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Blockchain, Business Supply Chains, Sustainability, and Law: The Future of Governance, Legal Frameworks, and Lawyers?

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Abstract

Blockchain technology has been hailed as the next disruptive leap forward in data sciences. Most legal scholarship related to the topic has focused on its relevance to finance, but it could revolutionize business supply chains. Specifically, blockchain-enabled solutions are expected to improve the reliability of data related to supply chains and to help businesses eliminate fraud, inefficiencies, waste, and harms to people and the environment. Despite the surrounding hype, this paper will explain why the promise of distributed electronic ledgers will only be realized in the context of effective governance and legal frameworks. This paper draws upon scholarly articles and the opinions of entrepreneurs actively engaged in bringing blockchain-enabled technologies to market to arrive at two sets of related conclusions. First, that the benefits of the technology (including its potential to help businesses prosper while eliminating societal and environmental harms) will only be realized in the context of enabling frameworks of law. Second, the author articulates how the role of the legal profession vis-à-vis business clients will evolve in the era of blockchain-enabled business supply chain optimization.
BLOCKCHAIN, BUSINESS SUPPLY CHAINS, SUSTAINABILITY, AND LAW:
THE FUTURE OF GOVERNANCE, LEGAL FRAMEWORKS, AND LAWYERS?
ADAM SULKOWSKI*
ABSTRACT
Blockchain technology has been hailed as the next disruptive leap
forward in data sciences. Most legal scholarship related to the topic has
focused on its relevance to finance, but it could revolutionize business
supply chains. Specifically, blockchain-enabled solutions are expected to
improve the reliability of data related to supply chains and to help
businesses eliminate fraud, inefficiencies, waste, and harms to people and
the environment.
Despite the surrounding hype, this paper will explain why the
promise of distributed electronic ledgers will only be realized in the
context of effective governance and legal frameworks. This paper draws
upon scholarly articles and the opinions of entrepreneurs actively engaged
in bringing blockchain-enabled technologies to market to arrive at two sets
of related conclusions. First, that the benefits of the technology (including
its potential to help businesses prosper while eliminating societal and
environmental harms) will only be realized in the context of enabling
frameworks of law. Second, the author articulates how the role of the legal
profession vis-à-vis business clients will evolve in the era of blockchain-
enabled business supply chain optimization.
* The author would like to thank the following individuals for their insights and helpful
commentary on earlier drafts: Charlotte Alexander, Robert Bird, Ian Gauci, Steven Gordon, Kai-
Lung Hui, Julie Magid, Miko Matsumura, Donald Mayer, Ross Petty, Carla Reyes, Alexandros
Seretakis, Tatjana Solodnovnikova, Robert Sprague, Lawrence Trautman, and Aaron Wright.
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TABLE OF CONTENTS
INTRODUCTION ........................................................................................................ 305
I. BLOCKCHAIN BASICS ......................................................................... 308
II. BLOCKCHAINS POTENTIAL ............................................................. 310
A. Supply Chain Optimization and Sustainability ........... 311
B. Potential for Sustainability Reporting ......................... 315
III. REASONS TO TEMPER EXPECTATIONS OF BLOCKCHAIN ........ 319
A. Unhackable Like the Titanic was Unsinkable, and Even
Less Green? ................................................................ 319
B. Who Generates the Original Record? ......................... 322
C. Self-Executing is Not the Same as Self-Enforcing ..... 323
D. Certifications Only Matter if Someone Cares ............. 324
E. Humans—Our Mindsets and Goals-Are Still the Key
.................................................................................... 325
IV. WILL LAWYERS AND LEGAL FRAMEWORKS REALLY BE
RENDERED OBSOLETE? ........................................................ 326
A. Rumors of the Obsolescence of Law are Greatly
Exaggerated ................................................................ 326
B. Specific Impacts on Lawyers ...................................... 333
1. Educating Clients on Their Options and Risks ..... 333
2. If a Smart Contract is Adopted, What Next? ........ 335
3. Property, Perpetual Records, and Privacy ............ 336
C. The Scholarship of Proactive Law: Visualizing the
Evolving Role of Attorneys ........................................ 340
CONCLUSION ............................................................................................................ 345
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INTRODUCTION
Blockchain technology—essentially a form of distributed electronic
record-keeping allegedly immune to forgery and errorsis being hailed
as the next disruptive leap forward in data sciences, on par with the advent
of the Internet itself.1 It is most commonly associated with
cryptocurrencies such as Bitcoin,2 and legal scholarship to date, including
much of what is cited in this paper, has mostly focused on the impact of
blockchain in the world of finance.3 It is vital, therefore, to clarify: This
paper does not deal with Bitcoin or other cryptocurrencies.
Rather, this paper examines blockchain, the underlying technology
that enables cryptocurrencies such as Bitcoin. and its potential to impact
supply chains. Supply chains are defined as the means by which inputs
arrive at a business to create value, including the means by which products
arrive to consumers.4 This paper examines the benefits, risks, and
consequences of blockchain technology being applied in this context,
including those that arise for legal professionals serving business clients.
Early deployments of blockchain technology to facilitate reliable
record-keeping in business enterprises have tested its potential in
combatting both fraud and theft, as well as its potential in assuring quality
in a supply chain context.5 Blockchain technology has reportedly
functioned well, for example, in the context of authentication of inventory
1 See Laura Shin, How The Blockchain Will Transform Everything From Banking To
Government To Our Identities, FORBES (May 26, 2016),
https://www.forbes.com/sites/laurashin/2016/05/26/how-the-blockchain-will-transform-
everything-from-banking-to-government-to-our-identities/#17ed4cfc558e.
2 Scott J. Shackelford & Steve Myers, Block-by-Block: Leveraging the Power of
Blockchain Technology to Build Trust and Promote Cyber Peace, 19 YALE J. L. & TECH. 334,
33839 (2017).
3 See infra, Section IV.A. and accompanying notes.
4 See Steve LeMay, Marilyn M. Helms, Bob Kimball &Dave McMahon, Supply chain
management: the elusive concept and definition, 28 INTL. J. LOGISTICS MGT., 1429-–32 (2017).
5 See Heather Clancy, The blockchain's emerging role in sustainability, GREENBIZ (Feb.
6, 2017, 1:15 AM), https://www.greenbiz.com/article/blockchains-emerging-role-
sustainability. But see Steve Banker, Blockchain In The Supply Chain: Too Much Hype, FORBES
(Sept. 1, 2017), https://www.forbes.com/sites/stevebanker/2017/09/01/blockchain-in-the-
supply-chain-too-much-hype/#4e4510f9198c (suggesting that while this technology has the
potential to prevent thefts and combat cybersecurity issues, it is still relatively new and in beta
stages and is likely to experience several challenges while maturing).
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in the timber industry, in which illegal sales are estimated to total $51–152
billion annually.6 Other illustrative blockchain applications in the context
of supply chains include examples such as proof-of-provenance, or tracing
the geographic source of a product, an area in which fraud and
counterfeiting cause losses to businesses that authentically source from
specific locations.7 Another example includes certification of good
environmental and labor practices, the violation of which negatively
affects not only human life and health and ecological life support systems,
but also, similarly, causes losses for businesses that adhere to higher
standards.8 In all of these cases, improved record-keeping allows
companies to gain more efficient traceability and reduce loss and theft
while societies and governments benefit from increased tax revenues,
reduced corruption, andespecially when blockchain is coupled with
certification schemes and transparencyenvironmental benefits from
encouraging sustainable practices.9
However, high profile hacks suggest that some blockchain
applications can be as unhackable as the Titanic was unsinkable.10 Based
on limitations, some argue that blockchain is, at best, a solution in search
of a problem, while others write it off as simply overhyped.11 Even if the
technology works flawlessly, fundamental problems include human
6 Boris Düdder & Omri Ross, Timber Tracking: Reducing Complexity of Due Diligence
by Using Blockchain Technology 1, 3 (Univ. of Copenhagen Dept. of Computer Sciences,
Working Paper, Aug. 8, 2017), available at https://ssrn.com/abstract=3015219.
7 Phil Taylor, EY partners with EZLab on blockchain wine security project, SECURING
INDUSTRY (Apr. 18, 2017), https://www.securingindustry.com/food-and-beverage/ey-partners-
with-ezlab-on-blockchain-wine-security-project/s104/a4014/#.WvenBogvw2w.
8 See Jochem Verberne, How can blockchain serve society? WORLD ECON. FORUM
(Feb. 1, 2018), https://www.weforum.org/agenda/2018/02/blockchain-ocean-fishing-
sustainable-risk-environment/.
9 See Id. Another application arguably related to supply chains is the enabling of peer-
to-peer energy contracts, such that local entities can buy-and-sell energy to each other from local
sources such as rooftop solar panels. See Mike Butcher, Power Ledger deploys first blockchain-
based P2P energy trading system in Chicago, TECH CRUNCH (May 3, 2018),
https://techcrunch.com/2018/05/03power-ledger-deploys-first-blockchain-based-p2p-energy-
trading-system-in-chicago/. However, that topic could merit its own dedicated article, as
mentioned in the foregoing discussion of polycentric governance, infra, Section IV.B.
10 Swati Khandelwal, Hackers Stole $32 Million in Ethereum; 3rd Heist in 20 Days, THE
HACKER NEWS (July 19, 2017), https://thehackernews.com/2017/07/ethereum- cryptocurrency-
hacking.html.
11 See Joseph Young, Blockchain is Overhyped and Not Quite Applicable: VC Andrew
Parker, COINTELEGRAPH (Mar. 23, 2017), https://cointelegraph.com/news/blockchain-is-
overhyped-and-not-quite-applicable-vc-andrew-parker.
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fallibility and corruption when creating the underlying records and
enforcing consequences.12 As elaborated upon herein, this is sometimes
known as “the last mile problem”; even if a record-keeping scheme is
flawless, at either end there remains the problem of human fallibility or
indifference.13
This leads some to argue that the true potential of blockchain
technology can only be realized when coupled with effective governance.
According to one perspective, “[w]holly divorced from legal enforcement,
blockchain-based systems may be counterproductive or even
dangerous.”14 This is somewhat in tension with what blockchain
evangelists call “trustless trust.”15 Some question the premise that
blockchain-based systems can bypass any kind of public or institutional
governance.16 A closely related question is whether uses of blockchain
technology will result in a new subset of law—or whether they can
function in the absence of legal frameworks.17 This is because blockchain’s
potential role in supply chain optimization could go beyond matters such
as proof-of-provenance and certification. As discussed herein, blockchain
could be used for sustainability data reporting, self- executing digital
contracts, and devices that can be controlled over the Internet.
This paper will proceed as follows: We must begin with a simple
description of how blockchain functions. The paper will then proceed to
12 See The great chain of being sure about things, THE ECONOMIST (Oct. 31, 2015),
https://www.economist.com/news/briefing/21677228-technology-behind-bitcoin-lets-people-
who-do-not-know-or-trust-each-other-build-dependable.
13 Author’s conversation with Miko Matsumura [co-founder of Evercoin] (June 20, 2018
[2:03PM]) (on file with the author).
14 Kevin D. Werbach, Trust, But Verify: Why the Blockchain Needs the Law, BERKELEY
TECH. L. J., 1, 1 (forthcoming 2018).
15 Reid Hoffman, Why the Blockchain matters, WIRED UK (May 15, 2015),
https://www.wired.co.uk/article/bitcoin-reid-hoffman.
16 Blockchain Workshops, Thinking Through Law and Code, Again - Lawrence Lessig
- COALA's Blockchain Workshops - Sydney 2015, YOUTUBE (Jan. 6, 2016),
https://www.youtube.com/watch?v=pcYJTIbhYF0 .
17 See Aaron Wright & Primavera De Filippi, Decentralized Blockchain Technology and
the Rise of Lex Cryptographia 1, 4 (Mar. 12, 2015), available at
https://ssrn.com/abstract=2580664. See also Lawrence J. Trautman, Is Disruptive Blockchain
Technology the Future of Financial Services? 69 CONS. FIN. L.Q. REP., 232, 240-41 (2016)
(discussing how smart contracts will change current law); Max Raskin, The Law and Legality of
Smart Contracts, 1 GEO. L. TECH. REV. 305, 308, 311, 321–25 (2017) (discussing smart
contracts and their legal basis); Kevin Werbach & Nicolas Cornell, Contracts Ex Machina, 67
DUKE L. J., 313, 31619 (2017) (discussing blockchain foundation and if smart contracts apply).
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evaluate the promise and then the perils of blockchain in the context of
business supply chains. Among the limitations, we will examine how, as
with other advancements related to data, such as the Internet itself and
mobile devices, a more powerful tool related to information does not
necessarily improve outcomes. Sound governance (including the
deliberate setting of clear, measurable, and enforceable outcomes) is
necessary if the potential of blockchain is to be realized. We finally move
on to the key question of whether blockchain applications are likely to
obviate the need for lawyers and legal frameworks, as some have
prognosticated. Although it is debatable whether blockchain adoption will
result in a new practice area, and while some functions will be streamlined,
legal framework and lawyers will retain their essential roles in a
blockchain-enabled business environment. This paper concludes by
describing how the role of attorneys will evolve in a blockchain-enabled
business environment.
