Regulating Blockchain: A New Challenge for Society

As a fifth and last post on this blog series regarding blockchain, Stein IP introduces Regulating Blockchain: A New Challenge for Society

As known and explained on our previous posts, Blockchain is a growing technology that promises to streamline processes, clarify transactions and avoid third parties interventions and costs. Moreover, it’s better known as the platform where Bitcoin and other cryptocurrencies are processed, which triggered governments and regulatory agencies to  realize that a lot of the money involved in financial transactions worldwide was carried out using these kinds of digital currencies.

Along with this, in some cases this money was used to fund certain illegal activities. Due to this, countries all around the globe have started issuing regulations to control Blockchain technology.

Image from “Blockchain Regulations » Know The Law | Lisk Academy”. Lisk, 2018,

Below there are some examples of regulations in different countries on Blockchain technology:

European Union

On May 25, the General Data Protection Regulation (GDPR) issued a regulation that allows users to delete personal information on a Blockchain network. This is obviously against Blockchain principles where transparency is one of its main advantages. In addition, some countries like France warn citizens about making investments using cryptocurrencies. On the other hand, Switzerland seems to be a pioneer about projects being developed on Blockchain technology. As an example, Zug (a city located in the previously mentioned country) provides tax benefits and flexible legislation to startups that build its business on Blockchain bases.


Eastern Asian is the most advanced region using Blockchain and cryptocurrencies. When this technology appeared, nations in this region established a “business first, regulations later”  mindset and companies were given the freedom to operate without restriction. But as cryptocurrencies exploded last year, East Asian nations began to subject blockchain to more significant regulatory measures.

With regards to China, Chinese ministries restricted the use of Bitcoin on December 2013 and in January 2017, the People’s Bank of China banned initial coin offerings (ICOs)[1] in the country. Japan and South Korea took similar measures but not as severe as in China. In India the use of Bitcoin is contentious.

Other countriesOn March 20, 2018, G20 countries gathered in Buenos Aires to discuss the possible regulation of cryptocurrency. Argentina, Australia, Turkey, South Africa, and the United Kingdom proclaimed that they decided not to regulate cryptocurrencies. On the other hand, Russia is drafting a bill that will allow the registration of cryptocurrency exchanges only on official government websites.

United States of America

In the US, the “regulations first, business later” approach was adopted by government agencies. The overwhelming skepticism has prompted regulators to restrict the potential mainstream applications of blockchain programs utilizing cryptocurrency. U.S. regulatory agencies have had some of the most controversial regulatory discussions about the future of this technology, especially with regard to security-related topics. The U.S. Securities and Exchange Commission has mandated that cryptocurrencies will be considered “assets” under governmental purview, deterring many major international crypto-companies from wanting to operate in America.

However, states across the US have shown interests in leveraging blockchain technology to stimulate local economies and improve various aspects of public service. For example, the state of Delaware announced in 2016 the Delaware Blockchain Initiative, a comprehensive program intended to spur adoption and development of Blockchain and smart contract technologies in both private and public sectors in the state. In 2017, the state of Illinois announced the Illinois Blockchain Initiative, which calls for a consortium of state and county agencies to “collaborate to explore innovations presented by Blockchain and distributed ledger technology”. Similar to Delaware, the state of Illinois aims to utilize blockchain and distributed ledger technologies to “transform the delivery of public and private services, redefine the relationship between government and the citizen in terms of data sharing, transparency and trust, and make a leading contribution to the State’s digital transformation.”

The Brookings Institute provides a state classification according to their levels of engagement with the blockchain technology into the following categories:

Map from Kevin C. Desouza, and Kiran Kabtta Somvanshi. “Blockchain And U.S. State Governments: An Initial Assessment”. Brookings, 2018,

Unaware: State that have taken no actions – states for which we were not able to find any relevant information through publicly available sources (e.g., Arkansas, South Dakota), although there are substantial activities within private industries and academia in some of these states

Reactionary: States that have taken a negative stand against cryptocurrencies or flagged them as potentially risky (e.g., Indiana, Iowa, Texas).

Appreciative: States that have made initial attempts to pass bills concerning cryptocurrencies without any successes (e.g., North Dakota).

