely because blockchain accounts cannot be truly anonymous that entrepreneurial projects around "mixing coins" or "washing coins" are booming. Therefore, when the appraiser faces a pile of digital assets, it is not a responsible approach to directly draw the conclusion that they cannot be found based on the anonymous characteristics of the blockchain. Instead, they can circle out the characteristics of the beneficiaries and define the approximate search scope through a series of relationship deductions.

3. Again, we should look at "immutability" and "avoiding double spending" objectively. "51% attack" uses enough computing power (not the number of nodes) to make a new chain replace the old chain at a past fork point and become the main chain recognized by the whole network, so that the data after the fork point becomes invalid, thus realizing the reversal and change of blockchain data. For the Bitcoin network, because the computing power is already frighteningly large, "51% attack" is only a theoretical possibility. However, on the one hand, the security of the blockchain network is only a probabilistic security. Even if the computing power is less than 51%, there is still a certain probability that the established blockchain status can be changed; on the other hand, if the data is stored on other blockchains that use the POW mechanism but the computing power is not large enough, or it is based on the POS mechanism but the algorithm may have unknown vulnerabilities, whether the data is safe, reliable, and irreversible needs to be questioned. If a "51% attack" succeeds, it may lead to the problem of "double spending". Even if it is not a "51% attack", using the same transaction ID (txid) to construct and broadcast two transactions at the same time, sending the same amount of money twice at the same time, combined with some sophisticated lies and a time difference, can also achieve the purpose of deception, because in the end only one of the transactions will be confirmed, and the other will not. Faced with these complex situations, the appraisers need to treat each case specifically, rather than drawing conclusions based on the characteristics of a few words described in the language.

4. Finally, the biggest feature of blockchain is “去中心化”, but it does not mean that blockchain applications no longer need centralized facilities such as traditional servers. If you have tried to develop blockchain applications, you will know that the capacity of blockchain is very limited, whether it is storage capacity or computing power. We can only put the most core data and the calculation formulas that need to be trusted by multiple parties on the blockchain. As for relatively less important data and calculation processes, we can only consider the cost and operation efficiency comprehensively and put them on traditional centralized servers. Just like a proof system, if we want to prove the existence of a commercial contract document, the normal practice is to only store the hash value of the file in the blockchain, and the contract document may still be stored on the server in the traditional way. Developers will automatically connect the blockchain storage with the application module on the server. The data stored on the blockchain may be a JSON string. Due to limited storage space, this JSON may be: {"Zhang San":"20","Li Si":"30","Wang Wu":"50"}. When the application module reads it, it will understand its meaning according to the established program. However, since the application module is on a traditional centralized server, whether these numbers are understood as actual units or percentages is not something that the blockchain can control. The current blockchain application cannot be completely decentralized. When faced with specific codes, the appraisers must analyze every possibility and must not ignore possible vulnerabilities because it is a blockchain and has decentralized characteristics.

As legal professionals, we cannot blindly follow what others say like ordinary people, because the carnival based on "big words" often blinds our eyes. Only by studying hard and delving into the necessary new knowledge and technologies and maintaining a clear and independent mind can we see the truth and essence of things. This is why we regard blockchain as a kind of evidence and identification standard.

3. Blockchain as the underlying technology of information system

In my opinion, the most important reason why blockchain technology has been widely favored by all sectors of society is that it is a reliable underlying technology that can be widely used in all walks of life, and the legal field is no exception: as an underlying technology, blockchain can be used to enhance the security of existing information systems, improve the efficiency of existing judicial work, and promote changes in existing legislative concepts.

1. First of all, blockchain technology provides security for data, making information systems transparent and reliable. Developers can use blockchain technology to write the core data of the information system directly to the blockchain. Non-core data can also be reinforced by anchoring the hash value of the file on the blockchain. This is equivalent to adding a lock to the data. Before running the program, check whether the data is correct. If it is not correct, refuse to execute, thereby avoiding the possibility of "insiders" or hackers tampering with the data. This security measure is used in legal information systems, such as: judges and prosecutors' case handling software, which can faithfully record the case handling situation and cannot be tampered with, which helps to implement the lifelong responsibility system for case handling promoted by this round of judicial reform.