I. BLOCKCHAIN BASICS
Stated simply, blockchain is a form of record-keeping.18 It is a
digital ledger distributed among nodes in a network, meaning that no one
central authority controls the data.19 Rather, “everyone can maintain a copy
of a dynamically-updated ledger, but all those copies remain the same,
even without a central administrator or master version.”20 At least one
author has employed the analogy of a giant shared spreadsheet, in that
several people all see it, any of them could change it, and everyone can see
both the past and current changes to it.21 It is typically characterized as “a
digital, tamper-proof record of information, accessible to everyone.”22 As
astutely pointed out by Aaron Wright and Primavera De Filippi, it is an
“incremental improvement” over earlier steps since the late 1970s in
encryption, peer-to-peer applications, consensus mechanisms, and
decentralized, distributed data storage.23 As they optimistically put it, the
combination of these technologies provides “a way for people to agree on
18 See generally Marco Iansiti & Karim R. Lakhani, The Truth About Blockchain, 95
HARV. BUS. REV., Jan.Feb. 2017.
19 Id.
20 Werbach, supra note 14, at 3.
21 Melanie Swan, BLOCKCHAIN: BLUEPRINT FOR A NEW ECONOMY, at xi (2015).
22 Verberne, supra note 8, at 3.
23 Wright & De Filippi, supra note 17, at 48.
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a particular state of affairs and record that agreement in a secure and
verifiable manner.”24
Ironically, the short-term hype and speculation about
cryptocurrencies may be exaggerated, while the long-term impact on
business (especially supply chains) may be underappreciated and
epochal.25 However, to explore why that may be true, as we will in the next
section, we must first understand the two means by which the underlying
technology may be implemented. Blockchains can be public or private; a
public blockchain —or permission-less or ‘unpermissioned’ ledger —has
no single owner and allows anyone to add information or hold a copy of
the record, making permission-less blockchains censorship- resistant and
hard to hack.26 Cryptocurrencies such as Bitcoin and Ether from Ethereum
are examples of public blockchains. Private blockchains (permissioned
ledgers) are created for private groups to share information or transactions;
Hyperledger from Linux Foundation and Corda from the R3 financial
services consortium are two examples.27 Distributed private ledgers could
track transactions across and between enterprises without the overhead of
a central system. According to Goldman Sachs, this market opportunity
could be worth $2.5–7 billion annually.28 Some authors, such as Carla
Reyes, prefer to use the term DLT (distributed ledger technology) as a term
that encompasses both varieties of blockchain applications: both the
decentralized (or permission-less) variety and the private (or
permissioned) variety.29
Moving up through a spectrum of complexity, smart contracts use
blockchain ledgers to create “self-executing” agreements: a series of “if-
then” conditions that purportedly remove some of the human discretion
24 Id. at 5.
25 Iansiti & Lakhani, supra note 18 (describing the vast potential of the blockchain as a
“foundational technology” which will only be fully realized over the long-term).
26 Michèle Finck, Blockchains: Regulating the Unknown, 19 GERMAN L. J. No. 4 665,
670 (2018).
27 Todd Benzies, Tech and Banking Giants Ditch Bitcoin for Their Own Blockchain,
WIRED (Dec. 17, 2015), https://www.hyperledger.org/news/2015/12/17/wired-tech-and-
banking-giants-ditch-bitcoin-for-their-own-blockchain.
28 James Schneider et al., Blockchain: Putting Theory into Practice, GOLDMAN SACHS
EQUITY RESE ARCH REPORT (May 24, 2016), https://www.unlock-bc.com/news/2017-05-
25/blockchain-putting-theory-into-practice.
29 Carla Reyes, Conceptualizing Cryptolaw, 96 NEB. L. REV. 4, 8–12 (2017) (discussing
DTL and the Bitcoin blockchain).
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involved in contracting.30 By combining smart contracts, a Distributed
Autonomous Organization (DAO) could use blockchain technology to
encode arrangements of debt, equity, and governance,31 effectively
creating an enterprise that would be to some extent run on auto-pilot. In
Section IV.B. and IV.C. of this paper we will return to examining the
implications of smart contracts and DAOs for attorneys.
II. BLOCKCHAINS POTENTIAL
Despite blockchain and Bitcoin earlier being nearly synonymous
with each other, Bitcoin’s near-synonymy with cryptocurrency, and the
association of these buzzwords with the infamous online black market Silk
Road,32 blockchain has lately emerged as a data sciences innovation with
massive potential to disrupt all of commerce.33 Of the new technologies
comprising the Fourth Industrial Revolution, blockchain has been said to
show “the most promise for radical disruption.”34 While others have
identified blockchain as furiously overhyped, there is, at the least, a
consensus that blockchain’s full potential to alter the business world lies
ahead.35
30 Raskin, supra note 17, at 309311. Some call into question characterizing such
arrangements as truly qualifying as either smart or contracts. See Finck, supra note 26, at 6.
Jeremy Sklaroff clarifies that “decentralized code-only contracts are part of a decades-long quest
to eliminate supposed inefficiencies in traditional written agreements. Electronic data
interchange (EDI), a contracting technology from the 1970s . . . successfully reduced some
transaction costs while preserving efficient forms of contractual flexibility. Smart contracts are
indeed more technologically sophisticated than EDI. Smart contract scripting languages offer a
broader range of operations and greater scalability.” Jeremy M. Sklaroff, Smart Contracts and
the Cost of Inflexibility, 166 U. PA. L. REV. 263, 263 (2017) (discussing Bitcoin and the
transformation of smart contracts).
31 Philip Boucher, How blockchain technology could change our lives, EUR.
PARLIAMEN TARY RES. SERV., (Feb. 2017),
http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/581948/EPRS_IDA(2017)581948
_EN.pdf.; Vitalik Buterin, Bootstrapping A Decentralized Autonomous Corporation: Part I,
BITCOIN MAG. (Sep. 19, 2013), https://bitcoinmagazine.com/articles/bootstrapping-a-
decentralized-autonomous-corporation-part-i-1379644274/.
32 See Shackelford & Myers, supra note 2, at 338–39; see also Mitchell Hyman, Bitcoin
ATM: A Criminal's Laundromat for Cleaning Money, 27 ST. THOMAS L. REV. 287, 295, 97
(2015).
33 Sarah Underwood, Blockchain Beyond Bitcoin, 59 COMM. OF THE ACM, no. 11
(Nov. 2016), at 15.
34 Verberne, supra note 8, at 2.
35 See Swan, supra note 21, at xi.
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A. Supply Chain Optimization and Sustainability
A major aspect of business that could be improved—in the interest
of the firm, its stakeholders, and public policy—would be supply chain
optimization related to sustainability. First, as already discussed,
enterprises could prosper by eliminating waste, loss, and inefficiency;
deliberate supply chain fraud alone has been characterized as “an
epidemic” costing a typical business 5% of its revenue, or an aggregated
total global loss of $3.7 trillion per year.36 Second, some consumers,
investors, and employees care about the origins and health and
environmental impacts of the products and services of firms with which
they are involved;37 uncertainty, ambiguity, deliberate obfuscation, and
outright fraud persist in this arena.38 Third, some businesses see an
opportunity in reliably meeting these demands from consumers.39 Fourth,
environmental degradation is an existential threat to civilization,40
meaning that efficient and environmentally benign supply chains are
consistent with good public policy.
36 David Landsman, Marcus Puschke, Lilliana Grbic, & Stephanie Overby, 3 Ways to
Fight Fraud, Waste, and Abuse in the Supply Chain, INQUIRY NO. 138, SAP CENTER FOR BUS.
INSIGHT (2015),
https://dam.sap.com/mac/download/a.htm?k=nExPgsAJyXnxwllJS7AwSlOvHOEHOByOOU
yuPAmXPswlXSHA&c=67 (citing data from Report to the Nation on Occupational Fraud and
Abuse, ASSN OF CERTIFIED FRAUD EXAMINERS (2014), http://www.acfe.com/rttn/docs/2014-
report-to-nations.pdf).
37 According to a 2015 Nielsen poll, 66% of global consumers were willing to pay more
for environmentally sustainable products; 72% of millennials expressed such a preference. Bruce
Watson, The troubling evolution of corporate greenwashing, THE GUARDIAN (Aug. 20, 2016),
https://www.theguardian.com/sustainable-business/2016/aug/20/greenwashing-
environmentalism-lies-companies.
38 Even defining the boundaries of what constitutes misleading and deceptive
greenwashing can be a challenge. See Id.
39 For example, Unilever has promoted the results of an international study of 20,000
adults in five countries which found that 33% were choosing to purchase goods from brands that
they believed were “doing social and environmental good.” Press Release: Report shows a third
of consumers prefer sustainable brands, UNILEVER (May 1, 2017),
https://www.unilever.com/news/press-releases/2017/report-shows-a-third-of-consumers-
prefer-sustainable-brands.html. More than one in five (21%) of the people surveyed said they
would “actively choose brands if they made their sustainability credentials clearer on their
packaging and in their marketing,” representing an unrealized opportunity of €966 billion out of
a €2.5 trillion total market for sustainable goods. Id.
40 Economic losses related to extreme weather have increased by 86% to $129 billion
over the last 10 years and the global population is projected, by 2030, to need 40% more water
than the planet can sustainably supply. Virginie Helias, Why the future of consumption is
circular, WORLD ECON. F. (Jan. 15, 2018), https://www.weforum.org/agenda/2018/01/future-
consumption-circular-economy-sustainable/.
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Both market mechanisms involving consumer choice and regulatory
restrictions can only work if information is both available and reliable;
otherwise, asymmetries of information remain one of the widely
acknowledged reasons for market failures.41 More broadly, as already
mentioned, better tracking of goods and material can improve efficiency
and reduce theft, loss, or spoilage.42 Reducing such costs and related
negative externalities is clearly in the interest of both business and public
policy. Blockchain’s applications for improving supply chains so as to
achieve greater sustainability include the following, as briefly mentioned
above.
Proof-of-provenance is a concern for businesses (or entire regions)
that suffer as a result of goods whose loci of production are fraudulently
labeled.43 For example, counterfeit Italian wines cost the economy of Italy
two million Euro in 2015; a blockchain-enabled proof-of-provenance
experiment has proven to be successful in this context.44 A similar
application has succeeded in the context of the olive oil industry.45
Closely related to simply proving the geographic origin of a product
is assuring that its means of production minimized harm to people and the
environment. The tuna industry has successfully experimented with
blockchain-enabled tracking that verifies fish are caught without the use
of forced labor and with minimal bycatch.46 Illegal fishing is a $23 billion
cost to the $2.5 trillion ocean economy; a platform called Global Fishing
41 See Joseph E. Stiglitz, Markets, Market Failures, and Development, 79 AM. ECON.
REV. No. 2, 197, 197202 (May 1989).
42 Boucher, supra note 31.
43 John Palfreyman, Proving Provenance with Blockchain, IBM GOVT INDUSTRY BLOG
(Mar. 17, 2016), https://www.ibm.com/blogs/insights-on-business/government/proving-
provenance-with-blockchain/.
44 Taylor, supra note 7, at 23.
45 Kristoffer Just Peterson, Blockchain in supply chain: Identification of opportunities
with blockchain as a platform of traceability, information and documentation sharing regarding
Extra Virgin Olive Oil (EVOO), (thesis, IT U. OF COPENHAGEN) (2017),
https://www.researchgate.net/publication/320559685_Blockchain_in_supply_chain_Identificat
ion_of_opportunities_with_blockchain_as_a_platform_of_traceability_information_and_docu
mentation_sharing_regarding_Extra_Virgin_Olive_Oil_EVOO.
46 See From shore to plate: Tracking tuna on the blockchain, PROVENANCE (July 15,
2016), https://www.provenance.org/tracking-tuna-on-the-blockchain.
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Watch is attempting to address this.47 Separately, a partnership of the
World Wildlife Fund, ConsenSys, TraSeable, along with fishing company
Sea Quest Fiji, tested a blockchain-enabled application that allows
consumers to scan a product and see when and where the fish was caught
and by what means.48 In the context of conflict minerals (raw material
purchased from parties associated with unsavory and illicit forms of
violence), blockchain-enabled proof-of-ethical-sourcing of diamonds has
similarly functioned well.49
In these cases, once a record (the certification) is generated, it is
distributed across a network.50 As explained above, and just as with a
record of a cryptocurrency transfer, each movement of a certified good
through the supply chain (or chain of custody) is accompanied by an
update in the distributed ledger.51 Companies have recently started offering
enterprise-grade blockchain solutions,52 of whom many focus on proof-of-
provenance and supply chains.53 Illustrations of how blockchain- enabled
solutions function together have been produced by Josh Nussbaum of
Blockchain Project Ecosystem, Lawrence Lundy-Bryan of Token
Ecosystem Map, and Jordan Odinsky of Logistics Market Landscape.54
These processes enhance the credibility of the certification later in the
supply chain.55 Combined with other trends such as green
47 Id.; but see Gus Lubin, Satellite watchers busted an illegal fishing vessel, and they’re
coming for others around the world, BUSINESS INSIDER (Nov. 1, 2016),
https://www.businessinsider.com/global-fishing-watch-catches-illegal-fishing-vessel-2016-11
(explaining some downfalls with Global Fishing Watch’s attempt).
48 Verberne, supra note 8, at 3.
49 Promise and Peril: Blockchain, Bitcoin and the Fight Against Corruption,
TRANSPAR ENCY INTL (Jan. 31, 2018),
https://www.transparency.org/news/feature/blockchain_bitcoin_and_the_fight_against_corrupt
ion.
50 See Palfreyman, supra note 43, at 2 (providing a simple explanation accompanied by
a helpful visual representation).
