There has been much buzz in the media recently about blockchain technology and its ability to transform the way a number of industries do business. In Australia, for example, ASX has been investigating the implementation of blockchain technology to replace its current CHESS market clearing and settlement platform, and new blockchain-based energy trading technology is being trialled.
However, as with many emerging technologies, there are still concerns in the market regarding the security and reliability of blockchain. The development of standards and regulations for blockchain has a role to play in establishing market confidence in, and supporting the eventual commercial implementation of, blockchain technology.
In September 2016, the International Organization for Standardization (ISO) approved Standards Australia’s proposal for new International Standards on blockchain and announced that Australia would manage the Secretariat of ISO/TC 307, the technical committee established to develop these standards. As part of this role, Standards Australia published its Roadmap for Blockchain Standards Report (Roadmap). The Roadmap is based on the results of a consultation process conducted between November 2016 and February 2017.
This article provides a basic overview of blockchain and a summary of the key points raised in the Roadmap.
In its simplest terms, blockchain is a digital database that records and verifies transactions. It is sometimes also known as “distributed ledger technology”. However, the name “blockchain” is instructive, as it is useful to visualise the blockchain as a chain or stack of blocks – each transaction forms part of a block, and each new block is connected to (or stacked on top of) the other blocks containing the preceding transactions to form a chronological and linear chain. In order to alter a transaction recorded in the blockchain, you would need to alter all transactions which occurred after the transaction you wish to alter (i.e. remove the blocks above it in the stack to get to the block containing the transaction in question). For the reason described below, this is an almost impossible task using currently available technology.
Blockchain’s key feature is that it is decentralised – rather than being held on one server, the database is held on multiple servers (typically called “nodes”). This means that every time a transaction is recorded on the blockchain, it needs to be verified by each of those nodes. Currently, it is almost impossible to reverse a transaction or alter transactions further back in the chain, as this reversal or alteration would need to be done on every node which holds the blockchain. This makes the blockchain trustworthy and immutable (relative to centralized databases).
Based on responses from participants in the consultation process, the Roadmap identifies financial services, government services and supply chain as the key sectors with the greatest potential for use of blockchain technologies. Likely uses of the technology by these sectors include:
These uses will form the priority use-cases for ISO/TC 307 to consider in developing the standards. The technical committee will also consider ‘smart contracts’, which is a term used to refer to a broad variety of contracts with self-executing features. Typically, a ‘smart contract’ will be used to automate the transactions which are recorded on the blockchain.
The Roadmap identifies the following issues as priorities which should be addressed by the standards.
The standards will provide guidance on technical matters only, and will not deal with matters relating to law. However, the standards will be developed with the participation of regulators from all interested economies to ensure (as much as possible) that the standards and the law are congruent. Interestingly, the development of the standards appears to be preceding the development of the relevant laws in Australia, so the standards may well influence the law. Indeed, the Roadmap indicates that the standards should be robust enough to potentially be referenced by regulators in policy and regulation.
Australia will host the first international blockchain standards meeting for ISO/TC 307 in April 2017. JWS will publish further updates as new developments in the standards and Australian law relating to blockchain arise.
Be the first to receive the latest articles, news and publications.