2. Secondly, the blockchain network can be used to improve the efficiency of existing judicial work. We know that the blockchain network combines the consensus mechanism with the public-private key system, and has been sought after by researchers of the Internet of Things (IoT), who believe that blockchain will be a new type of high-efficiency IoT protocol. Taking the "Internet of Vehicles" as an example, the traditional Internet of Vehicles cannot solve the network instability caused by factors such as the number of unspecified online users and unspecified mobile destinations. However, the blockchain network protocol can achieve good fault tolerance with the help of the "consensus mechanism" when the node status is unstable, and then accurately deliver the encrypted message through "broadcast" (the sender encrypts the message with the public key, broadcasts it to the entire network, and all nodes can receive it, but only the recipient with the private key can decrypt it and see the plain text content of the message). Nowadays, "delivery" in civil and commercial legal procedures has always been a difficult problem. The defendants in some cases are often relatively clear, but they do not meet the clear requirements of legislation (people are mobile, and the court does not have so much time and manpower to help the parties find a defendant who has no fixed residence and irregular movements), so the first procedure of many cases encounters obstacles. If one day in the future, each of our mobile phones or other terminals is a node in the blockchain network, then the court can broadcast the information of the delivery of legal documents on the blockchain network. The information is encrypted by the defendant's public key (such as name, ID number), and all nodes in the entire network can receive this information. However, this information is meaningful only to the defendant himself, because only he can decrypt and see the plain text content through the private key. This can solve the current difficulties encountered in "delivery".

3. Thirdly, the use of blockchain can realize the rich expression of legal rights, thereby promoting the development of existing legislation. In the past, legal rights (such as my ownership of an item) were relatively static and ironclad. Even if they were distinguished, the boundaries of behavior and power were relatively clear (such as possession, use, income, and disposal). However, nowadays, with the rapid development of the economy and society, especially the germination and outbreak of the sharing economy, the legal rights of the right holders may change dramatically, and the ever-changing legal relations will also make the boundaries between powers unclear. This is the fundamental reason why the current legislation seems to be stretched when adjusting the legal relations of new things such as "Didi Taxi" and "Internet Finance". We need to use modern scientific and technological means to express the legal rights we have in real time and from multiple angles. This is not something that traditional text legislation and physical judges can do. It requires a set of precisely designed software programs. However, software programs may have backdoors and may be tampered with by human forces. Therefore, when traditional legislation and judicial power cannot leave some authoritative gaps, it is necessary to establish a new authority building based on the naturally decentralized and trustworthy blockchain technology. When new technologies give birth to new economic markets, the legal community will of course need to use new technologies such as blockchain to construct an order that is sufficient to regulate the new society. Traditional textual legislation is certainly necessary, but in the world of bits, the power of code is more effective. Coded legislation will be an extension of textual legislation, and code will be the presentation of legal force in the world of bits (Code as Law, so Code is Law).

Applying blockchain technology to the underlying layer of information systems not only brings about security reinforcement, efficiency improvement and cost reduction effects, but also after integrating many characteristics such as "decentralization", "consensus mechanism", "public and private key system" into specific legal scenarios, it can make the world different based on "minimized trust" and allow legal professionals to do things that were originally impossible or difficult to do.

4. Blockchain as a new model for legal work

If blockchain is only regarded as a technology, it is at most the icing on the cake of existing things. In fact, if the potential of blockchain is fully released, it will bring a rebirth to the model of legal-related work and make everyone amazed at the magical power contained in blockchain.

1. First of all, the natural evidence storage characteristics of blockchain make confidentiality and disclosure in legal work perfectly compatible. Take the procuratorate as an example. According to the regulations on public disclosure of procuratorial affairs, case information including the progress of case procedures must be disclosed in a timely manner. However, if some major sensitive cases are disclosed, it may cause a devastating blow to subsequent work. For example, after a case of suspected duty-related crimes of a certain leader is filed, the information is disclosed in a timely manner. Even if the name, position and other important contents have been hidden, people with ulterior motives can still judge who the suspect is through other features. This will inevitably arouse the vigilance of related persons, and then take measures in advance to destroy evidence or collude with confessions. Therefore, in the current actual work, it is difficult to achieve both public disclosure of procuratorial affairs and confidentiality of investigations, and some trade-offs must be made (hiding some content has made the disclosure of information neither fish nor fowl. If all features are completely hidden, people cannot distinguish and guess, then the disclosure will be meaningless). If blockchain is used, the procuratorate will release case information in a timely manner at various time points in the case process, but the specific content will not be announced to the public. It will only store the hash value of the content on the blockchain. After a period of time, the case content will be desensitized, and the timestamp recorded on the blockchain will be used to prove that the procuratorate handled the case strictly in accordance with the legal procedures at the time (here, we have to go back to the original intention of publicizing procuratorial work, which is to allow the people to supervise the procuratorate in handling cases according to the law and establish judicial credibility. The author believes that the best policy is to use advanced scientific and technological concepts and technical means to achieve the goal without interfering with normal work).