51 See Werbach, supra note 14, at 11 (explaining the function of a ledger in blockchain
technology).
52 See Elena Mesropyan, 30 Companies Providing Enterprise-Grade Blockchain
Solutions, MEDICI (Feb. 19, 2017), https://gomedici.com/companies-providing-enterprise-
grade-blockchain-solutions/.
53See e.g., Palfreyman, supra note 43, at 1.
54 Artur Safaryan, Blockchain projects aiming to reinvent the Supply Chain: Landscape
Map, HACKERNOON (Nov. 9, 2017), https://hackernoon.com/blockchain-projects-aiming-to-
reinvent-the-supply-chain-landscape-map-cf28ba9557d1
55 Margaret D. Fowler, Linking the Public Benefit to the Corporation: Blockchain as a
Solution for Certification in an Age of “Do-Good” Business, 20 VAND. J. ENT. & TECH. L. 3,
881, 913 (2018).
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consumerism,56 some have suggested that blockchain will increase our
ability to solve the world’s sustainability problems.57
Prognostications from 2015–2016, or the early adoption phase of
blockchain, have largely proven correct as start-ups have deployed and
tested applications of blockchain.58 According to Euroclear and Oliver
Wyman, early experiments with cryptocurrencies were to precede
disruptive innovations and niche applications, with long-term mass
adoption following in about 2025.59
According to a recent report by McKinsey & Company, there is
reason to believe that blockchain could be adopted and scaled more
rapidly, and have material impact on commerce between 2020 and 2022.60
The firm identified several dozen nascent use cases.61 However, McKinsey
concluded that most of blockchain’s initial $80–110 billion impact would
be related to record-keeping in both the finance and insurance industries,
where most of early venture capital and established financial institutions’
investments were made.62 Ironically, therefore, it can be said that large and
centralized institutions are pushing the adoption of this decentralized
approach to data.63 Other sources have independently concluded that
blockchain is poised to move from experimental to mainstream adoption
between the immediate future and a time horizon of five to ten years, or
roughly 2023–2028.64
56 See William Young, Kumju Hwang, Seonaidh McDonald, & Caroline J. Oates,
Sustainable Consumption: Green Consumer Behaviour when Purchasing Products, 18 SUST.
DEV. 2021 (2010) (discussing micro-purchasing decisions of green consumers).
57 Catherine Early, Blockchain, regenerative farming and mobility as a service: global
trends hold key to sustainability, ECOLOGIST (Feb. 9, 2018),
https://theecologist.org/2018/feb/09/blockchain-regenerative-farming-and-mobility-global-
trends-hold-key-sustainability.
58 See Trautman, supra note 17, at 232233.
59 Oliver Wyman & Euroclear, BLOCKCHAIN IN CAPITAL MARKETS: THE PRIZ E AND
THE JOURNEY, 12 (Feb. 2016), http://www.oliverwyman.com/content/dam/oliver-
wyman/global/en/2016/feb/BlockChain-In-Capital-Markets.pdf.
60 MCKINSEY & CO., Blockchain Technology in the Insurance Sector: Quarterly
Meeting of the Fed. Advisory Committee on Ins. (FACI), (Jan. 5, 2017),
https://www.treasury.gov/initiatives/fio/Documents/McKinsey_FACI_Blockchain_in_Insuranc
e.pdf.
61 Id. at 1.
62 Id. at 6-9.
63 Id. at 1516.
64 Jay Samit, 4 Technology Trends That Will Transform Our World in 2018, FORTUNE
(Dec. 2017), http://fortune.com/2017/12/26/4-technology-trends-2018/.
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Despite the potential of blockchain to correct for “imbalances
caused by asymmetric information and opaque supply chains,”65 a 2016
study found that similar to venture capital, academic publications had
focused on the technology’s relevance to finance, with scarcely a mention
of its application in the field of supply chains.66
Additionally, blockchain could help to track quantities, cost, and
impact of materials; Plastic Bank is an example of an application that could
help turn supply chains into supply loops.67 Other applications, such as
Electric Chain, involve decentralized micro-grids so that local producers
and consumers can exchange power without intermediaries.68 LO3 is a
solar energy company that operates with a similar technology supporting
the Brooklyn microgrid.69 Finally, by tracking emissions against targets
and limits, blockchain could help in the monitoring and regulation of
climate-altering gases, regardless of whether the governance framework is
self-regulation, regulation-by-disclosure, credit trading, or some system of
pay-to-pollute.70 The significance of blockchain to sustainability reporting
is the topic to which we next turn our attention.
B. Potential for Sustainability Reporting
Over 90% of the world’s largest companies publish regular
disclosures on their societal and environmental side effects, a practice
known as “sustainability reporting, corporate responsibility (CR)
reporting, corporate social responsibility (CSR) reporting, citizenship
reporting, environmental, societal, and governance (ESG) reporting, or
65 Amina Badzar, Blockchain for securing sustainable transport contracts and supply
chain transparency An explorative study of blockchain in logistics, Master’s Thesis, Lund
University Libraries (2016), 8, https://lup.lub.lu.se/student-papers/search/publication/8880383.
66 Id. at 35.
67 Project Breakthrough, U.N. GLOBAL COMPACT (2016), 5,
http://breakthrough.unglobalcompact.org/breakthrough-business-models/closed-loop/.
68 Srinivasan Keshav, How blockchain can democratize green power, THE
CONVERSATION (Jan. 7, 2018), https://theconversation.com/how-blockchain-can-democratize-
green-power-87861.
69 Elizabeth Woyke, Blockchain Is Helping to Build a New Kind of Energy Grid, MIT
TECH. REV. (Apr. 19, 2017), 2, https://www.technologyreview.com/s/604227/blockchain-is-
helping-to-build-a-new-kind-of-energy-grid/.
70 Tom Baumann, What Is Blockchain GHG Management, GHG MANAGEMENT
INSTITUTE (Oct. 18, 2017), http://ghginstitute.org/2017/10/18/what-is-blockchain-ghg-
management/.
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triple bottom line (TBL) reporting.”71 Such information is sometimes
published in the financial disclosures of companies, a practice called
integrated reporting.72
Sustainability reporting straddles the realms of hard law and
voluntary CSR, and for most global companies, remains a largely
voluntary practice.73 Sustainability reporting is meant to help companies
improve their performance in terms of societal and environmental side
effects by bringing the rigor, discipline, and transparency of financial
reporting to the realm of externalities.74 The general practice, to some
extent, has been required by some countries including Denmark, France,
and South Africa,75 and has been required in the context of specific issues,
such as labor conditions, by countries such as the United Kingdom76 and
sub-national political units like California.77
U.S. securities law is relevant to sustainability reporting. The Dodd-
Frank Act includes a section that requires reporting of the use of conflict
minerals sources from the Democratic Republic of Congo (DRC).78 The
71 Adam Sulkowski & Sandra Waddock, Beyond Sustainability Reporting: Integrated
Reporting is Practiced, Required and More Would be Better, 10 U. ST. THOMAS L. J. 1060, 1061
(2013).
72 Id. at 1063.
73 Id. at 10631067.
74 See John Elkington, CANNIBALS WITH FOR KS: THE TRIPLE BOTTOM LINE OF 21ST
CENTURY BUSINESS 70–94 (1998) (describing the concept of corporate sustainability and
presenting the concept of the quantifying and reporting on a firm’s “Triple Bottom Line” of
economic prosperity, environmental impacts, effects on society, and steps being taken to
improve these impacts).
75 For comparative overviews, see U.N. Econ. Comm’n for Europe, Supporting
Frameworks for Corporate Environmental Reporting, U.N. Doc. ECE/CEP/AC.10/2009/7 (June
19, 2009). See also Thomas P. Lyon & John W. Maxwell, Greenwash: Corporate Environmental
Disclosure Under Threat of Audit, 20 J. ECON. & MGMT. STRAT. 39 (2011). French rules have
been criticized for lacking penalties for non-compliance. Lucien J. Dhooge, Beyond
Volunteerism: Social Disclosure and France’s Nouvelles Regulations Economiques, 21 ARIZ. J.
INTL & COMP. L. 441, 445 (2004).
76 Modern Slavery Act 2015, c.30, § 54(4) (Eng.).
77 California Transparency in Supply Chains Act of 2010, CAL. CIV. CODE
§ 1714.43(a)(1).
78 See DoddFrank Wall Street Reform and Consumer Protection Act § 1502, 15 U.S.C.
§ 78m(p) (Supp. V 2011). The goal of these requirements is to allow consumers and investors
to make informed decisions as to their involvement with companies that could be complicit with
human rights abuses in their supply chains originating in the DRC. See id. at § 1502(a); Conflict
Minerals, 77 Fed. Reg. 56,274, 56,275 (Sept. 12, 2012) (to be codified at 17 C.F.R. pts. 240 &
249b). In 2012, the SEC finalized Rule 13p-1, requiring all companies that file reports to perform
due diligence and report on Form SD the origin of certain minerals in their products if those
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Securities and Exchange Commission (SEC) has issued guidance on
disclosing climate change risks for publicly traded companies, but it does
not appear to be an enforcement priority.79 There are also arguments that,
even in the absence of legislation and regulations, the concept of
materiality in the context of American investor protection law (the
common law principle that a firm should disclose anything that changes
the total mix of information that a reasonable investor would care about)
obliges firms to track and publish sustainability data.80
However, despite sustainability reporting becoming commonplace,
and to various degrees mandated in some jurisdictions, there are several
limitations and problems with the practice. First, some criticize the
practice itself, either because it may discourage firms from engaging in
some parts of the world,81 oras one of its early champions has declared
it has failed to adequately disrupt the status quo.82 Second, firms and their
consultants can, to some extent, game the system of sustainability
reporting—technically meeting requirements and market expectations
while actually misrepresenting the truth or suppressing or otherwise
misleading regulators, consumers, and other stakeholders.83 Witness
Volkswagen’s outright and massive fraud, in terms of both creating
systems to mislead emissions testing equipment and then crowing about
their green credentials in their marketing and sustainability
minerals originated in the DRC or adjoining countries. Conflict Minerals, 77 Fed. Reg. at
56,275, 56,362, 56,356.
79 See Commission Guidance Regarding Disclosure Related to Climate Change,
Securities Act Release No. 9106, Exchange Act Release No. 61469, FR-82, 75 Fed. Reg. 6290
(Feb. 8, 2010); see also 17 C.F.R § 229.101(c)(1)(xii) (2011). In the wake of the SEC’s guidance
on climate change, the Commissioner clarified, “I can only conclude that the purpose of this
release is to place the imprimatur of the commission on the agenda of the social and
environmental policy lobby, an agenda that falls outside of our expertise and beyond our
fundamental mission of investor protection.” John M. Broder, S.E.C. Adds Risk Related to
Climate To Disclosure List, N.Y. TIMES (Jan. 27, 2010),
https://www.nytimes.com/2010/01/28/business/28sec.html (quoting Commissioner Kathleen L.
Casey).
80 Sulkowski & Waddock, supra note 71, at 10701072.
81 Marcia Narine, From Kansas to the Congo: Why Naming and Shaming Corporations
Through the Dodd-Frank Act’s Corporate Governance Disclosure Won't Solve a Human Rights
Crisis, 25 REGENT U. L. REV. 351, 35152, 392 (2012).
82 John Elkington, 25 Years Ago I Coined the Phrase “Triple Bottom Line.” Here’s Why
It’s Time to Rethink It, HARV. BUS. REV. (June 25, 2018), https://hbr.org/2018/06/25-years-ago-
i-coined-the-phrase-triple-bottom-line-heres-why-im-giving-up-on-it.
83 Sulkowski & Waddock, supra note 71, at 10771078.
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reporting: the misleading of investors constituted its own basis for
prosecution and fines, and yet, even with the threat of these sanctions, the
fraud was committed.84 As it turns out, there is reason to believe that
Volkswagen is hardly alone in not fully disclosing everything that it
should; various studies have found high rates of non-compliance with a
simple requirement like disclosing environmental fines.85 Third, there is
the failure or inability of systems to reliably track and aggregate data,
especially in the context of complex multinational supply chains.86
It is with regard to these last two problems listed above that
blockchain technology could contribute to a solution. Namely, as
explained in the preceding sections, it addresses both the technological
problem of tracking and aggregating data across large systems, plus the
limitations of human systems in terms of auditing and verification. As
Scott Shackelford and Steve Myers have written, “the history of finance
would be an open book, potentially being a boon to sustainability and the
Corporate Social Responsibility (CSR) movement.”87 First, as described
above, the technology allows a record to irrevocably be attached and to
follow a unit.88 Once a block of data is created and linked in a chain, it
becomes impossible to alter or erase.89 Second, the distributed nature of
the record in effect means it is effectively continually third-party audited.90
Assuming that the original record is 100% reliable, then blockchain
technology would be a component of a vision of the future articulated by
one of the earliest proponents of blockchain technology. Namely, where
sustainability data is not limited to a reporting exercise, but rather instantly
and universally accessible, and where the end-user of product can zoom-
in on fully transparent systems, seeing realities and side effects from the
84 Charles Riley, Why Volkswagen can't ignore new diesel cover-up claim, CNN MONEY
(May 4, 2018, 1:18PM), https://money.cnn.com/2018/05/04/investing/volkswagen-winterkorn-
diesel-scandal-legal/index.html.