Organized: States that have succeeded in passing some legislation in this regard (e.g., Washington, New Hampshire).

Active Engagement: Seven states have gone beyond cryptocurrencies and examined the governmental use of blockchain, either as isolated applications in specific government functions, or as integration across different government functions. Vermont, for example, recognizes data stored on a blockchain as admissible in the court system.

Recognizing Innovation Potential: States that envision a broader role for blockchain in their economies. In addition to Delaware and Illinois, Arizona has introduced or passed regulations ranging from making signatures, transactions, and contracts on a blockchain legally valid to allowing residents to pay their income tax in cryptocurrencies.

It is expected to see less developed states evolving on regulations related to this technology.

The following map reflects how governments around the world regulate cryptocurrencies and blockchain technology.

Map from “Bitlegal | Tracking Blockchain Technology And Regulation Around The World”. Bitlegal.Io, 2018,

Although some regulations exist, Blockchain technology seems to keep growing at a fast pace rate. It is very important that this regulations veil for people’s rights and security but allowing this new breed of business to leverage its benefits at the same time. This is certainly a challenge that starts today and remains for the upcoming generations. An interdisciplinary team of lawyers, engineers, economists, software experts and more will be necessary to achieve this objective, so it is crucial to educate people in such area.

By Pablo N. Garcia Rodriguez



[1]ICOs are an issuance of virtual tokens for the primary investment.

Blockchain And IP Law

As a fourth post on this blog series regarding blockchain, Stein IP introduces “Blockchain and IP Law.”

Due to Blockchain is frequently related with Bitcoin exclusively, people might think Intellectual Property (‘IP’) Law and Blockchain are incompatible or perhaps never thought of a potential combination of these two. But what if we were able to trace an intellectual property right from its beginnings? Seems like Blockchain may have the answer to that question and many others, opening a wide range of opportunities where IP Law proceeds.

First of all, Blockchain could help fix IP registration system inefficiencies. In the United States, according to the US Patent and Trademark Office (USPTO), it takes more than a year to take action after a filing because a lot of applications are subject to manual review, resulting in the total length of time from filing to completing the registration to be 2 years in most cases. This is a real problem if we talk about innovation, since technology moves very fast. But, as we have explained in our previous post (link to Blockchain 101), Blockchain is a decentralized record, meaning that it could make easier to update applications and fillings, saving a lot of time for the applicants as well as the USPTO.

There are other applications of Blockchain in this field such as evidence of creatorship and the existing possibility to track the entire lifecycle of an IP right. This means that permissioned users on a blockchain network will be able to track and recognize, rapidly and unmistakably, when a mark was registered or a patent was licensed. Moreover, at the time a network participant uploads a patent description or any kind of valuable information to the network, a time-stamped record is created enforcing security and anti-counterfeiting of IP rights. Potentially, Blockchain could help parties solve disputes in a more efficient way.

In the graph below (Fig. 1), we show how publications related to Bitcoin have been increasing since Bitcoin’s applications in 2012, although the number of Patents related to it has increased at a slower rate.

Figure 1. Image from

Figure 2. Chart from

More than half of Blockchain-technology US patents are owned by Blockchain-specific companies, such as Coinbase, Monegraph Inc., and Medici Inc., among others. While 20% are owned by financial institutions, Bank of America leads this category as it has filed over 30 Blockchain technology-based patent applications by 2017, and 13% are owned by traditional technology businesses, now led by IBM.

Examples of several companies benefiting from profits of their blockchain patents are shown in the following chart (Fig. 3).

Figure 3. Image from:

The biggest question on this new technology is, can patents be filed? A search of the word “blockchain” in the USPTO website, brings up more than 170 patents and 1200 applications regarding this topic, showing a strong desire to file as soon as possible from companies and individuals in this field since this technology is growing at a fast paced rate.

