Except for those folks living under rocks (sounds uncomfortable), everyone knows about or at least has heard of bitcoin. However, not everyone understands the technology of bitcoin, which extends well beyond Internet-based currency.
For the rock people, bitcoin is an Internet-based currency that allows for transparency with respect to each transfer of the currency through the use of a distributed database. Each transaction is locked in a block, and blocks are connected to form a “blockchain.”
What Is Blockchain?
Blockchain is an open source technology that facilitates creating each block, locking each block, and connecting the resulting string of blocks. Because it is a write-only database that never can be edited or deleted, the blockchain gives integrity to the complete history of the transaction.
For example, if we purchase a new tablet online using bitcoin, the seller wants certainty that the purchaser actually owns the bitcoins used to purchase the tablet. Also, the seller wants to be certain that the bitcoins have not already been spent by the purchaser for other goods.
The blockchain shows the ownership history of the bitcoins used before the purchase of the tablet. As a result, blockchain makes it difficult for a dishonest person to break the law by stealing some else’s data.
We are now entering a time when blockchain is expanding to wider, nonmonetary activities — at least since earlier this year, when the U.S. Food and Drug Administration signed an agreement with IBM to explore Watson, famous from Jeopardy!, and blockchain to protect electronic health records.
As a matter of fact, the use of Watson’s artificial intelligence recently has expanded beyond the FDA deal to other important areas. For instance, IBM earlier this year began offering Watson/Blockchain as a Service, so we likely will see even more AI interfacing with blockchain.
Where Are We With AI?
AI is hardly new — it has been a part of the IT world for about 50 years. However, it was not until 2011 — when Watson became a public success in on Jeopardy! — that most people began to understand AI as more than just something from a science fiction novel.
Today, one only has to acknowledge the recent and extensive media coverage of driverless cars to realize just how ubiquitous AI has become.
Back in 1955, James McCarthy of Dartmouth College and a team of researchers defined AI as follows:
“… the conjecture that every aspect of learning or any other feature of intelligence can in principle be so precisely described that a machine can be made to simulate it. An attempt will be made to find how to make machines use language, form abstractions and concepts, solve kinds of problems now reserved for humans, and improve themselves.”
The process of self-improving computers, AI, or machine learning has an inherent legal risk if the process violates a law in one or more countries.
For example, if an AI system learns that it is acceptable to alter true facts (for the rock people, we are referring to “lying”), what is to stop it from altering something like a financial report made to the SEC to make a company look profitable, when in fact it is not, or a contract for the sale of the Brooklyn Bridge in New York as being executed by the true owner of the property?
Follow the Data Trail
Combining AI with blockchain allows for the secure, transparent review of data that is changed or moved over time, giving both the buyer and seller confidence in the validity, title and transfer of that bridge in Brooklyn.
The Federal Trade Commission last year issued report entitled “Big Data: A Tool for Inclusion or Exclusion?” The report focuses on privacy for citizens, since many companies rely on big data for AI to provide help with strategic business decisions without understanding the validity of the data.
The use of big data has distinct concerns for electronic medical records. The Federal Trade Commission earlier this year held its third FinTech Forum, which included a discussion about blockchain payment systems and smart contracts to ensure consumer protection.
Blockchain and Electronic Medical Records
The FDA agreement with IBM/Watson “will explore the exchange of owner-mediated data from several sources, such as electronic medical records, clinical trials, genomic data, and health data from mobile devices, wearables and the Internet of Things.”
Initially, the project will explore the use of blockchain to share oncology-related patient data for research.
As the use of EMRs has expanded, the quantity of data has exploded. The mass of medical data tied to an individual gives medial researchers and professionals a complete view of the individual. The data, though, must be accurate and complete. Blockchain technologies keep an unalterable audit trail of all the medical data.
As the use of blockchain expands, it is reasonable to see its use not only in medical research, but in real and intellectual property transactions, contracting and auditable file storage.
Arizona Adopts Blockchain Laws!
Arizona recently recognized blockchain as legal, when the governor signed HB2417 into law. Among its provisions:
- A signature that is secured through blockchain technology is considered to be in an electronic form and to be an electronic signature.
- A record or contract that is secured through blockchain technology is considered to be in an electronic form and to be an electronic record.
- Smart contracts may exist in commerce. A contract relating to a transaction may not be denied legal effect, validity or enforceability solely because that contract contains a smart contract term.
As more states adopt laws recognizing the legality of blockchain, more lawyers will need a full understanding of this disruptive technology.
Peter Vogel has been an ECT News Network columnist since 2010. His focus is on technology and the law. Vogel is a partner at Gardere Wynne Sewell, and Chair of its Internet, eCommerce & Technology Team. He tries lawsuits and negotiates contracts dealing with IT and the Internet. Before practicing law, he received a master’s in computer science and was a mainframe programmer. His blog covers IT and Internet topics. Email Peter.
Eric Levy has been an ECT News Network columnist since 2017. His focus is on compliance, privacy and data security. Levy is a senior attorney at Gardere Wynne Sewell, where he assists clients with HIPAA, FERPA and Gramm-Leach-Bliley compliance, and with responses to data intrusions and breaches.
Eddie Block has been an ECT News Network columnist since 2017. His focus is on information security and data privacy. Block is a senior attorney at Gardere Wynne Sewell. Before practicing law, he spent 20 years as an information security professional in a variety of roles, from network security management to chief information security officer for the State of Texas. His
blog covers information security and data privacy topics.
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