85 David W. Case, Corporate Environmental Reporting as Informational Regulation: A
Law and Economics Perspective, 76 U. COLO. L. REV. 379, 410 (2005).
86 Palfreyman, supra note 43; Alanna Petroff, Carmakers and big tech struggle to keep
batteries free from child labor, CNN TECH (May 3, 2018, 2:16 PM),
https://money.cnn.com/2018/05/01/technology/cobalt-congo-child-labor-car-smartphone-
batteries/index.html.
87 Shackelford & Myers, supra note 2, at 379.
88 See Id. at 340–43.
89 See Id.
90 See Id.
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most local to the most global levels.91 Data sciences are beginning to
provide the tools (though not the mental habits and incentives) to be able
to access information instantly and universally—and, in the opinion of one
of its original champions, this is exactly the direction in which
sustainability reporting must evolve to function as a constructively
disruptive tool.92
In this paper, we have primarily outlined the potential of blockchain
technology in the context of supply chains and sustainability reporting.
Specifically, this was to establish a foundation of basic knowledge to
enable an informed discussion of the relatively unexplored question (in
this context) of whether and how legal frameworks will remain relevant to
realizing the benefits mentioned above. However, part of realizing the
benefits for businesses and the rest of society necessitates an appreciation
of the risks and limitations of the technology, the topic to which we next
direct our attention.
III. REASONS TO TEMPER EXPECTATIONS OF BLOCKCHAIN
In this section we will explore the limitations of blockchain as
applied to improving supply chains so as to eliminate waste and harms to
people and the environment. This will add heft to our thesis that business
supply chains are most likely to be optimized and made more
environmentally sustainable when blockchain-enabled solutions are
married to legal frameworks, along with sound policy goals and political
will.
A. Unhackable Like the Titanic was Unsinkable, and Even Less
Green?
In mid-2016, over $67.4 million of $250 million committed to a
blockchain-based cryptocurrency was stolen; the “DAO hack,” as it came
to be known, suggested that blockchain applications may not always be as
91 Adam Sulkowski, 20 Years Ago He Gave Cannibals Forks. Now John Asks: Where’s
the Disruption?, HUFFINGTON POST (July 10, 2017, 10:32 AM),
https://www.huffingtonpost.com/entry/20-years-ago-he-gave-cannibals-forks-now-john-
asks_us_59637fabe4b085e766b51450.
92 Id.
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secure as many believed.93 However, what is more interesting is that the
platform could not distinguish between the thefts (it was actually a massive
number of small outflows) and legitimate uses. Due to a fault in one line
of code, the platform allows the culprit(s) to withdraw funds (accumulated
from other uses), the way a thief may withdraw cash from an ATM.94
Further, to stop the theft, Ethereum had to split the DAO (“executing a
hard fork”) which, he acknowledged, seems to run counter to a bedrock
principle of how blockchain is supposed to work.95 To an outside observer,
this may appear to be proof that blockchain applications are neither as
secure (nor the code as immutable) as some believe. Some would counter
that, because the hacking occurred at the level of digital wallets and smart
contracts, it is better to think of the failures as analogous to the theft of a
conventional wallet, in that the theft of one’s wallet does not lead
reasonable people to conclude that conventional currencies and one’s
ATM cards are fundamentally invalid and untrustworthy concepts.96
Regardless of the degree to which the DAO hack (and others) have kindled
some healthy skepticism in blockchain applications, it is noteworthy that
the identity (or identities) of those responsible for the DAO heist, as of the
end of 2018, is (or are) still unknown.97
Advances in quantum computing could mean that blockchain
encryption in public blockchains will be increasingly vulnerable.98 Even
absent advances in quantum computing, some point to past and current
breaches and prognostications about the rate of future hacks as part of a
larger warning to be skeptical of claims that any online system will remain
93 Matthew Leising, The Ether Thief, BLOOMBERG, (June 13, 2017),
https://www.bloomberg.com/features/2017-the-ether-thief/.
94 Id.
95 Id.
96 Correspondence E-mail withfrom Prof. Kai-Lung Hui, Hong Kong University of
Science and Technology, to author June (June. 25, 2018) (on file with author), (expanding upon
a conversation on June June. 21, 2018)..
97 Leising, supra note 93.
98 Divesh Aggarwal, Gavin K. Brennen, Troy Lee, Miklos Santha & Marco
Tomamichel, Quantum attacks on Bitcoin, and how to protect against them, CORNELL U.
LIBRARY (Oct. 28, 2017), https://arxiv.org/abs/1710.10377 (as cited in Quantum Computers
Pose Imminent Threat to Bitcoin Security, MIT TECH. REV. (Nov. 8, 2017),
https://www.technologyreview.com/s/609408/quantum-computers-pose-imminent-threat-to-
bitcoin-security/). Then again, others counter that if quantum computing evolves to such a point,
then all encryption systems will fail, constituting one of several doomsday scenarios that, while
possible, are somewhat pointless to contemplate. Hui, supra note 96.
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100% secure.99 Even if encryption stays a step ahead of codebreaking,
there are other potential vulnerabilities related to permission-less
blockchains, including the non-zero probability that someone can amass
enough power in a network to validate fraudulent records.100 Legal
mandates could set minimum reasonable standards of care for coders and
institutions to protect them from future accusations of being careless.101
Besides lingering doubts related to hackability, another bedrock
question of any new technology is whether the side effects of the cure are
worse than the harm it is attempting to curb. Bitcoin alone has been
consuming more energy than Ireland, and was anticipated to surpass the
energy demand of New Zealand.102 It turns out that widely distributing
records and the related programming needed to confirm the validity of
99 According to Piper: “Despite blockchain’s reputation for high-level security, virtual
currency providers using the platform have been hacked. Tokyo- based bitcoin exchange Mt.
Gox, for example, was forced into bankruptcy after a $460m security breach in 2014. As
blockchain currencies and smart contracts grow in popularity, hacks will increase. A growing
concern, though, is that blockchain may be built on a digital house of cards. Late last year, a
study by the Global Risk Institute found there was a one in seven chance that the key
cryptography tools that thwart hacks will be broken by 2026, with a 50 per cent chance that that
would happen by 2031. The result could be an internet with no data encryption and blockchain
codes that can be cracked in a couple of minutes.” Arthur Piper, Blockchain and Smart Contracts,
INTL BAR ASSN (Aug. 25, 2017),
https://www.ibanet.org/Article/NewDetail.aspx?ArticleUid=e64618b4-02bc-
4e57-a5a6-
3167027de3f9.
100 See Roger A. Grimes, Hacking bitcoin and blockchain, CSO (Dec. 12, 2017, 3:45
AM), https://www.csoonline.com/article/3241121/cyber-attacks- espionage/hacking-bitcoin-
and-blockchain.html. See generally Theodore Kinni, Tech Savvy: How Blockchains Could
Transform Management, MIT SLOAN MGMT. REV.. (May 12, 2016), http://sloanreview.mit.
edu/article/tech-savvy-how- blockchains-couldtransform-management.
101 The alternative is to allow the common law to evolve and for courts to determine
over time what constitutes an appropriate standard of care in this contextthe obvious
disadvantage being that retroactively a judge may divine and apply a higher standard than a
programmer may anticipate. Reference redacted to preserve anonymity of the authors in the
review process.
102 Alex Hern, Bitcoin’s energy usage is huge we can't afford to ignore it, THE
GUARDIAN (Jan. 17, 2018, 10:15 AM);
https://www.theguardian.com/technology/2018/jan/17/bitcoin-electricity-usage-huge-climate-
cryptocurrency.
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transactions requires a tremendous amount of electricity.103 This has
soured some green business advocates on the notion that blockchain-
enabled solutions could make supply chains more environmentally
sustainable.104 However, as with the hackability question, this problem is
arguably surmountable with the large-scale adoption of emissions-free
sources of energy.105 Another solution that retains the benefits of
blockchain technology while reducing its demand for electricity is to move
away from proof-of-work cryptography to other cryptographic methods.106
Companies such as Apple have shown that it is possible to source
electricity to meet their massive needs for energy for data storage
requirements.107 To be completely zero net impact, of course, the entire
technology industry has the remaining challenge of figuring out how to
source, construct, and dispose of the electronics themselves in a way that
does not involve toxic materials and polluting energy sources.
B. Who Generates the Original Record?
Arguably, certification has been conflated with confirmation; no
matter how allegedly tamper-proof it may be, data verification is only
useful if the original record is reliable. Or, put another way: “garbage in,
garbage out.”108 Nothing about blockchain technology eliminates
conventional problems of establishing the nature of reality at the origin of
a supply chain.109 In other words, when a certification is first createdat
the point where an individual inspects and certifies that a labor abuse or
environmental harm is not being committed—how can anyone be sure the
certifying individual has not been bribed or coerced? Take, for instance,
the context of cobalt mined in the Democratic Republic of Congo.110 Even
103 Id.
104 Joseph Young, Bitcoin Mining Costs More Electricity Than Houses, But it’s a Non-
Issue, COINTELEGRAPH (Feb. 14, 2018), https://cointelegraph.com/news/bitcoin-mining-costs-
more-electricity-than-houses-but-its-a-non-issue.
105 Id.
106 Id. For an explanation of proof-of-work cryptography, see Shackelford & Myers,
Block-by-Block: Leveraging the Power of Blockchain Technology to Build Trust and Promote
Cyber Peace, 19 YALE J.L. & TECH. 334, 386 (2017).
107 Keshav, supra note 68.
108 Just, supra note 45.
109 Victoria Louise Lemieux, Trusting Records: Is Blockchain Technology the Answer?,
26 RECORDS MGMT. J. 110, 128 (2016).
110 Annie Kelly, Children as young as seven mining cobalt used in smartphones, says
Amnesty, THE GUARDIAN (Jan. 18, 2016, 7:02 PM), https://www.theguardian.com/global-
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if the chain of custody is tracked perfectly and certification is validated
along the value chain, how can anyone be sure that, in the middle of an
ocean or a remote jungle, the certifying individual at the source was not
tricked, mistaken, coerced, or corrupted?
Based on conversations with entrepreneurs with start-ups using
blockchain to certify responsible supply chains, it seems that this is an
acknowledged challengesometimes called “the last mile problem” with
certification schemes.111 The ultimate solution offered by these individuals
is the hope that autonomous sensing equipment and artificial intelligence
will develop to a point that non-corruptible and 100% reliable hardened
equipment will take the place of human inspectors and certifiers.112 Until
then, one of the necessary remaining roles of conventional frameworks––
both regulatory agencies and, for example, the discovery process in civil
litigation––is to provide a means of detecting, deterring, and punishing
fraud.
C. Self-Executing is Not the Same as Self-Enforcing
The other reason to temper expectations in blockchain’s potential to
optimize business supply chains is that observers seem to have conflated
execution and enforcement.113 Consequences sometimes still have to be
enforced in the real world by employing the assistance of entities beyond
the parties to a contract. Legal frameworks will still be needed (as they are
now) to resolve disputes over whether obligations are fulfilled or excused.
Lawyers do not execute contracts; they have and will continue to help
clients finalize details of what is agreed upon and figure out what should
happen when the unexpected occurs.114 Conventional dispute resolution
frameworks are unnecessary in a majority of cases, yet will
development/2016/jan/19/children-as-young-as-seven-mining-cobalt-for-use-in-smartphones-
says-amnesty.
111 Author’s conversation with Tatiana Solodnovnikova [Founder, Product Manager
CertifyIt] (Feb. 28, 2018 [7:30PM]) (on file with author). As Miko Matsumura has
summarized the problem, blockchain has “solved the problem of third person trust but not first
or second person trust,” or, put another way, that one cannot necessarily trust the original
record nor one’s self. Matsumura, supra note 13.
112 See Solodnovnikova, supra note 111. See also Just, supra note 45.
113 See, e.g., Wright & De Filippi supra note 17, at 24.
114 See Raskin, supra note 17.
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always be needed as a backstop precisely because, despite the best of
intentions and careful planning, the unexpected does happen.115 One could
argue that law seems to be nonessential or obsolete as long as things work,
but that it turns out to be essential when plans fail. Then, even the
staunchest libertarians will want public legal institutions, for example, to
defend against fraud or to assert what they perceive to be their property
rights.116
D. Certifications Only Matter if Someone Cares
A key assumption made by those who believe that blockchain-
enabled certifications can “green” supply chains is that someone—
typically consumers—will notice and care and actually base their purchase
decisions on whether a product or service has been certified. This can be a
problematic assumption, and the problem is compounded when industry
groups establish their own (and easier-to-meet) certification standards that
compete with activist-generated certifications.117 In an extreme vision of
the futureone that imagines conventional legal frameworks as entirely
obsolete and completely replaced by the rules programmed into code—
there would be no role for, say, the U.S. Department of Agriculture to set
boundaries and standards to clarify what a term and a certification such as
“organic” actually means. Even when certification standards are set by a
non-industry entity, not every consumer actually bases purchase decisions
on certification.118
The best answer to this dilemma from entrepreneurs with
blockchain-enabled certification solutions is that the consumer is not their
client; rather, they are pitching their services to retailers such as
Walmart.119 Recently, retailers such as Walmart have stepped-up efforts to
ensure that their products are reliably sourced as, for example, organic.120
So, somewhat ironically, one massive source of support for the
115 Id.
116 Friedrich Hayek, THE ROAD TO SERFDOM 45 (1994).
117 See Tad Mutersbaugh, Fighting Standards with Standards: Harmonization, Rents,
and Social Accountability in Certified Agrofood Networks, 37 ENVT. AND PLANNING A 2033,
2033–51 (2005).