The U.S. Supreme Court has had multiple cases in which abstract ideas, natural phenomena, and laws of nature have been tried for patentability, and in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012) the court relied on Diamond v. Diehr, 450 U. S. 175 (1981) as precedent for the application of a law of nature, and on Gottschalk v. Benson, 409 U. S. 63 (1972) as precedent for the inventive factor or concept on the law of nature in the claims. The court decided that “a process that focuses upon the use of a natural law also contain other elements or a combination of elements, sometimes referred to as an “inventive concept,” sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself.” [1]

Thus creating a two-prong test for patentability of claims: the first prong is to determine if the claims are drawn to a judicially created exception to patentability, like a law of nature or an abstract idea. If the answer is “yes,” the second prong is to determine whether additional elements are added that transform the nature of the claim into a patent-eligible invention. Although some applications relating to blockchain may fail the first prong, because it is related to the abstract idea of blockchain’s peer-to-peer network, depending on the specific claims the patent application makes, it may pass as patentable if the second prong is satisfied. Since blockchain is “well known in the art” thanks to the many publications 
explaining this technology and the creator’s first paper on blockchain, it may not be enough to just show an “inventive concept” but if the application claims to use the algorithm in a process designed to solve a technical problem in “conventional industry practice,” the assignee could still be granted the patent. This was the case in Diamond v. Diehr, 450 U.S. 175 (1981), the patent was granted because the invention involved a “thermocouple” to record constant temperature measurements inside the rubber mold—something “the industry ha[d] not been able to obtain”.[2] 

There is still a need to show that the claims in the patent application are novel (original) and nonobvious (viewed as an unexpected or unthought of development by someone skilled in the technology of the particular field).

By Pablo N. Garcia Rodriguez and Carla Vercellone


[1] Quoting opinion in Mayo from Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012). (pages 7-8)

[2] Quoting opinion in Diehr from Diamond v. Diehr, 450 U.S. 175 (1981).

How Is The World Using Blockchain?

As a third post on this blog series regarding blockchain, Stein IP introduces “How is the world using blockchain?”

In our previous two posts we have explained what blockchain is and how it affects businesses, in this post we will be talking about the different uses blockchain has or can potentially have in different sectors. From financial services, to voting, to healthcare, blockchain has many applications to today’s world and companies and individuals are starting to dive into them.


Probably the most known application of blockchain has been cryptocurrencies. Cryptocurrencies are essentially digital money, digital tools of exchange that use cryptography and with blockchain technology it can facilitate secure and anonymous transactions among users. Cryptocurrencies like Bitcoin and Ethereum (the two biggest cryptocurrencies of this technology) are necessary for many of the applications and transactions in blockchain. Even when writing and executing smart contracts in the network, participants in the transaction must have a cryptocurrency stake and unlike traditional markets, such as gold, there are only so many tokens of a cryptocurrency that can be created (or “mined”) in a given timeframe. Therefore, the only other way to acquire cryptocurrency tokens, aside from mining them since it requires such specialized computers, is to buy them from someone who already has them.

Tracking goods in global supply chains

Another example is Walmart’s supply chain management. The retail corporation has taken a step further in tracking their vegetables and other products through blockchain. By using this database, Walmart will begin requiring its lettuce and spinach suppliers to contribute and input information to a blockchain database to rapidly pinpoint food contamination. This is the result of a 2-year long pilot project, and after dozens of people got sick from contaminated romaine lettuce across the country this year, Walmart decided to start implementing this project [1]. This use of blockchain could increase the quality of products being sold, and also speed the movements of goods internationally.

A lifelong medical record

Because blockchain is a shared ledger and database, implementing blockchain into health care systems would track one’s complete medical history, medications, illnesses, injuries, doctors, etc., and also create tamper-resistant means of storing medical histories/records.

MIT researchers have created a prototype product called MedRec that tracks who has permission to view and change a record of medications a person is taking. MedRec also incentivizes medical researchers to verify data on its blockchain by rewarding them with access to aggregated, anonymized data from patients’ records that can be used, with each patient’s consent, for epidemiological studies.

Currently, the US Department of Health and Human Services (HHS) envisions blockchain to be used as a more efficient method of tracking payments made into Medicare and Medicaid. Blockchain could also secure the quality and shipment of medical and pharmaceutical products, thereby combating the proliferation of fake drugs that are contaminating drug supply chains and helping highlight the providers of uncontaminated products. The same application and tamper-proof logs would benefit any over-the-counter cures, herbal mixtures, organic foods and drinks, and so on. [2]

Preventing voter fraud and securing identities

Governments nowadays are also taking advantage of this new technology. Applying blockchain technology and databases to government projects could reduce costs and time in identity verification at voting polls, allow the government to keep track of ID records and ownership of assets, therefore reducing the possibilities of identity theft.

