Considering Blockchain? Nine Items For In-House Counsel To Consider

1. Less Simple = Less Secure
   
   
   • The more features and complexity in a distributed application, the more potential vulnerabilities
   • Ask: What is our strategic goal? What functionality is necessary vs. just desirable?
2. Jurisdiction issues
   
   
   • Consider cross-border transactions, different laws and regulatory schemes
   • Ensure clear and comprehensive choice of law, venue and jurisdiction provisions for resolving any disputes
3. Vendor issues
   
   
   • Blockchain vendors will want to disclaim as much risk and liability as possible
   • Consider necessary service levels and performance required for business application in determining when to walk away
4. Testing / Liability
   
   
   • Robust testing environment to validate and debug application before launch
   • Consider risk of improperly settled transactions, network failures, and other risks inherent to business application
   • In customer and vendor agreements, clearly allocate risks and liabilities under all potential dispute and/or failure scenarios
5. Privacy / Customer Data
   
   
   • Understand benefits and need for comprehensive permission-based structure
   • Verify identification of participants and set access levels to ensure compliance with all applicable privacy and security regulations
6. Intellectual Property
   
   
   • Ensure appropriate user permissions and access limitations to prevent harvesting of proprietary business data or trade secret information
   • Vendor and customer agreements should address ownership of existing IP, later-developed IP, and comprehensive restrictions on use / disclosure
7. Enforceability / Dispute Resolution of Smart Contracts
   
   
   • Automated process, but what if something goes wrong?
   • Allocate liability & risks, and outline procedures for enforcement / dispute resolution
   • Have "in case of fire" plan – may need to unwind transactions or manually evaluate and create corrective entries.
   • Consider including real-time monitoring and auditing functionality
8. Regulatory Compliance
   
   
   • Same rules, different game
   • Critical to understand technology, how it works, what processes it is supplanting, and what it is doing to coordinate and update compliance regimes
9. Transaction Due Diligence
   
   
   • Ownership of data / property on Blockchain
   • Critical to understand how Blockchain technology works
   • Traditional approaches to due diligence may need to be altered

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.