118 Id.
119 Solodnovnikova, supra note 111.
120 Robert Hackett, Walmart and 9 Food Giants Team Up on IBM Blockchain Plans,
FORTUNE (Aug. 22, 2017), http://fortune.com/2017/08/22/walmart-blockchain-ibm-food-
nestle-unilever-tyson-dole/.
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deployment of decentralized technology are large centralized institutions
such as mega-retailers.121 As mentioned above, and in the ultimate twist of
irony, the very best spur to blockchain-enabled solutions for supply chain
certification would be government mandates that claims to investors and
consumers be validated using distributed ledger technology; a world, as
some have predicted or recommended, where decentralized solutions are
coopted by centralized authorities.122
E. Humans—Our Mindsets and Goals—Are Still the Key
Even the greatest champions of blockchain highlight the essential
role of the human factor in optimizing the benefits of the technology.
Jonathan Verbene notes that “…beyond radical transparency, automation,
smart contracting and elimination of uncertainty and blind trust, only the
vision and ingenuity of people and partnerships can realise the true
potential of blockchain technology for our wellbeing, future prosperity,
and enterprise.”123 The thesis of this section and the foregoing content on
law was articulated by professors Mainelli and Milne as follows:
“[a]chieving all the potential benefits from mutual distributed ledgers will
require board level buy-in to a substantial commitment of time and
resource [sic], and active regulatory support for process reform, with
relatively little short-term payoff.”124
In this regard, blockchain is neither a panacea nor a sine qua non for
sustainability-related problems in business supply chains. Remarkably, as
advances in technology and connectivity have accelerated, so has growth
in the awareness that our goals and ultimately mindsets are really the level
where innovation is most needed if larger systemic problems are to be
solved.125 In management literature, Peter Senge gets the earliest credit for
highlighting this need, referring to the concept of a fundamental shift
121 This is an echo of the irony touched upon earlier: that large centralized financial
institutions are among the largest source of bleeding-edge investment into blockchain
applications. See discussion supra Section II.A.
122 See Reyes, supra note 29, at 40507.
123 Verberne, supra note 8.
124 Michael Mainelli & Alistair Milne, The Impact and Potential of Blockchain on
Securities Transaction Lifecycle 1 (SWIFT Inst. Working Paper No. 2015–007, 2016), available
at http://ssrn.com/abstract=2777404.
125 See, e.g., Su-San Sit, Mindset is biggest barrier to blockchain, SUPPLY MGMT. (Mar.
13, 2018), https://www.cips.org/supply-management/news/2018/march/invest-in-blockchain-
or-risk-falling-behind-ceos-warned/.
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of mindset as metanoia, a precondition for solving big problems in
learning organizations.126 A literature stream in management about the key
role of business leaders in catalyzing fundamental shifts of awareness and
culture with stakeholders is widely seen as having been sparked by Ed
Freeman.127 Better access to data only matters inasmuch as individuals and
organizations actually care, pay attention, are not deceived, and use
information when they choose how to act.128 As events and trends in the
new millennium have shown, we have better access to information than
ever, yet there are enormous and widespread failures in human capacities
to recognize misinformation, and to care about and act upon meaningful
data that serve the goals of sustainable production and consumption.129
Now that we have reviewed the limitations of technology, we will
review available literature and consider whether legal institutions will
likely remain relevant in a blockchain-enabled world before evaluating
foreseeable implications for lawyers with business clients.
IV. WILL LAWYERS AND LEGAL FRAMEWORKS REALLY BE
RENDERED OBSOLETE?
A. Rumors of the obsolescence of law are greatly exaggerated
The potential implications of blockchain technology for the law has
spurred a range of analyses since 2015, with a variety of issues raised and
opinions proffered.130 Some suggest that both the law and attorneys will be
rendered largely obsolete or irrelevant.131 Marco Iansiti and Karim
Lakhani go so far as to argue that lawyers will be part of an entire genus
of professional services that will be rendered unnecessary.132 Conversely,
126 Peter M. Senge, THE FIFTH DISCIPLINE: THE ART AND PRACTICE OF THE LEARNING
ORGANIZATION 13 (1990). Additional reference removed to preserve anonymity of authors in
the review process.
127 R. Edward Freeman, STRATEGIC MANAGEMENT: A STAKEHOLDER APPROACH 1
(1984).
128 See Adam J. Sulkowski, Melissa Edwards, and R. Edward Freeman, Shake Your
Stakeholder: Firm Initiated Interactions to Create Shared Sustainable Value. ORG. & ENVT.
31, 3 (2018).
129 Cathy O’Neil, Big-Data Algorithms Are Manipulating Us All, WIRED (Oct 18, 2016,
7:00 AM), https://www.wired.com/2016/10/big-data-algorithms-manipulating-us/.
130 See Mark Fenwick, Wulf A. Kaal, & Erik P. M. Vermmeulen, Legal Education in the
Blockchain Revolution 3 (Univ. of St. Thomas (MN) Legal Studies Research Paper No. 17- 05,
2017), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2939127.
131 Id.
132 Iansiti & Lakhani, supra note 18, at 120.
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there is the debate over whether a new body of law will emerge, and
whether blockchain-enabled solutions could become another tool of
centralized authorities.133 Another way of characterizing forecasts is to
distinguish between those foreseeing a greater degree of obsolescence of
law as we know it, and those holding that legal frameworks will remain
relevant and necessary. Ultimately, there is a nascent consensus,
persuasively based on lessons of recent history, that existing legal
institutions will, for the foreseeable future, adapt and will be needed to
provide a framework for, among other things, enforcing consequences.134
We will return to the following themes in the next section, IV.B., to
explore the implications for attorneys.
Mark Fenwick, Wulf Kaal, and Erik Vermeulen have clearly
articulated how a combination of technologiesincluding but not limited
to blockchainthreaten the current role of attorneys and law firms.135
Their reasoning is largely based on the observation that existing training
and structures do not prepare attorneys and organizations to be agile and
adaptable.136 Further, they cite others who see most roles for attorneys
being automated137 by technologies such as blockchain.138 It is not difficult
to imagine some due diligence functions being rendered obsolete. For
example, the role of attorneys reviewing real estate ownership
documentation prior to a sale would be unnecessary if ownership was
recorded on blockchain.139 According to one estimate, blockchain could
save between $24 billion in costs related to human effort and errors in
just the arena related to title insurance.140 However, their ultimate thesis is
that the education and role of lawyers can be tweaked, saving at least a
133 See Wright & De Filippi, supra note 17, at 48.
134 Michèle Finck, Carla L. Reyes, and Kevin Werbach have, to date, provided detailed
synopses and articulations of this emerging scholarly consensus. See, respectively, Finck supra
note 26, Reyes supra note 29, and Werbach supra note 14.
135 Fenwick et al., supra note 130, at 6.
136 Id. at 5.
137 See, e.g., John O. McGinnis & Russell G. Pearce, The Great Disruption: How Machine
Intelligence Will Transform the Role of Lawyers in the Delivery of Legal Services, 82 FORD. L.
REV. 3041, 3041 (2014).
138 See, e.g., Benjamin Barton, The Lawyer's Monopoly What Goes and What Stays,
82 FORD. L. REV. 3067, 306970 (2014).
140 Schneider, supra note 28, at 45.
US
& INFO. SYS. ENGG. 183, 185 (2017).
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select few from total obsolescence.141 Deal-making and other tasks that
require ambiguity and flexibility (including, as Nick Szabo would put it,
translating the “wet code” of human norms into the “dry code” of
programming languages) still leaves room for human attorneys.142
Wright and De Philippi have suggested that a “lex cryptographia”
will emerge, consisting of “rules administered through self-executing
smart contracts and decentralized (autonomous) organizations.”143
However, a thorough reading of their article does not propose substantive
details and actually provides historical precedent and arguments for why
conventional regulation is likely to continue in a blockchain-enabled
world. Like other scholars, Wright and De Philippi review the scholarly
debate between professors Frank Easterbrook144 and Lawrence Lessig145
over whether “cyberlaw”146 is truly a separate field of law, or just a context
in which generalizable principles are applied. Wright and De Filippi also
explain why the blockchain “is—and will fundamentally remain—a
regulatable technology” because of centralized chokepoints.147 They point
out that this is a task that has been facilitated by the recent concentration
and centralization of Internet services.148
Kevin Werbach’s review of the history of the theory and practice of
regulation of the Internet further lends credibility to the view that some
amount of regulation is possible, desirable, and inevitable in the coming
age of blockchain.149 Simply put, the law has always won; it has
incorporated every disruptive technology for the sharing of ideas and value
in the history of humanity.150 Witness the cyber-libertarian manifesto,151
141 See Fenwick et al., supra note 130, at 3435.
142 Nick Szabo, Wet Code and Dry, UNENUMERATED (Aug. 24, 2008),
http://unenumerated.blogspot.com/2006/11/wet-code-and-dry.html.
143 Wright & De Filippi, supra note 17, at 4.
144 See Frank H. Easterbrook, Cyberspace and the Law of the Horse, 1996 U. CHI.
LEGAL F. 207, 207–8, 210 (1996).
145 See Lawrence Lessig, The Law of the Horse: What Cyberlaw Might Teach, 113
HARV. L. REV. 501, 502 (1999).
146 Wright & De Filippi, supra note 17, at 47.
147 Id. at 51.
148 Jack Goldsmith & Tim Wu, WHO CONTROLS THE INTERNET? ILLUSIONS OF A
BORDERLESS WORLD 65–68 (2006).
149 Werbach, supra note 14, at 3036.
150 See id. at 31.
151 See John Perry Barlow, A Declaration of the Independence of Cyberspace,
ELECTRONIC FRONTIER FOUNDATION (Feb. 8, 1996), https://www.eff.org/cyberspace-
independence.
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scholarly musings,152 and actions to assert sovereign-less zones of the
1990’s.153 On the contrary: instead of the Internet providing a haven from
government oversight and control, it became a channel of oversight154 and
control,155 or, at worse, a weapon of manipulation156 and war.157 The
Internet has been tamed and consolidated and controlled.158 Once we
accept the historical fact that what was once deemed as impossible to
regulate is now regulated, it becomes only natural to speculate how a
blockchain-enabled world could be governed by legal structures.159 A more
thorough analysis of how various authorities and jurisdictions are
attempting to categorize and regulate blockchain-based activities is
outside of the scope of this paper, but is an area that promises to continue
to be fruitful for future research and writing.
Although Max Raskin’s analysis is limited to smart contracts, his
conclusions about the role of law in the age of blockchain are
generalizable.160 He notes that the role of self-executing smart contracts is
a form of preemptive self-help that should not be discouraged by
legislatures or courts.161 However, he concludes that government and
conventional legal frameworks will be needed to intervene and prevent
enforcement of unconscionable contracts(or, more broadly, arrangements
that are against sound public policy)162 and that adopting existing
152 See David R. Johnson & David G. Post, Law and Borders: The Rise of Law in
Cyberspace, 48 STAN. L. REV. 1367, 1367 (1996).
153 See Goldsmi th & Wu, supra note 148, at 66.
154 See Evgeny Morozov, THE NET DELUSION 296 (Public Affairs 2011).
155 See Jonathan Zittrain, Internet Points of Control, 44 B.C. L. REV. 653, 673 (2002).
156 See The Latest: McMaster: Russian meddling beyond dispute, POLITICO (Feb. 17,
2018, 8:07 AM), https://www.politico.com/story/2018/02/17/mcmaster-russian-meddling-
beyond-dispute-416848.
157 See Kim Zetter, Inside the Cunning, Unprecedented Hack of Ukraine’s Power Grid,
WIRED (Mar. 3, 2016, 7:00 AM), https://www.wired.com/2016/03/inside-cunning-
unprecedented-hack-ukraines-power-grid/.
158 See Marshall Brown, Humanitarian Blockchain: Coding For A Humane, Sustainable
World Marshall Brown, FORBES (Feb.18 2018, 11:40 AM),
https://www.forbes.com/sites/marshallbrown/2018/02/15/humanitarian-blockchain-can-we-
code-for-a-humane-sustainable-world/#5bba119b6f3d.
159 Marina Fyrigou-Koulouri, Blockchain Technology: An Interconnected Legal
Framework for an Interconnected System, 9 CASE W. RESERVE J.L. TECH. & INTERNE T 1, 8
(2018).
160 Raskin, supra note 17, at 305.
161 Id.
162 Id. at 340.
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frameworks to new blockchain-enabled technologies is possible and will
encourage their adoption.163
Michele Finck has outlined an excellent typology of regulatory
approaches already adopted in similar contexts.164 Finck and Kevin
Werbach agree that innovators gain the certainty provided by a regulatory
framework.165 Finck urges a flexible and co-regulatory approach, citing
successful examples of governments explicitly allowing the sandboxing
(or experimentation in specified contexts) of blockchain applications.166 If
nothing else, regulation could at least provide a common lexicon and
settled terminology.167 For example, Angela Walch pointed out that it is
not yet completely resolved whether a blockchain is the same as a
distributed ledger,168 nor, as Werbach pointed out, is it even settled whether
one should write “blockchain” or “block chain.”169 Certainty is a good
thing, and co-regulation was a constructive phenomenon in the context of
the Internet;170 as Werbach has highlighted, “[i]f anything, the innovators
stand to lose the most by delaying government involvement in adopting
reasonable solutions.”171
As Shackelford and Myers summarize, “blockchain regulation is
happening at various levels and through various modalities beyond black
letter law, including, to use Professor Lawrence Lessig’s nomenclature,
norms, markets, and code, as well as self-regulation, and multilateral
collaboration, all of which can contribute to enhancing critical
infrastructure cybersecurity through blockchains.”172 Shackelford and
163 Id. at 340–41.
164 See Finck, supra note 26.
165 See generally Werbach, supra note 14.
166 Id. at 2.
167 See Angela Walch, The Path of the Blockchain Lexicon (and the Law) 36 REV.
BANKING & FIN. L. 713, 728–30 (2017).