2. Secondly, the "public ledger" feature of blockchain provides the possibility of a "unified platform for legal work". We know that, taking criminal cases as an example, the public security organs investigate-the procuratorate prosecutes-the court judges-the judicial administrative organs execute (in some cases, such as the sentence of probation), the process is long and there are many nodes, but even in the 21st century with advanced information technology, even if they all belong to state organs, the procedural connection between them is still mostly paper-to-paper, not information flow. If we consider the broader scope of civil and commercial cases, we will find that lawyers, corporate legal affairs, community legal services, and judicial appraisal institutions are even more information islands. Some people attribute the causes of these information islands to "lack of leadership" or "departmental interest protection", but the author believes that the fundamental reason is the lack of trust between each other, and they are all afraid of losing out, so they cannot reach a basic "consensus" on the flow of data information. With the "public ledger" feature of blockchain, in theory, we no longer need a "leading unit" or even traditional meetings and negotiations. Instead, a "consortium chain" is initiated by a certain party, such as the procuratorate, and then responsible for the interface specifications and data exchange strategies for upstream and downstream (public security, courts), and then waiting for "joining". Here, the endorsement of the "leading unit" is no longer needed, because the blockchain protocol is a guarantee of fairness, and no one will suffer a loss, and of course no one can take advantage. There is no need for repeated joint negotiations, because the scope of "bargaining" is written in the program. If you want to get the dividends brought by data circulation, just dock in according to the technical specifications, and the program will automatically select the best and most matching strategy. The consensus at the bottom of the technology avoids the consumption of communication between people, so we have reason to expect that in the near future, there will be a "legal work unified platform" composed of various "nodes" such as public security, procuratorate, court, and even community, enterprise, law firm, judicial appraisal agency, notary agency, etc., to achieve a complete closed loop of efficient, low-cost, fair and secure legal big data production, circulation and sharing.

3. Again, deploying smart contracts on the blockchain will become the norm for law enforcement. Just a few days ago, Barclays Bank of the United Kingdom used the blockchain platform developed by Wave to achieve the world's first cross-border settlement. This $100,000 trade payment would take 7-10 days with a traditional letter of credit, but less than 4 hours with blockchain. In fact, in addition to being used for trade settlement, many application models have been mentioned in articles about blockchain, and these models have a common feature, that is, they have built-in judgment and execution functions. In future trade, the essence of the contract signed by both parties will be to use private keys for technical signatures, and the signed contract will be a "smart contract". In general, you can find a smart contract template on the Internet (perhaps scan the QR code next to a certain article in the Civil Code, and the code of the corresponding contract template will be obtained). If the transaction is more complicated, you can find a professional lawyer to improve it based on the template, and of course it can also be customized (today's lawyers write contracts in words, and future lawyers will also need to write contracts in code). When the smart contract is deployed to the blockchain network, the next thing to do is to fulfill the contract. There are some purely bit-world contents (such as digital currency settlement and online game equipment transactions) that can be directly executed by the blockchain network. There are some contents connected to IoT devices (such as electricity distribution and vehicle rental) that can also be automatically executed by the blockchain network. However, there are some contents that are not so easy to control (such as the delivery of creative workload) that still rely on the parties’ voluntary performance of the contract. If the parties fail to perform as required (whether the performance is in accordance with the requirements, the smart contract will make a judgment based on the previous contract agreement, so it has its own judgment function), the blockchain network can impose penalties (the assets of the parties will also be on the chain, and the smart contract will automatically deduct penalties, so it has its own execution function).

Using technology to replace traditional paper codes and code to replace text is the trend of the future, so Professor Lawrence Lessig shouted " Code is Law " more than ten years ago. Today, the increasing maturity of blockchain technology has only accelerated the progress of this evolution. Legal professionals, whether in legislation or law enforcement and justice, inevitably have to master the ability to understand programs and use code to express themselves. This is an urgent need. Applying the most popular "cross-border" thinking in the current entrepreneurial circle: it will not be another group of legal professionals who will subvert the legal profession, but it is likely to be a group of programmers, because when the professional knowledge that traditional legal professionals are proud of has been efficiently realized by algorithms, and when complicated legal arguments have become common sense like "the sun will rise from the east" in the world of machines, the space for traditional legal skills will become smaller and smaller. According to the author's understanding, in the United States and the United Kingdom, in Shanghai and Shenzhen, some lawyers in the fields of finance and international trade, due to their professional characteristics, were the first to see the trend of new technologies such as blockchain, and have begun systematic learning and training on programming skills. In contrast, if you can finish reading this article, I believe you can also catch the early train of this era.