Blockchain: A Distributed Ledger for Transactional Data

This report discusses the structure, applications, life cycle, pros and cons, and legal issues of blockchain technology. It also explores the regulation of blockchain in UAE and around the world, as well as its impact on the economy and business. The report concludes with a discussion of the potential of blockchain technology.

Running Head: BLOCK CHAIN CONCEPT
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Blockchain
Student name

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Table of Contents
Introduction................................................................................................................................2
Structure of block chains........................................................................................................2
Applications of blockchain.....................................................................................................3
The life cycle of blockchains..................................................................................................5
Pros and cons of blockchain...................................................................................................6
Blockchain technology in UAE..............................................................................................7
Regulation of blockchain around the world...........................................................................7
Effects of blockchain on the economy and business..............................................................8
Legal issues involved.............................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
The blockchain is a kind of distributed ledger used to maintain a permanent and the
temporary proof record of transactional information. A blockchain works as a decentralized
database which is managed by the computer belonging to P-2-P (peer to peer) network. Every
computer in the distributed network monitor or maintain a clone of a ledger to stop one point
of failure and entire copies are validated and updated simultaneously. Previously the block
chains were generally associated with bitcoin, and digital currencies specifically (Pilkington,
2016). Nowadays block chain used by many industries as a safe and cost-effective way in
order to generate and maintain a distributed database and to manage the records for the online
transactions of different types (Crosby, Pattanayak, Verma, & Kalyanaraman, 2016). The
very first work on the cryptographically secured chains of the blocks was explained in 1991
by two-person named Stuart Haber and W. Scott Stornetta. The first block chain has been
conceptualized in 2008 by Satoshi Nakomoto (Crosby, Pattanayak, Verma, & Kalyanaraman,
2016). In this particular report, the topics like the pros and cons of the blockchain, regulation
of this technology in UAE and in the world will be discussed. Its impact on the economy and
business and the legal issues and essential documentation involved in this will also be
mentioned in this report.
Structure of block chains
The structure of blockchain consist of the main three components
Blocks
A block is the list of the transactions noted into a ledger over a specific time period.
For every blockchain the size, period and triggering events of the blocks are different. All the
block chains are not recording and securing the records of the transportation or movements of
their cryptocurrency as their first objective. However, all the bock chains do note or record

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the movement of their token or cryptocurrency. For example, thinking of a transaction that is
simply keeping the record the data. Now assigning any value to it is applicable to interpret
what the data or information’s means.
Chains
A chain is defined as the hash that connects in the block to another, mathematically
making a chain to link them together in a blockchain. This is considered as the most difficult
concept of the blockchain. It can also be described as the magic glue that stuck or glues the
block chains together and enable them to create a mathematical trust. The hash value in the
blockchain is formed from the data that was present in the previous block. This has the
fingerprint of this particular data and blocks in time and order (Zheng, Xie, Dai, Chen, &
Wang, 2017).
Network
A network is the component of blockchain that is composed of full nodes. One can
think of these nodes as the computer running the algorithm which is keeping the network
safe. Each and every node contains a full record of all the transactions that were noted or
recorded ever in that blockchain. The nodes are present in all over the over and can be
monitored by anyone. However it is expensive, difficult and time-consuming to manage or
operate, therefore people generally do not do it for free of cost (Underwood, 2016).
Applications of blockchain
Blockchain as a system to record
Digital identity
The cryptographic keys in a person’s hands enable her or him for new ownership
rights and the basis to make digital relationships. Blockchains can provide a chance to

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establish an unbreakable system for the digital identity. This is because it does not base on
the accounts and the permissions that are associated with the accounts, it is type of push
transaction, and because the ownership the private key is the ownership of the digital-asset.
This can place a secure and new way to handle identity in the digital-world.
Tokenization
For authentication, a unique physical component is used to link the physical and
digital world called token. These are useful to supply chain maintenance, anti-counterfeiting,
detection of fraud, and intellectual property.
For governments
Governments are interested in all the aspects components of this technology.
Primarily there are the ownership rights that are surrounded by cryptographic key possession,
generation, revocation, and replacement. They are interested in who can act as the part of
this blockchain network and blockchain protocols as they allow authorization of transactions.
For Audit trials
Block chains technology offers the feature to automatically generate a record of who
has the information or records that are accessed, and to set binderies or controls to see the
information in banks, large institutions and health care systems (Zhu, & Zhou, 2016).
Blockchain as the platforms
Use as a smart contracting
The largest banks and various insurance organizations led by a start-up wants to
produce a platform in order to establish fresh digital relationships among the banks. This
type of smart contracts seeking to apply the information and the documents recorded in block

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chains to support the complex legal documentation of agreements (Bahga, & Madisetti,
2016).
Uses in markets
The cryptocurrency can also be used as a digital bearers bond which means making a
unique identity to control the code that can provide as special ownership rights.
Automation of regulatory compliance
Rather than only being a trusted platform of information this technology may enable
regulatory compliance in the form of code. In other words, the way the blocks are made valid
can be a transaction of the legal prose into the digital code for governments. In banks, this
can be used to improve the efficiency in the anti-money laundering compliance. This
technology can also be used in different things like permit transactions or transactions of
reports of different types on the basis of rules and regulations (Yli-Huumo, Ko, Choi, Park, &
Smolander, 2016)
The life cycle of block chains
The technology of block chains is originated from the creations of bitcoins. It
described as that a group of people who never met or sees each other can work online within
the system which was formed to de-sensitize to cheat other that was previously cooperating
on a network. Bitcoin network was generated to secure the bitcoin cryptocurrency. There are
5000 full nodes in this system and it was used to trade bitcoin and to exchange values
(Chapron, 2017). Because of its time-tested security feature and size it is also applicable to
secure the smaller block chains and blockchain application. Ethereum network is the second
evolution of the blockchain approach. It also has more than 5000 nodes. Factom network was
considered as the third evolution of this technology which uses a lighter consensus system,
stores more information and incorporate voting (Tellis, 2006).