168 Id. at 719.
169 Werbach supra note 14, at 1 n.1.
170 See Kevin Werbach, The Song Remains the Same: What Cyberlaw Might Teach the
Next Internet Economy, 69 FLA. L. REV. 887, 88889 (2017).
171 Id. at 889.
172 Shackelford & Myers, supra note 2, at 368. See also Scott J. Shackelford and Amanda
N. Craig, Beyond the New “Digital Divide”: Analyzing the Evolving Role of National
Governments in Internet Governance and Enhancing Cybersecurity, 50 STAN. J. INTL. L. 119,
119 (2014) (finding national governments are increasingly seeking to secure their critical
infrastructure throughout regulation that may have global impact). See generally Adam J.
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Myers’ articulation of the concept of polycentric governance is defined by
three characteristics, which, to enthusiasts of the federal system of shared
governance in the United States, will seem intuitivethe difference is that
the similar features of governance are emerging in the world of blockchain
without the equivalent of a constitutional convention.173 First, polycentric
governance is defined by a multiplicity of autonomous decision centers, at
different levels and with different methods, with more-or-less shared
goals.174 Second, it is defined by an institutional and cultural framework,
whose principles are seen as useful in terms of the nature of the collective
choice aggregating mechanism.175 The third defining characteristic is
"spontaneous order generated by evolutionary competition between the
different decision centers' ideas, methods, and ways of doing things,” and
where the relevant information for decision-making is public.176 A
precondition of polycentric systems is the reality that the governed
consent, participate, and continue to see the governance systems as useful
and legitimate.177
Carla Reyes builds upon several of the lines of reasoning above to
perhaps most throughly articulate a vision of “crypto-legal structures.”178
She foresees governments building elements of regulation into code with
international structures developing as well.179 Significantly, Reyes
explains that beyond self-execution, predictive technology and
autonomous interaction could enable law, expressed as code, to learn and
adapt, on its own, endogenously, in the course of its operation.180 Besides
reducing the lag time typically associated with legislating, regulating, or
adjudicating cases, this phenomenon actually could result in a body of
Sulkowski, Cyber-Extortion: Duties and Liabilities Related to the Elephant in the Server Room,
U. ILL. J.L. TECH. & POL'Y 19, 3360 (2007) (examining the duties and potential liabilities of
businesses that fail to protect themselves from cyber- extortionists).
173 See Shackelford & Myers, supra note 2, at 369-–74.
174 Id. at 372 (citing Vincent Ostrom & Elinor Ostrom, A Behavioral Approach to the
Study of Intergovernmental Relations, 359 ANNALS OF THE AM. ACAD. POL. SOC. SCI. 138–40
(1965)).
175 Id.
176 Id.
177 See Shackelford & Myers, supra note 2, at 372.
178 See Reyes, supra note 29, at 40001.
179 Id. at 405.
180 Id. at 413.
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substantive rules that actually deserve their own moniker and to be
recognized as a discrete subset of law.181
Interestingly, Reyes does not delve deeply into the potential due
process problems presented by the possibility of self-revising law-in-
code.182 Presumably, the answer to any such objection is that code can be
programmed with procedural safeguards to assure that, for example,
humans receive fair notice when software code starts self-editing and
trying to play the role of autonomous legislator.183 Nevertheless, the
ultimate thesis of Reyes’ scholarship is that law and government can and
should play a constructive role in both driving the adoption of blockchain-
enabled technologies and then enforcing the real-world consequences
thereof.184 In this view, legal professionals and institutions do not become
obsolete, but rather cooperate with coders to achieve both private and
public policy goals.
Last, but-certainly not least, entrepreneurs who are bringing
blockchain-enabled applications to market confirm that conventional legal
frameworks have a role to play, and a lawless “Wild West” context is not
the regulatory environment that they envision as ideal.185 Rather, echoing
the scholarly opinions cited above, entrepreneurs in the blockchain space
concur that they prefer a sandboxing approach where regulators stay
informed, educated and up-to-speed, and, while open-minded and flexible,
are ready to step in and provide certainty and remedies if and when markets
fail.186 This should not be a surprise; as mentioned above, even staunch
libertarians see a role for legal frameworks in protecting the rule of law,
including property rights, enforcing agreements, and awarding damages
when harm and fraud are committed.187 Now that we have established that
legal frameworks will not become obsolete, we move on to the question of
how business lawyers will be impacted and how they can adapt to add
value in a blockchain-enabled business world.
181 Id. at 410.
182 See Reyes, supra note 29, at 42627.
183 Id.
184 Id. at 445.
185 Matsumura, supra note 13.
186 Id. See discussion supra Part V.A.
187 See Hayek, supra note 116, at 45.
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B. Specific Impacts on Lawyers
Contrary to stereotypes about lawyers being risk-averse and late
adopters of new technology, some law firms already started adopting
blockchain-enabled innovations as of 2018.188 A quarter of the 100 largest
global law firms joined Enterprise Ethereum Alliance and lawyers’ interest
in blockchain discernibly grew in 2017.189 Attorneys worldwide seem to
be embracing a perspective that, while lawyers will still have a role for the
next few decades,190 change is happening now inside and outside of firms,
and the functions and expectations of attorneys may be changing soon.191
The aim of this section is to summarize and frame the evolving roles of
lawyers in a blockchain-enabled world.192 At the end of this section the
concepts and terminology of proactive lawclosely related to the
scholarship of law-and-strategywill be employed to help frame the
evolving future role of attorneys.
1. Educating Clients on Their Options and Risks
A background risk is simply falling behind and not meeting client
expectations.193 Previous sections of this paper have reviewed the inherent
risks of blockchain-enabled applications, including the risk that the
original records entered into a system are faulty, or that even “unhackable”
188 See Jasmine Ye Han, How Blockchain Technology Is Transforming the Legal
Industry, BLOOMBERG LAW (Feb. 20, 2018 7:31 AM ), https://bnanews.bna.com/daily-labor-
report/how-blockchain-technology-is-transforming-the-legal-industry.
189 Id. (The legal industry was one of the fastest-growing industries joining the Wall
Street Blockchain Alliance last year, according to founder and chairman Ron Quaranta.)
190 Piper, supra note 99. As summarized by Piper: “Today’s status quo is unlikely to
change significantly for another 30 years if their predictions are correct. ‘Unlike the development
of the internet, the infrastructure is already in place for blockchain to take off,’ says Joost
Linnemann, Attorney-at-law at Kennedy Van der Laan in the Netherlands and IBA Technology
Law Committee Membership Officer. In the back offices of banks, for example, blockchain
applications are developing quickly. While there’s not likely to be a big bang, he says, at some
stage the blockchain era will have arrived. Linnemann is also skeptical about the disappearance
of lawyers with the proliferation of smart contracts.”
191 Han, supra note 188.
192 In doing so, this article endeavors to strike a balance between blockchain evangelism
and Neo-Luddism.
193 Han, supra note 188. (According to Holland & Knight partner Joe Dewey, “If clients
adopt it and we have to interact with them on it, we will have little choice but to be on board
ourselves.”) See also Id. (According to Judith Rinearson, partner at K&L Gates, “Blockchain is
going to have an impact on how we do business and how we live on a scale similar to the Internet.
. . . Clients want lawyers who understand it, and who can help them adapt.”).
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systems end up hacked.194 Some see the list of risks growing over time as
attempts arise to scale-up blockchain applications.195 These risks include
that of consensus-building systems breaking down or drastically different
regulatory approaches being taken in different jurisdictions.196
However, even if and when blockchain-enabled applications work
flawlessly, they still might not be the best choice for a business client.
Ironically, a key implication of a business environment in which
blockchain-enabled technologies begin entering mainstream use is that
attorneys must be prepared to educate and caution clients when not to
embrace an application. A prime example is smart contracting. Jeremy
Sklaroff points out that smart contract advocates do not envision
enhancing human activity, but rather that such contracts will replace
“every stage of agreement formation and performance.”197 As he goes on
to argue: shifting away from human-language contracts creates new
inefficiencies.198 In volatile environments or whenever there is uncertainty
about an agreement, Sklaroff points out that conventional contracting
allows parties to arrive at an enforceable agreement without requiring total
and precise prescience by referencing customs.199 He points out that
attorneys can include the right to modify clauses and discretionary
language that allows for selectively enforcing breaches.200 Before leaping
in to help clients adopt smart contracts, lawyers would be wise to keep in
mind Sklaroff’s admonition: “These two forms of flexibility—linguistic
ambiguity, and enforcement discretion—create important efficiencies in
the contracting process . . . [b]y eliminating this flexibility, smart
contracting will impose costs that are more severe and intractable than the
ones it seeks to solve.”201 A better warning might allow for the possibility
that a smart contract is appropriate for some contexts, and suggests that
lawyers educate themselves and their clients about the risks and benefits
194 See supra Part I.
195 See Shackelford & Myers, supra note 2, at 37382.
196 Id. at 373 n.214 (citing Vincent Ostrom & Elinor Ostrom, A Behavioral Approach to
the Study of Intergovernmental Relations, 359 ANNALS OF THE AM. ACAD. POL. SOC. SCI. 258
(1965)).
197 Sklaroff, supra note 30, at 264.
198 Id. (These stem from three aspects of smart contracts, according to Sklaroff:
automation (which demands that every agreement be formed from comprehensively-defined
terms), decentralization (which outsources verification to third parties), and anonymity (which
by means there is a lack of commercial context to give meaning to terms)).
199 Id. at 282–83.
200 Id. at 279–82
201 Sklaroff, supra note 30, at 264.
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of conventional versus smart contracts, so as to tailor a solution that best
serves clients’ interests.
Lawyers should also be cognizant of the risk of a lack of
interoperability between blockchain-enabled systems and between
businesses and among law firms.202 This perspective is somewhat in
contrast with the view of Aaron Wright when he states that “[w]e can use
blockchain as a ‘spine’ to manage the entire legal industry, build more
efficient systems, decrease the cost of legal services, and make sure people
get the legal services they need[.]”203 One of the provocative streams of
future legal research (if not a subject for litigation in the courts) will be, as
in the context of office software developed by Microsoft, whether
blockchain-enabled business applications will be a form of legally
tolerated natural monopolies in the United States.204
2. If a Smart Contract is Adopted, What Next?
Blockchain applications in the context of supply chains—such as
smart contractscould increase the ability of attorneys with a proactive
mindset to prevent disputes and achieve their clients’ goals. This is
because, as discussed above, the monitoring of contractual compliance and
the triggering of consequences—inasmuch as the parties so choose and the
technology allows—is accomplished automatically by software code.205
Some point out that automatic consequences are not really a novelty in the
world of contracting;206 the difference now is that technology allows more
complexity in agreements and the permutations of the outcomes built into
the code.207 As Kevin Werbach and Nicolas Cornell argue, this capacity of
current technology to capture and self-execute more of an agreement is a
value-adding advancement, but clarifies—not obviates—the need for
202 Han, supra note 188.
203 Id.
204 See Franklin A. Gevurtz, Vertical Restraints on Competition, 54 AM. J. COMP. L.
357, 358–59 (2006).
205 Jonas DeMuro, 7 ways blockchain will change the legal industry forever, TECH
RADAR (Jan. 18, 2018), https://www.techradar.com/news/7-ways-blockchain-will-change-the-
legal-industry-forever.
206 Piper, supra note 99. (As Piper points out: “[A]utomated contracts are not newthat
is what a customer’s standing order to pay a monthly mortgage is, for example. The difference
with a smart contract is that, once the agreement is in place, the bank cannot decide not to
perform it.”).
207 See Werbach & Cornell, supra note 17, at 367.
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attorneys in formulating promises and enforcing consequences.208 One of
the scholars consulted on this article is also one of the founders of a
company, OpenLaw, whose technology aims to enable lawyers to form
smart contracts and to decrease “the cost and friction of creating, securing,
and generating binding legal agreements.”209 One of the implications of a
tool like OpenLaw is that “a lot of the scut work lawyers do on a day-to-
day basis will presumably go down over time.”210 A partner and leader in
the real estate group of Holland & Knight is developing a similar platform
called ContractCode and agrees with this description.211 The key
implication of such tools for attorneys is that, more than usual, they need
to help their clients imagine what outcomes they truly and ideally want, to
work-through every conceivable contingency, and to specify, with greater
precision and certainty, the consequences that clients want.
