Isn't Blockchain Illegal? And other questions............

It may come as no surprise that Blockchain specialists say this is one of their most frequently asked questions. Around six years ago Bitcoin, the cyber-currency founded on the back of Blockchain, first came to my attention. It all sounded very shady to me, and I ignored the opportunity.   If only I had known then what a phenomenon it was going to become.  Since then I've become less dismissive of new ideas, no matter how ‘dodgy’ they may appear at the time, and I have a new found respect for visionaries. 

I am sure all early adopters and innovators face the same challenge of convincing the unprepared to accept their visions.  Culturally, it is one of the biggest problems disruptors face.

And so it is with Blockchain.  Ask a room full of business people, as we have, how many are thinking about how to introduce this technology into their business.  You will get blank faces (unless of course, you are addressing a specialist audience).  Talk to your friends about Blockchain, and the easiest way to get any glimmer of recognition is to say “Have you heard of Bitcoin? Well, it’s the technology behind that.”

But before we go into the good and the bad of Blockchain,  let’s give a brief 101.

Blockchain 101

What is Blockchain?

It is a method of recording a transaction between two entities (people or organisations, for example) onto a distributed ledger that is almost impossible to modify fraudulently. 

What is the difference between Bitcoin and Blockchain?

Bitcoin is a peer-to-peer cyber-currency that can be used for secure transactions. Through encryption, the identity of the participants can remain secure and a secret.  It uses Blockchain technology to achieve this.

How does Blockchain work?

A package of data, or a block, is posted to the Blockchain and then distributed to hundreds or thousands of computers around the world.  It is not held in one place.  The computers agree between them what the updates to the information should be and each new "block" of information is added to the chain, and a "hash" is made of the new information and how it interacts with the existing blocks.  This is how the transaction data is protected.  It is impossible to change the data without everyone in the chain knowing about it because the hash will be wrong. This makes the transaction secure. 

What are the benefits of Blockchain?

The main direct benefits are security, accountability, trust and transparency.  Indirectly there are also significant savings to be made in time, money and processing power.

What can you use Blockchain for?

While many people still associate Blockchain mainly with cyber-currency, it can be used for recording anything - agreements, transactions, contracts or even certificates for diamonds.

A PUBLIC Blockchain can be used to transact between entities that don't know each other.  However, the transactions are public and slow

An ENTERPRISE Blockchain can be used to secure transactions between known partner entities; ensure that records remain a single version of transactions; remain in control of the Enterprise that uses it and is more efficient than a public Blockchain.

Isn't Blockchain illegal?

Getting back to our original question. Well no. As with many good things, it can be used for evil, and its use may go into dark places, but as a technology, it is completely neutral.

Because the identities of the parties can be hidden in the encryption, it is possible to use Blockchain technology to facilitate illicit or illegal activities.  For this reason, the Bitcoin has been used for both legal and illegal purposes.    Individuals can buy or sell over the internet using such cyber-currencies without leaving any trace of their actual identity. 

The most notorious use of the Bitcoin for illegal transactions was on Silk Road, where trade in drugs, fake IDs and stolen credit cards,  and many other more serious criminal activities took place.  Silk Road, was closed down in 2013. It is recognised that there is significant potential for criminal activity using bitcoins, but as of yet, large-scale criminal activity has not been identified.  This does not mean it is not happening.  It just hasn’t been identified.  In reality, although some call the Bitcoin the currency of choice for criminals, the Blockchain Alliance point out that Cash is still the predominant currency for illegal activities.

Recognising this potential, in 2015 law enforcement agencies in the US joined with Blockchain companies and organisations to form the Blockchain Alliance to combat criminal activity and make the Blockchain ecosystem more secure.

Using Blockchain for good

On a more positive note, at the end of 2016, the Blockchain Alliance for Good, was formed to more proactively stimulate ideas as to how this technology could be used for good social and environmental outcomes.

CIO of Save the Children (UK), and active contributor in PathFinder4, Karl Hoods, is a keen advocate of Blockchain and how it could benefit charities in regards to the transfer of money.   For example, the use of BitPay, with the waiving of fees, means that more of the net donations made this way get to the charity. Speaking to Hoods said: “The whole blockchain area and humanitarian blockchain is really interesting for me – how do we harness that across a global movement?” 

Karl Hoods will be speaking at the Becon Conference in London on 24th January on “Blockchain and Charities”. 

For those who are interested in how Blockchain can be used for good, there are many other interesting speakers at the Becon conference talking on subjects from logistics to music and government use of Blockchain.

PathFinder4 advocate Michael Reh, CEO of Enterprise Blockchain company - Tymlez (Germany) -  will be speaking about real life uses of Blockchain in industry.

PathFinder4’s Founder, Marc Dowd, will lead a CIO panel at the event discussing the future uses of Blockchain in Law, Insurance and other realms.

More details of the programme are here.

Contact us for more information on access to the Becon Conference for PathFinder4 Members and special guests.

And as for the other questions..............

There’s quite a few, and we can only answer so much in one article.  So we will be getting back to those in time.  One question at a time.

If you need to know more sooner, contact us. PathFinder4 members can connect and contract safely with known and trusted experts, advanced suppliers and start-ups in Blockchain and other emerging technologies.



Caroline WrightCaroline is PathFinder4's Marketing Director and Senior Lecturer at the University of Hertfordshire in Digital Business and Innovation.  She believes that progressive leaders play a key role in creating an abundant world, through innovative social and technological approaches.  Caroline has innovated at many corporates including BT, O2 and Epson UK.  



A good summary of Blockchain though I would add that the public Blockchain is hugely inefficient with severe performance limits and this is one of several drivers behind the development of private alternatives
Comment by Brendan Dunphy - 22 Jan 2017
Thanks Patrick. Yes it is interesting for disruptors. There is often a sweetspot where a new idea becomes an accepted idea. Get in too early and no-one will back you. Getting in at just the right time to be ahead of the curve is the trick.
Comment by Caroline - 20 Jan 2017
Nice article. Disruptors often face years of distrust and mockery before their idea breaks through the wall of innovators to early adoptors and on to early majority. A good idea also requires perseverence!
Comment by Patrick Miller - 20 Jan 2017
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