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Pros and cons of the blockchain
Pros
Process identity: blockchain program is made in such a way that any type of block or
transaction which adds to the chain cannot be altered or edited that ultimately can provide a
strong range of security
Traceability: this technology can easily locate any type of problem and can correct them. It
can also form an audit trail that is irreversible.
Security: this advanced approach is highly secure as is provides a unique identity that is
linked to individual's (who enters into the network of blockchain) account. This makes sure
that the account holder themselves can operate the transactions. In the chain, the block
encryption makes it stronger for any hacker to alter the traditional setup of the chain.
Faster processing: before this technology takes place the banking organizations used to take a
lot of time ( nearly three days) to process and initiate the transactions, but after the
implementations of this approach speed of these transactions has been increased (in minutes)
at a high extent (Yli-Huumo, Ko, Choi, Park, & Smolander, 2016).
Cons
Power use
The consumption of electricity or power in this technology is comparatively high. For
example, in a year the power consumption of the bitcoin miners was recorded higher than the
per capita power use of 159 people countries. This is because it creates a fresh node every
time in order to keep a real-time ledger (de Meijer, 2016).
Cost

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The average cost of the bitcoin transactions accounts for $75 to $ 160. Most of this
cost covered by power consumptions and there are very fewer chances that this cost can be
reduced by the advancement in the technology.
Uncertainty in regulatory status
The modern money has been produced and controlled by the government all over the
world. It became difficult for bitcoin to bet accepted by the financial institution
Blockchain technology in UAE
The United Arab Emirate (UAE) has introduced or launched UAE blockchain strategy
2021 by Sheikh Mohammed bin Rashid who was the vice president and prime minister of
UAE, in April 2011, aiming to conduct nearly 50 % government transaction using this
technology by 2021. To provide solidification to those vision regulations related to the use of
crypto assets like cryptocurrency, have been issues recently in UAE. FRSA (Financial
services regulatory authority) has become the first regulator of this approach in UAE to issues
the comprehensive guidance and regulations on managing the activities relating to
cryptocurrency (Aitzhan, & Svetinovic, 2018).
Regulation of blockchain around the world
In European Union (EU) the firm stance has been taken on data privacy,
implementing a regulation that has recordable implications for block chains. For different
blockchains organizations, this right can contradict the immutability and decentralized that
this technology provides their users. In East Asian nations have taken business first
regulations later approach, according to which the blockchain companies are allowed to
operate without any restrictions. In South Korea, the blockchain community has increased in
recent years. Japan has adopted bitcoin but not ready to embrace other business powered by
blockchain. In the US the applications of this approach have been restricted by regulations
(Kiviat, 2015).

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Effects of blockchain on economy and business
Blockchains can record the registered attestations that are important for supply chain
participants, consumers, and procedures. This is because the blockchain allows
representations of the business workflows housed with the smart contracts. Automated block
chains and enforcement can help the entire nation to avoid humanitarian calamities caused by
the economic transactions. Blockchains technology allows ensuring the trust between the
business partners. According to world economy forum survey, ten percent of the worldwide
GDP will be stored on the blockchain and the taxes will primarily be collected by using a
blockchain by 2025. Ending technology enterprise is also heavily investing in the block
chains, for example, IBM invested nearly $ 200 million in the blockchain powered IOT or
internet if things (Sun, Yan, & Zhang, 2016)
Legal issues involved
Jurisdiction: Blockchain can cross the jurisdictional boundaries as the nodes on the
blockchain can be present anywhere in the world. This may pose a number of complex
jurisdictional problems which may require careful consideration related to the contractual
relationship.
Service level and performance: the balance of the performance risk can be a key issue as
there is no warranty regarding the performance of services
Liability: Blockchain poses various types of risks such as its inability to stop its functioning
and control.
Data privacy: once data is stored it cannot be changed, this has clear implications for the data
privacy, and specifically where the related data is metadata sufficient to expose someone's
secrets personal details (Yeoh, 2017).

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Conclusion
The blockchain is the type of distribution ledger that is used to regulate a permanent
and the temporary proof record of the transactional data. The first block chain was
conceptualized by Satoshi Nakomoto in 2008. The structure of this technology includes
blocks, chains, and network. The blockchain approach can be applied in digital identity,
tokenization, for governments, for audit trails, as a smart contracting, automation of
regulatory compliance and smart contracting. The main advantages of this technology are
process identity, traceability, storing security, and faster processing. On the other hand,
disadvantages include high cost, uncertain regulatory status, and high consumption of power.
Blockchain technology has been introduced in UAE as “UAE Blockchain strategy 2021” in
April 2011. It has been adopted in various other nations like Korea, European nations, Asian
countries like China. According to world economy forum survey, 10 % of the total world
GDP will be stored on this technology by 2025. The legal issues associated with this
technology are liability issues, jurisdiction, and data privacy issues.

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References
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