The first example of this was in West Virginia’s primary elections this past May by allowing internet voting through blockchain for deployed military personnel and their dependents from several countries [3]. West Virginia used a startup called Voatz, and although there had been several small scale elections such as student government and town meetings, if the use of blockchain were to become more popular in this sector it could lead to higher voter turnout, and be more representative of the electorate since voting would become more accessible to those who may not be able to get to the polls.

Another country that uses this technology is Estonia, with 30 percent of Estonians using it for “i-Voting”. This application was estimated to have saved 11,000 working days in the most recent elections [4]. Estonia has been offering this service since 2005, and public services like health care, medical prescriptions, pensions, and many others make up 99% of services being offered to the public through the internet. [5]

Smart Cities

Hundreds of cities have turned to smart city applications to manage traffic flows, combat crime, deliver energy, and alert people about extreme pollution. Blockchain can now magnify the impact of current technologies in making a city run on its own. Dubai for example, currently has a pilot to implement blockchain in city services. Among other things, Dubai wants to use blockchain by 2020 in over 100 million annual government documents, including all visa applications, bill payments, and license renewals. The technology can also “give power to the people” and enable individuals to engage in transactions directly with each other. For example, Dubai has launched a blockchain-powered system to record all real estate contracts and connect homeowners and tenants to billable services such as electricity, water, and telecommunications. [6]


Although some applications of blockchain are more popular or easier for individuals and companies to implement, this technology has a lot of potential and experts are still finding new ways in which blockchain could dramatically change our lives in a matter of a few years. On our next posts we will dive into the regulations of blockchain, and the benefits and drawbacks of this technology.

By Carla Vercellone


[1] Corkery, Michael, and Nathaniel Popper. “From Farm To Blockchain: Walmart Tracks Its Lettuce”. Nytimes.Com, 2018.

[2] De, Nikhilesh. “HHS Architect Talks Blockchain’s Potential Role In Healthcare Administration – Coindesk”. Coindesk, 2017.

[3] Miller, Ben. “West Virginia Becomes First State To Test Mobile Voting By Blockchain In A Federal Election”. Govtech.Com, 2018.

[4] “I-Voting — E-Estonia”. E-Estonia,

[5] “State E-Services Portal — E-Estonia”. E-Estonia,

[6] Suominen, Kati. “Harnessing Blockchain For American Businesses And Prosperity: 10 Use Cases, 10 Big Questions, 5 Solutions”. 2018.



Blockchain & Business: Improving Your Companies’ Future

By Pablo N. Garcia Rodriguez

As a second post on this blog series regarding Blockchain, Stein IP introduces “Blockchain & Business: Improving Your Companies’ Future.”

Considering the power of Blockchain, it is not surprising that it can also be applied to business. In fact, companies such as Walmart and FedEx implement Blockchain technology as a way to manage their supply chains since it makes possible tracking a product from its origin[1] and controlling assets’ conditions instantly. There are a lot of applications for this technology in the business field, such as smart contracts and transactions recording which can be achieved thanks to Blockchain being a distributed ledger. But what is a distributed ledger and why is everyone talking about it?

A distributed ledger is a decentralized, synchronized and shared database where information is recorded.

  • Decentralized: Data doesn’t rely on a central point of control, it is stored within a network of nodes. Due to lack of a single authority[2], is a more secure place to record transactions and valuable information to the company.
  • Shared: Every member on the network has access to the recorded information, unless there is a permission prohibiting it. This helps the organization save time and money as everything is uploaded just once.  
  • Synchronized:The information is shared simultaneously among all the network’s participants.


Because Blockchain is a shared ledger, organization members might be concerned about people from their network having the possibility of modifying information that is important for the company, causing security problems such as data leaks. This leads us to another concept: permissions. If the business network’s operator chooses to set permissions, he or she will have the ability to restrain members’ participation and access to information. This means that participants get a selective visibility into the ledger which protects the organizations’ relevant data from malicious attacks.