3. Property, Perpetual Records, and Privacy
Property is another specific subject area in which lawyers will need
to take a more proactive role.212 Protecting ownership rights over creative
works (including images, audio, and video files, as well as designs, text,
and symbols) has been difficult in the digital age.213 Often, even when
systems and platforms have evolved to secure property rights (including
the right to exclude others from accessing a work and/or the ability to
extract value in exchange for access) eventually “end runs” have
developed.214 Companies plan to offer platforms for registering intellectual
property and ‘anchoring’ it using blockchain.215 The implication for
attorneys—especially in contexts where clients attempt to use independent
contractors to generate intellectual propertywill be a need to be engaged
in the systems by which property is registered.216
On the other hand, Benito Arruñada has specifically focused on the
impact of blockchain technology on this field of law and has concluded
208 Id. at 318.
209 DeMuro, supra note 205.
210 Han, supra note 188.
211 Id.
212 DeMuro, supra note 205.
213 See Stefan Bechtold, Digital Rights Management in the United States and Europe,
52 AM. J. COMP. L. 323, 331 (2004).
214 Id. at 327–31.
215 Han, supra note 188.
216 Id.
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that blockchain enthusiasts are the latest generation of technology
evangelists to underestimate the value of conventional third party
institutions.217 As with smart contracts, a key role of lawyers will be to
educate clients about their options when choosing between legacy systems
and new forms of registering property ownership. An interesting tangent
of the property tracking issues is the more general matter of public records,
such as titles and deeds,218 or certification of certain declarations by an
official source of authority.219 Currently, notaries public confirm and
verify signatures on legal documents, such as deeds and contracts.220
Blockchain-enabled applications could record-and-preserve such
documents as part of a digital ledger that includes timestamps and
fingerprints, which could potentially eliminate the stamp of notary public
as a necessity.221
Also, closely related to property records (and of key importance to
this paper’s primary focus on supply chains) is the issue of establishing a
chain of custody.222 Consider for a moment the array of claims that could
involve a lawyer that relate to the details of “who gave what to whom
under what circumstances.” It could involve a criminal case or a civil
claim. It could involve opioid-based pain medication moving from a
pharmaceutical producer to a pharmacy to point-of-sale to a patient with a
prescription who overdoses. It could involve any part that fails and leads
to a product liability case. Or, it could involve consumer fraud claims
based on false statements about ingredients or labor or environmental
issues in the supply chain. Or, it could involve embezzlement or other
white-collar crimes. Until now, proving any such claims has typically
involved finding a paper trail for each piece of evidence and maintaining
records until evidence is presented in court.223 Attorneys defending a
business client have had a somewhat easier task in challenging ass ertions
and evidence. Digital evidence has, until now, proven to be even more
difficult from a chain-of-custody perspective than proving chains-of-
217 Benito Arruñada, Blockchain’s Struggle to Deliver Impersonal Exchange, 19 MINN.
J.L. SCI. & TECH. 56, 103-04 (2018).
218 As discussed in earlier sections, conventional record-keeping of real estate ownership
could be a significant area for disruption. See Nofer, et al., supra note 140, at 185.
219 DeMuro, supra note 205.
220 Id.
221 Han, supra note 188.
222 DeMuro, supra note 205.
223 Id.
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custody for physical objects, including, for example, files found on a hard
drive, or a device transmitting or receiving data on a Wi-Fi network log.224
As was discussed in previous sections, a distributed digital ledger creates
permanent and transparent records of chain of custody, preserved like a fly
in amber, so evidence is never discarded or destroyed.225 In the context of
protracted litigation, testimony on chain of custody will therefore not be
necessary (or, at least, would be much more limited in scope), thus creating
another efficiency.226 “Blockchain-based records are admissible as
evidence to courts in Vermont. Arizona also enacted a law in 2017 that
acknowledged the legality of signatures and contracts secured on
blockchain.”227 The implications for attorneys on this issue, therefore, is to
first be even more hawkish in gauging all possible risks created by claims
or promises related to claims and services, and to other liability risks
arising from the conduct of employees and business leaders, and, second,
to warn their clients about the risks that arise from operating in a reality
defined by extreme and permanent transparency.228
Privacy in the age of blockchain possibly presents the most difficult
thicket of issues.229 There are already conflicting interests, obligations, and
legal duties, to say nothing of conflicts between jurisdictions.230 By
creating immutable records, both public and private blockchain
applications have the potential to offend individuals’ sense of entitlement
224 Id.
225 According to David Fisher, co-founder of Integra Ledger, “if we sign a contract, now
and forever, we will be able to confirm that.” Han, supra note 188.
226 DeMuro, supra note 205.
227 Han, supra note 188.
228 Imagining, and then contemplating and fully appreciating a fully transparent world
where secrets cannot be kept from others in the present or from future observers may be
facilitated by reading works of science fiction such as Arthur C. Clarke’s and Stephen Baxter’s
book, THE LIGHT OF OTHER DAYS (2000). In what could be the greatest eventual damage to the
profitability of certain legal practice areas, potential clients may drastically curtail certain forms
of criminal activity and malfeasance in a drastically more transparent world. See id.
229 For an early discussion of the complications in navigating data privacy laws, see
Patricia Mell, A Hitchhiker’s Guide to Trans-Border Data Exchanges Between EU Member
States and the United States Under the European Union Directive on the Protection of Personal
Information, 9 PACE INT'L L. REV. 147, 149–52 (1997).
230 Ravi Antanid, The Resistance of Memory: Could the European Union’s Right to Be
Forgotten Exist in the United States? 30 BERKELEY TECH. L. J. 1173 (2015). For a skeptical
perspective as to whether privacy is even possible in the modern era, see generally Sandra Byrd
Petersen, Your Life s An Open Book: Has Technology Rendered Personal Privacy Virtually
Obsolete? 48 FED. COMM. L. J. 163 (1995).
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(or legal rights, in some cases) to be forgotten.231 While the European
Union often gets cited as the jurisdiction where privacy is most protected,
privacy and privileged access to personal records is required by several
federal statutes in the United States.232 As businesses develop, use, and
adopt blockchain-enabled record keeping, attorneys need to be proactive
more than ever in investigating and educating their clients about the
consequences of their choices with regard to creating records and the
possibly permanent implications for others’ privacy.
Although this paper has deliberately not focused on Bitcoin and the
implications of blockchain for the world of finance, Bitcoin and other
blockchain-powered cryptocurrencies will matter in the context of supply
chains in that they will become increasingly accepted in transactions.
Therefore, attorneys advising business clients need to stay up-to-date and
familiar with the multiple ways that cryptocurrencies are perceived.233 Just
in the United States, various federal regulatory authorities have defined
cryptocurrencies in very different ways.234 For example, the Internal
Revenue Service deems cryptocurrencies to be property,235 while the
Securities and Exchange Commission sees fraudulent investments offering
cryptocurrency as within its jurisdiction,236 and FinCEN likewise
231 See Andrew Neville, Is It a Human Right to Be Forgotten? Conceptualizing the
World View, 15 S. CLARA J. INT'L L. 157 (2017).
232 See, e.g., The Children's Online Privacy Protection Act of 1998 (“COPPA”) 15
U.S.C. §§ 6501-6506 (2000); Gramm-Leach-Bliley Financial Modernization Act, Pub. L. No.
106-102, 113 Stat. 1338 (1999) (codified at 15 U.S.C. §§ 68016809 (2000)) (GLBA is also
known as the Financial Industries Modernization Act); Health Insurance Portability Act, Pub.
L. No. 104-191, 110 Stat. 1936 (codified as amended in scattered sections of 18, 26, 29, 42
U.S.C.); Christopher Rajotte, Andrew Ittleman & Mitchell Fuerst, Bitcoin Taxation:
Understanding IRS Notice 2014-21, BITCOIN MAGAZINE (Apr. 4, 2014, 9:20 PM),
https://bitcoinmagazine.com/articles/bitcoin-tax-understanding-irs-notice-2014-21-
1396660800/.
233 For a partial summary of how various jurisdictions were diverging from each other
in their treatment of Bitcoin, and whether to recognize it as something similar to currency, see
id.
234 Jai R. Massari, Annette L. Nazareth, Zachary J. Zweihorn, Jeanine P. McGuinness,
& Zachary B. Shapiro, SEC, FinCEN, and CFTC Actions Continue to Paint a Fragmented
Regulatory Landscape for Digital Tokens, DAVIS POLK (Mar. 8, 2018),
https://www.finregreform.com/single-post/2018/03/08/sec-fincen-cftc-actions-continue-paint-
fragmented-regulatory-landscape-digital-tokens/.
235 INTERNAL REVENUE SERVICE, NOTICE 2014–21, at 2 (Mar. 25, 2014).
236 Louise Matsakis, Rest Easy, Cryptocurrency Fans: Ether and Bitcoin Aren’t
Securities, WIRED (June 14, 2018, 4:19 PM), https://www.wired.com/story/sec-ether-bitcoin-
not-securities/.
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sees cryptocurrencies as money services businesses.237 This is not to say
that cryptocurrencies may not become a means of exchanging value in
mainstream business supply chains, but these developments highlight the
importance of lawyers staying abreast of the risks and consequences of
using these assets as units of exchange.
C. The Scholarship of Proactive Law: Visualizing the Evolving Role
of Attorneys
By combining the take-aways of the previous section with the key
insights of the scholarship of proactive law, we arrive at a picture of what
skills and activities attorneys should view as their opportunity to add value
to the business enterprise. As promised, the scholarship of proactive law
can provide us with a means and a model of appreciating the evolving role
of lawyers in a blockchain-enabled business environment.
Proactive law is defined and differentiated from conventional
approaches to law in that it sees the lens of legal analysis and role of
lawyers as best deployed in planning the future, rather than responding to
events in the past.238 The proactive law perspective does not view law as a
set of prohibitions, restrictions, and limitations with which companies and
people need to comply.239 Nor does this conceptualization of law see
expenditures on attorneys as a cost factor, a burden, or, strictly speaking,
a protective measure for one’s own interests to the exclusion of all other
parties’ interests or needs.240 This framing stands in sharp contrast to the
adversarial and backward-looking model which is so dominant in the
Anglo-American system.241 Overall, proactive law positions law as an
237 Amy Castor, FinCEN Deals Major Regulatory Blow to ICOs and Exchanges,
BITCOIN MAGAZINE (Mar. 7, 2018, 11:38 AM), https://bitcoinmagazine.com/articles/fincen-
deals-major-regulatory-blow-icos-and-exchanges/.
238 Gerlinde Berger-Walliser, The Past and Future of Proactive Law: An Overview of
the Development of the Proactive Law Movement, in PROACTIVE LAW IN A BUSINESS
ENVIRONMENT 13 (Berger-Walliser & Østergaard eds., 2012).
239 Id.
240 George J. Siedel & Helena Haapio, Using Proactive Law for Competitive Advantage,
47 AM. BUS. L. J. 641, 64144 (2010) (comparing proactive law to the perspective of law and
strategy in the United States and how proactive law can help identify sources of competitive
advantage).
241 Robert A. Kagan, Adversarial Legalism and American Government, 10 J. POL.
ANALYSIS & MGMT. 369, 369–406 (1991). See Marc S. Galantera, Reading the Landscape of
Disputes: What We Know and Don’t Know (and Think We Know) About Our Allegedly
Contentious and Litigious Society, 31 UCLA L. REV. 4, 51 (1983) (providing comparative data
on the costs of resources devoted to handling disputes in various countries).
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enabling instrument to create success and foster sustainable relationships.
All of this has been suggested by other authors using slightly different
terminology.242
To review the take-aways of the immediately preceding section:
first, a key function of attorneys will be to educate and help clients decide
whether and when to embrace blockchain-enabled solutions. Second,
simple tasksin any domain, including supply chain contracts and
documentation related to property—will be automated, but this means
more thought in setting up the “if-then” triggers, etc.243 As a practitioner
put it, “lawyers will focus more on complex agreements, and the smart
contract triggers embedded in those agreements. Their ability to carefully
set forth the rules behind the smart contract coding, and get the agreement
to reflect those rules, could become even more relevant.”244 None of this
necessarily means lawyers will need to be coders,245 but just as managers
need legal astuteness, lawyers will need to have technological astuteness,
or enough basic knowledge to be able to communicate and plan and act
effectively with software coders.246
Put another way, as Nick Szabo has articulated and as mentioned
above in Section IVA., in a world of smart contracts, someone has to help
determine and translate the “wet code” of human norms into the “dry code”
of softwarethis will be an aspect of the role of lawyers.247 Some would
even add more consequences to come further in the future: if artificial
intelligence or machine learning is married to fully transparent and
comprehensive records, then programs could reveal patterns or model
242 Constance E. Bagley, Winning Legally: The Value of Legal Astuteness, 33 ACAD.
MGMT. REV. 378, 38081 (2008) (proposing a framework for firms to use “legal astuteness” for
competitive advantage that included a “proactive approach”).
243 Han, supra note 188.
244 Id.
245 Piper, supra note 99. However, Piper acknowledges the opinion of a practice group
leader that, “[l]awyers are going to have to learn how smart contracts work in practice and what
the trigger points are for payments and other transactionsknowledge of which today is usually
provided by the client.” Id.
246 Han, supra note 188. As Bloomberg reporter Han summarized: “Will lawyers need
to be coders? Nearly everyone interviewed said no. Instead of being proficient coders
themselves, lawyers will work with engineers, Dewey [partner at Holland & Knight] said. But
‘knowing what the process involves and the right questions to ask would be an important skill
set[.]’” Id.
