Blockchain — panacea or bubble?

Blockchain — panacea or bubble?

Blockchain technology is taking the world by storm. From banking to health care, many tout block chain and the bit coin it enables as a cure-all. Others think bit coin is heading towards the edge. In between are those who see practical applications of block chain but caution on addiction to bit coin. On February 26th at the University of Copenhagen, I will be making a presentation entitled “Blockchain technology — good, bad, or somewhere in between?” This entry gives you a sneak preview of that talk.

Many of you have heard about “bit coin” but most of you don’t realize that block chain is what enables bit coin. If you are not a technologist, I believe the best way to understand block chain is by analogy. Take the poem by Shel Silverstein entitled “Where The Sidewalk Ends.” Below are the first two lines:

There is a place where the sidewalk ends

And before the street begins . . .

Now imagine that you enter into a Google documents session with your best friend to edit the poem. Instead of “ends” in the first sentence, you put “begins.” Your friend replaces “before” in the second sentence with “after” and “ends” in place of “begins.” These changes are all recorded on Google docs. Both of you can see the changes. Envision, now, that instead of just you and your friend making changes to the poem, there is a community of millions around the world who are making the changes to the poem. This is what is commonly known in computer software as an “open source” network.

Blockchain enables bit coin to work in a similar way. You and your friend do a transaction with bit coin. This transaction will be represented by an idiosyncratic number known as a “cryptographic hash.” It will then be placed on a block and added to the chain of other blocks. The block chain runs sequentially. So your transaction’s hash “777XYZ . . . 1” will be inserted into the next block, and that block will follow hash “777XYZ . . .0.” This would be akin to each word you put into the poem above, “begins,” “after,” “ends,” being represented by a hash. For the poem to rhyme, each word must fit. Similarly, any inserted block that doesn’t fit in the chain will change subsequent blocks’ hash tags, making the chain resistance to tampering.

There are many benefits to block chain. One is that your identity can be represented by a cryptographic hash or signature so as to protect you from hackers. Once your identity is verified, all of your personal information is then erased. In some ways, then, you become a numerical avatar. The benefit of this is that hackers can’t get to your personal information, such as your address, because this information isn’t stored.

But bitcoin is likely another story. For one, there is no centralized regulator given its open sourced nature. This means that the value attributed to bit coin is arbitrary, and there is no floor under which it won’t go. Such decentralization and lack of a central regulator can cause it to crash without warning, since bit coin transactions can be fantastical in reality but nobody would know until its too late.

Blockchain technology is likely here to stay, since it can be used to protect identities, encrypt financial transactions, or even sensitive national secrets. But bitcoin may be a bubble in the making.



Foreign and domestic clients in the software, hardware, and web development industries rely on our intellectual property expertise in order to protect and license their technological works. To do so, we often draft and negotiate software licensing, non-disclosure, and employment or subcontractor agreements with work-for-hire, non-compete, and non-solicitation provisions.

In addition, we have litigated various claims, including Digital Millennium Copyright Act, antitrust, and breach of licensing agreement, on behalf of our clients in federal and state courts at the trial and appellate levels. Such representation has included responding to cease and desist letters, filing antitrust counterclaims, and resolution of arbitration claims.

Representative matters include:

  • Alluring Logic — Negotiated the acquisition of client Alluring Logic, an SaaS company that serviced the retail sector, by digital marketing company Proximity Insight, including advising the client on the copyrightability of source code;
  • Gelo Factory — Advised Gelo Factory, a software development/design firm, on its client agreements with Toyota, among others, in addition to the preparation of the company’s operating agreement;
  • Kanvas Labs — Provided counsel to Kanvas Labs, maker of a best new iTunes app, on copyright fair use issues concerning the Apple iTunes license so as to enable the company’s acquisition by AOL; 
  • Legendsky Tech Co. — After filing antitrust counterclaims, favorably settled a Digital Millennium Copyright Act circumvention case filed by Intel and Warner Brothers against Legend Sky Tech., maker of hardware that enables HDCP interoperability between different devices. Warner Brothers et. al. v. Legendsky Tech Co., Index No. 15-CV-10169;
  • Tumblr litigation — Favorably settled alleged copyright infringement (a/k/a “copyright troll”) claims totaling at least six figures for a fraction of that amount on behalf of defendants who were the subject of N.Y. state court unmasking subpoenas in connection with their alleged unlawful Tumblr downloads of copyrighted material. Jane Doe v. Tumblr, Inc., et al, Index No.: 153709/2017; and
  • Open Influence (f/k/a “InstaBrand”) — Counseled InstaBrand, a digital ad start-up that promotes brands on Instagram, on the existence and scope of fiduciary duties per promoter agreements that were prepared for the client.