Smart Contracts

Contracts are commonly used in business transactions, and Blockchain is no stranger to this area. Although traditional contracts and smart contracts have the same objective, which is to get parties to reach an agreement, there are many differences that make smart contracts more suitable for the business world in the future. Below, a graph shows how smart contracts work.

pasted image 0
Graph from “What Are Smart Contracts? A Beginner’S Guide To Smart Contracts”. Blockgeeks, 2018,

Consensus is an important part of smart contracts’ functionality because conditions are settled and accepted by the parties. The next step is that requirements are met to validate the contract which executes automatically with no third party intervention.

According to a PwC’s[3] 2018 survey of 600 executives, 84% say their organizations have at least some involvement with Blockchain technology. Also, there are some existing predictions that express that by 2030 10% to 20% of global economic infrastructure will be running on blockchain-based systems. This means that companies are getting into this technology because of its benefits since costs are reduced, there is more transparency and a better control in what transactions concern, and besides is easier to trace the origin and conditions of assets and information. Blockchain is certainly improving business and that is why everyone is talking about it.



[1] “5 Companies Using Blockchain To Drive Their Supply Chain”. Youtube, 2018,

[2] “What Is Decentralization? » Basics Explained | Lisk Academy”. Lisk, 2018,

[3] PricewaterhouseCoopers is the biggest Professional Services’ company in the world headquartered in London, United Kingdom.



Blockchain 101: The Basics

By Carla Vercellone

As the first post in our new series on Blockchain technology, we will comment on the basics of blockchain, who participates in a blockchain network and how it works, and finally we’ll touch on the major cryptocurrency in the network, Bitcoin. Since its introduction in 2008 as the creation of a person, or group of people, known by the pseudonymous Satoshi Nakamoto, blockchain has grown and evolved into becoming the future of today’s internet and transactions.

What is blockchain?

The blockchain is a decentralized, shared, and immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, a car, etc.) or intangible (intellectual property, patents, copyrights, etc.).

  • Anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved. Transactions made in bitcoin or other cryptocurrencies are recorded chronologically and publicly between two parties, being efficient and in a verifiable and permanent way.

A peer-to-peer (P2P) network like Blockchain is, according to the Oxford English Dictionary, a network in which each computer can act as a server for the others, allowing shared access to files and peripherals without the need for a central server.

How is it decentralized you may ask? Every participant is an “administrator” of the blockchain, joins the network voluntarily and thus, anything that happens on it is a function of the network as a whole. As opposed to traditional transaction (as seen below in a server-based network on Fig. 1) methods involving third parties, such as banks, in which every piece of information is stored and recorded by one entity, the central bank. A main characteristic of this decentralization is that information is continually managed and hosted by millions of computers simultaneously worldwide on a distributed database, making the data accessible to anyone on the internet.

p2p 2
Figure 1. Kologynski, Maria. “P2P”.

Who participates?

To understand how Blockchain works, we need to first learn who participates in a blockchain network. The main participants of a blockchain network are (See Fig. 2 above):

  • User: A participant with permissions to join the blockchain network and conduct transactions with other network participants.
  • Node: A computer connected to the network.
  • Regulator: Individuals who oversee the transactions happening within the network, don’t have the authority to issue or control assets
    • Regulators simply receive blocks and view blockchain data.
    • Perform the duty of an observer, auditor, and/or analyst.
  • Developer: Creator of applications and smart contracts that interact with the blockchain and are used by the users.
  • Operator: Individuals who have define, create, manage, and monitor the blockchain network.
    • Businesses on a blockchain network have a blockchain network operator.
    • Determines who can participate in the blockchain, gather valid transactions from participants, etc.
  • Certificate authority: Manages the different types of certificates required to run a permissioned Blockchain.
  • Traditional Processing Platform: An existing computer system, such as Windows, Android, Apple OS X or iOS, Linux, etc., that may be used to augment processing or to initiate requests into the Blockchain.
    • There’s a mobile blockchain-enabled virtual operating system being developed now called “Nynja” that would allow the mobile device to combine communication and commerce in a single unified platform.
  • Traditional Data Sources: An existing data system which may provide data to influence the content and structure of smart contracts, as well as define how communications or data transfer will occur into the blockchain.