247 Szabo, supra note 142.
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the probabilities of outcomes.248 The ability to intuitively spot patterns and
warn of foreseeable risks has, until now, been a uniquely human aspect of
expertise that is developed over time.249 All of these build to one
overarching observation: that the role of attorneys will move “up the value
chain” or, in other words, away from glorified scribe work to more creative
and demanding tactical and strategic functions.250
Moving on to the mindset that lawyers are well-advised to foster, a
key change will be accepting that law and governance is happening in
more than one way, and this requires extreme flexibility and an ability to
see the same issue from several different perspectives. For example,
blockchain—in its application as Bitcoinhas, depending on the
jurisdiction, time, and relevant agency, been defined as money, property,
and, because it is ultimately software, even speech.251
Especially if decentralized sourcing of inputs becomes more
commonplace, such as the sourcing of power in blockchain-enabled peer-
to-peer sharing networks, then lawyers will need to adapt to a reality where
no central authority is completely in charge of providing a key input.252
There are several implications of polycentric governance for lawyers.
Lawyers (and the clients they counsel) may need to prepare themselves for
a greater degree of transparency and scrutiny and of surrendering complete
control than that to which they are currently accustomed.253 Articulating
values and vision and convincing internal and external stakeholders of the
merits and legitimacy of goals and systems will be more critical than it is
now.254 Overall, rather than command-and-control, telling a story and
creating meaning for others to get their buy-in and willing cooperation
248 Id.
249 Han, supra note 188.
250 This meta-observation on the role of attorneys vis-à-vis their business clients is
consistent with other predictions related to the future-of-work, holding that creativity and the
ability to see holistic realities will be increasingly valued capacities. See Daniel Pink, A WHOLE
NEW MIND: WHY RIGHT-BRAIN ERS WILL RULE THE FUTURE (2005).
251 See, e.g., Christophe r Wolf, THE DIGITAL MILLENNIUM COPYRIGHT ACT: TEXT,
HISTORY, AND CASELAW 1053–55 (2003); Adam Satariano, Apple-FBI Fight Asks: Is Code
Protected as Free Speech? BLOOMBERG TECH. (Feb. 23, 2016, 7:55 PM),
https://www.bloomberg.com/news/articles/2016-02-24/apple-fbi-fight-asks-is-code-protected-
as-free-speech.
252 As mentioned in Part III.A., peer-to-peer electric power sharing using a blockchain-
enabled platform has begun. See supra notes 64 and 65 and accompanying text.
253 This was discussed supra Part IV.C. in the context of sustainability data tracking and
transparency.
254 See Sulkowski et al., supra note 128.
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matters more in polycentric, and inherently more transparent, governance
systems.255
One particular model from the literature on proactive law can help
lawyers re-imagine their role and the function of law.256 The model
visualizes law as a medium between a firm and its external contexta
medium in which relationships are defined and the limits and
consequences of side effects are set.257 In this view, law is like a semi-
permeable cell membrane between the internal functions of the firm and
the realms of ecological systems and society in which the firm inextricably
operates, from which it procures resources, and into which it releases
products, services, and side effects such as pollution.258 Blockchain-
enabled applications that help firms communicate with external
stakeholders can be seen as part of this membrane between the firm and its
surrounding environment.259 This view is helpful in summarizing and
conceptualizing how blockchain-enabled technologies can be seen as a
tool that, in conjunction with a proactive approach to law, can help
business leaders and their attorneys to see risks and opportunities and plan
and act in a way that achieves outcomes while eliminating objectionable
harm.
To recap: the lower-skill functions of lawyers will be automated,
blockchain is expected to generally create more transparency and
decentralized power, giving the ability to encode norms and strictly-
defined outcomes into self-executing contracts. So overall, what do those
trends mean in terms of a meta-trend for the role of lawyers? This paper
concludes by positing the following: a blockchain-enabled business
environment allows lawyers to help firms re-think and commit to their
255 See Adam J. Sulkowski and Sandra Waddock, Midas, Cassandra & the Buddha:
Curing Delusional Growth Myopia by Focusing on Thriving. J. CORP. CITIZENSHIP, 61, 15-43
(2016).
256 Visualizations have been recently encouraged as a way to better convey legal
concepts and relationships. See Gerlinde Berger-Walliser, Thomas D. Barton, & Helena Haapio,
From Visualization to Legal Design: A Collaborative and Creative Process, 54 Am. Bus. L. J.,
347, 347–92 (2017).
257 Gerlinde Berger-Walliser, Paul Shrivastava and Adam Sulkowski, Using Proactive
Legal Strategies for Corporate Environmental Sustainability, 6 MICH. J. ENVTL. & ADMIN. L.
1, 18-20 (2016).
258 Id. at 20.
259 This is especially true of public blockchain-enabled applications. Private blockchain-
enabled technologies can be imagined as more limited to the inside of the firm. As explained in
Part II., this is because private blockchains can be permissioned, or, in other words, restricted in
terms of who has access to the records.
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mission and values. Lawyers are well-positioned to help business leaders
crystalize what are the duties of the firm and, critically, what is entirely
unacceptable; this is a natural consequence of understanding fiduciary
duties and the risks and costs of side effects.260 Lawyers, in conjunction
with software engineers, can then build non-negotiable minimum
requirements dictated by law and values into code. This can be seen as
writing the DNA of a firm. Instead of a triple bottom linethe aspiration
of business visionaries to further the interests of profit, people, and
planet—lawyers could become the co-authors of a firm’s “triple-helix,” to
borrow the term and accompanying metaphor from the biological
sciences.261 The metaphor is apt, in that building company values, duties,
norms, and goals into smart contracts governing their supply chain would,
at least in theory, mean that a simple code is hardwired into a robust and
resilient structure262 to ensure an outcome. This vision is consistent with
that of the concept of a DAO, alluded to earlier in the review of
blockchain-related literature in Section IV.A., except arguably not quite as
radical; rather than completely replacing conventional centralized
governance, the metaphor of writing firm DNA should be seen as a logical
step in the evolution of formulating and publishing—encoding—a firm’s
policies and procedures.
The foregoing speculation on the future role of attorneys in a
blockchain-enabled business environment points to potential future areas
of research. Unlike previous phases of the ongoing technological
revolution, there may be a greater basis upon which to differentiate the
body of law that relates to blockchain as separate and distinct from other
contexts. At this point in time, it appears that the general common law
260 Berger-Walliser et al., supra note 257 at 18-20.
261 This idea was somewhat suggested in an unpublished conference paper by Niels
Faber and Henk Hadders, Towards a blockchain enabled social contract for sustainability -
Creating a fair and just operating system for humanity, First International Conference on New
Business Models, Toulouse Business School, Toulouse, France (June 2016),
https://www.researchgate.net/publication/303923175_Towards_a_blockchain_enabled_social_
contract_for_sustainability_-_Creating_a_fair_and_just_operating_system_for_humanity. The
metaphor of the triple helix was recently suggested by John Elkington, the author of Cannibals
with Forks, who is normally credited with having coined the term “triple bottom line.
ELKINGTON, supra note 74.
262 The double helix structure of deoxyribonucleic acid (DNA) is such a robust and
efficient system for coding information that data scientists are literally experimenting with
encoding and storing data on human-engineered DNA structures. Yaniv Erlich & Dina Zielinski,
DNA Fountain enables a robust and efficient storage architecture, 355 SCIENCE, 95054 (Mar.
3, 2017). (Here, the use of the term DNA is intended to serve purely as a metaphor, although it
is actually possible to now store, say, a company’s collected policies (its encoded values and
rules-of-conduct, or metaphorical DNA) onto actual DNA).
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principles of contracting and torts will still be readily adaptable to
foreseeable applications of blockchain technology. However, periodic
reviews of best practices and disputes and public and private sector
responses to unforeseen problems in the deployment of blockchain-
enabled applications will be valuable to ascertaining whether a new
specialty of law is truly emerging. There is a wealth of interdisciplinary
research opportunities related to testing whether the vision of “attorneys
writing the DNA of firms” turns out to be substantiated or not.
Practitioners and academics in several business disciplines, data sciences,
plus the humanities have an opportunity to actively test and observe the
process by which firms integrate norms, goals, law, and their own policies
into blockchain-enabled applications.
CONCLUSION
This paper has reviewed the basic principles of blockchain
technology and its pitfalls and potential as it relates to optimizing supply
chains. Undoubtedly it has the potential to increase transparency and trust
once a record is created. After reviewing available literature, however, the
paper concludes that optimism with regard to blockchain should be
tempered with an appreciation for its limitations. Law will not become
irrelevant; on the contrary, attorneys will still have a role in translating
human intentions into the world of code and the mechanisms for enforcing
consequences in physical reality. We have also considered the last mile
problem and highlighted the role of law at both the point at which a record
is created and the point at which information is accessed. Someone has to
create records, and consumersor else governmental or private sector
intermediariesstill have to care enough to actually alter behavior based
on information about a product or service. The human element also cannot
be underemphasized in the context of blockchain-enabled applications
eliminating harmful side effects of business. Such goals can sometimes be
expressed through business planning, sometimes through laws, but
certainly there is a need for attorneys in translating human norms into code
and then resolving disputes and enforcing expectations. Optimism about
blockchain technology as a means of optimizing business supply chains
should be tempered with a dose of pragmatic realism: it is a tool that must
be married to good governance and legal frameworks to maximize its
impact.
***
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Similar to the early days of the Internet, today, the effectiveness and applicability of legal regulations are being challenged by the advent of blockchain technology. Yet, unlike the Internet, which has evolved into an increasingly centralized system that was largely brought within the reach of the law, blockchain technology still resists regulation and is thus described by some as being “alegal”, i.e., situated beyond the boundaries of existing legal orders and, therefore, challenging them. This article investigates whether blockchain technology can indeed be qualified as alegal and the extent to which such technology can be brought back within the boundaries of a legal order by means of targeted policies. First, the article explores the features of blockchain-based systems, which make them hard to regulate, mainly due to their approach to disintermediation. Second, drawing from the notion of alegality in legal philosophy, the article analyzes how blockchain technology enables acts that transgress the temporal, spatial, material, and subjective boundaries of the law, thereby introducing the notion of “alegality by design”—as the design of a technological artifact can provide affordances for alegality. Third, the article discusses how the law could respond to the alegality of blockchain technology through innovative policies encouraging the use of regulatory sandboxes to test for the “functional equivalence” and “regulatory equivalence” of the practices and processes implemented by blockchain initiatives.
... Rather than trying to directly regulate the behaviors of Internet users, governments sought to instead regulate strategic gateways and chokepoints, such as Internet service providers. While these approaches to regulation have not yet gained much traction in the blockchain policy arena, the identification of new mechanisms to control or influence the operations of a blockchain-based system will become increasingly necessary (Koens & Poll, 2018), as the technology gets adopted in the context of private companies, public sector agencies or other institutional frameworks (Sulkowski, 2019). An important question to address-as Johnson andPost (1996, p. 1375) had already observed with respect to cyberspace-is who can legitimately exercise control or influence a public and permissionless blockchain network? ...
... Smart contract on blockchain reduces time and cost delays of handling and forming the contract manually. The possible cases of smart contracts are pre-contracted budgets and deals to automated access systems and extending from e-commerce to autonomous machine transactions (Sulkowski, 2019). Ujo Music is a decentralized music platform that allows the artists to record a piece of music on a blockchain-based smart contract that shows the amount of share of each stakeholder in the project. ...
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Purpose Blockchain technology was developed to synchronize the data and transactions over the supply chain network and connected nodes. This paper aims to show how blockchain technology can enhance flexibility and agility in supply chain operations. The integration of blockchain and other recently developed technology can help deal with supply chain uncertainties and other challenges being faced by the industry. Design/methodology/approach Through an extensive literature review of existing research papers and conversation with supply chain managers, barriers and challenges in the supply chain were identified. Some elements were researched of blockchain technology that can be used to resolve some challenges. Blockchain technology and other technologies integration is developed for implementation in supply chain for better visibility and efficiency of supply chain. Findings The challenges in the supply chain are categorized, and the solution is given through the integration of blockchain and other technologies like Internet of Things and artificial intelligence. The integration shows the execution of tasks through blockchain and various technologies in supply chain. Research limitations/implications Blockchain in supply chain is finding its strong place in India when compared to developing nations. There is a need for technology experts, supply chain managers and consumers to understand blockchain’s importance. Challenges faced by industries to use blockchain may be analyzed further with real-life industry case studies. Practical implications This research helps enterprises in successful execution of smart technologies in their supply chains. This research helps enterprises in successful execution of smart technologies in their supply chains. Managers and practitioners may use the models developed in real-time implementation. The technologies are described in detail to help the practitioners select the best suitable for their organization. Social implications Digital supply chains are finding the way in industries due to lean and efficient nature. It is beneficial to use the smart technologies to make supply chain green and sustainable. Originality/value The implementation of the digital supply chain and its challenges are discussed in the research paper. This will work as a platform for research in the area of technologies for supply chain.
... This section provides a comprehensive identification of the specific supply chain functions that can be connected by the use of blockchain and cybersecurity. The prior contributions of blockchain technologies adoption in the supply chain management have been highlighted with notable examples, including improved data security and smart contracts; digital trust and supply chain relationship management; the tracking of the possession of goods and the identity of suppliers [81,82]; governance and legal frameworks for the execution of blockchain [83]; physical access control management based on Hyperledger Fabric platform and the security of IoT networks [84,85]; and integration with cutting edge technologies for storing and transferring encrypted data to the edge nodes [86]. Based on the most cybersecurity focused blockchain applications, "Internet of things" and "Transaction data" have received the most attention from scholars interested in the intersection of BDLT and cybersecurity and supply chain. ...