How does Blockchain work?

Figure 2 - Hash (blockchain)
Figure 3 – Gupta, Manav. Blockchain stores transaction records in a series of connected blocks. 2018. Graph. Blockchain for Dummies. Hoboken, NJ: John Wiley & Sons, Inc., 2018. 14. Print

In order for exchanges in today’s traditional transaction methods to take place, one of three things needs to happen: the individuals exchanging the item or data need to trust each other, engage in a legal contract, or involve third parties. Most of the time these exchanges are subject to several challenges, such as the time a customer waits between transaction and settlement, fraud and cyberattacks due to simple mistakes, the possibility of exposing the participants in the network to risk if the central system (i.e., a bank) is hacked or compromised, etc. On the other hand, Blockchain promises to facilitate the process of business transactions through tracking and trading of valuable assets in a shared, immutable network.

Blockchain owes its name to the way it stores transaction data —in blocks that are linked together to form a chain. As the number of transactions grows, so does the blockchain. Each block contains a hash (a digital fingerprint or unique identifier), timestamped batches of recent valid transactions, and the hash of the previous block. The previous block hash links the blocks together and prevents any block from being altered or a block being inserted between two existing blocks (Fig. 3 above). When a user requests a transaction (cryptocurrency, contracts, records, etc) in a network, said request must be validated by all the participants of the network to reach a consensus (Fig. 3 below). Once it has been verified, a block created with the new hash, the previous hash, and the transaction identifier (Fig 3 above), is added to the existing blockchain making it permanent, visible and unalterable. If the transaction were in error, a new transaction is made to reverse the previous one, and both transactions are visible to the participants, showing transparency in the network. All the nodes in the network check for errors in this transactions with the previous transactions correlated to the asset the user wants to transfer. When all transactions are finished, validated, and added to the blockchain, the transaction is complete.

how does it worl
Figure 4 – What is Blockchain Technology? A Step-by-Step Guide For Beginners. Digital Image. Blockgeeks. Blockgeeks, 13 September 2018. Web.

Key characteristics

What makes Blockchain different from other transaction systems are four key characteristics:

  • Consensus: As explained before, all participants of a network must agree for a transaction to be considered valid.
  • Provenance: Participants know where the asset came from and how its ownership has changed over time due to the trajectory of the asset in the ledger shown to the participant (Fig. 3).
  • Immutability: No participant can tamper with a transaction after its been recorded to the ledger.
    • If a transaction is in error, a new transaction must be used to reverse the error, and both transactions are then visible.
    • Transactions are combined into single blocks and are verified every ten minutes through mining[1]. The nature of this structure permanently timestamps and stores exchanges of value, preventing anyone from altering the ledger. If someone wanted to steal a Bitcoin, for example, they’d have to rewrite the coin’s entire history on the blockchain in broad daylight and “fake” all the participant’s consent.
  • Finality: A shared ledger provides one place to go to determine the ownership of an asset or completion of transaction; facilitating information to users in an open network rather than using intermediaries like banks, ports, etc. The accessibility of the blockchain during and after its creation is determined by the blockchain operator and/or the smart contracts associated with the network.

Bitcoin vs Blockchain: Difference

Although most people have heard of the Blockchain’s biggest cryptocurrency, Bitcoin, some still confuse both terms as interchangeable. Blockchain is a database that is simultaneously stored on a set of computers connected to each other on the Internet where each transaction is written down and safely stored; along the lines of an operating system like Microsoft Windows. On the other hand, Bitcoin is a digital currency, created and operated only on the Blockchain network; a similar example can be an application running on an operating system, such as Skype on Microsoft Windows.


Next in this blog series on blockchain, we will explore the application of blockchain in Intellectual Property, explaining its role in the field of IP, determining the classes and subclasses of blockchain technology-based patents, and many other topics.



[1] Mining: Confirmation process. “Cryptocurrency Glossary”. Blockchain Support Center.