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64 LEXPERT MAGAZINE | SEPTEMBER 2016 TECHNOLOGY | COLUMNS | George Takach is a senior partner at McCarthy Tétrault LLP and the author of Computer Law. replaced by the Interac Association, whose members settle their payment flows via the Canadian Payments Association. e point is, the credit and debit card systems have large institutions to manage and record transactions, which are subject to regulatory oversight by government de- partments and agencies. P2P CURRENCIES Digital currencies like Bitcoin, which are based on the blockchain P2P IT system, are structured quite differently than the tradi- tional payment systems. ere is no central authority, or even a managing intermedi- ary. Rather, digital information (reflecting various transactions), fully encrypted, is recorded and stored on a distributed elec- tronic ledger. So, rather than your bank or payment processor keeping track of all transactions, a multitude of participants in the digital currency P2P network all have transparent access to all transactions executed over the system. In the case of Bitcoin, for example, transactions that are in flight are, roughly every 10 minutes, permanently settled by being encased in the blockchain ledger, af- ter which they are not alterable. Put another way, with the traditional payment methodology, trust is generated by the fact that the system is overseen by large, (typically) solvent and highly regulat- ed banks and other intermediaries that are keeping detailed records of all transactions. With blockchain, the distributed ledger system generates the trust, because all in- formation is transparent and replicated for all participants to see. BEYOND PAYMENTS While payments (foreign remittances, e- fund transfers, e-commerce, etc.) is the first widespread application for which block- chain is being pressed into service, astute commentators are predicting that literally hundreds of other business processes will come to take advantage of blockchain sys- tems over the coming years. Essentially, any activity today where an entity records information about transac- tions, these pundits say, can be done more efficiently with blockchain. For instance, press reports have the Bank of England considering a cryptography-oriented pay- ments network, structured along the lines of Bitcoin. e bank's chief economist is quoted as saying that digital currencies tru- ly raise some fundamental questions about the very future of money. In terms of the public sector, activities such as recording and storing information about births, deaths, marriages, divorces and other key stages/events in life are also good candidates for blockchain treatment — not to mention, in the educational sec- tor, information about diplomas actually awarded. By keeping track of them on the blockchain, there is less opportunity for fraud, forgery or misrepresentation. Driv- ing records also raise possibilities — for sure, storing your licence, but also your actual driving behaviour, so that you (or your insurance company) can more read- ily translate your safety record into reduced auto insurance premiums. Another potential application may exist for land titles, which also raises the pros- pect of "public-private hybrid" models of blockchain deployment. With respect to land titles, you may be able to still have a central registry, but perhaps it's one that uses an approved registry system. And once you have land titles done this way, can the jurisdiction's personal property security registration system be far behind? And so on, including building a new type of stock exchange on the foundation of a block- chain distributed ledger system. In the private sector, a range of block- chain applications are also being contem- plated. e "smart contract" for intellec- tual property is one type of use, where the encoding of the blockchain releases specific payments whenever certain use is made of a particular soware, song or other prop- erty. Another likely candidate is in the insurance space, where policies, premium payments and payouts can all be stored and managed through the blockchain. THE INEVITABLE BLOCKCHAIN ere have been a number of incidents over the past few years that have tarnished the reputation of Bitcoin. ere have been ir- regularities with some of the players in the Bitcoin space, and the value of a Bitcoin relative to official currencies has some- times gyrated. It's worth keeping in mind, however, that there are a number of other digital currencies being pressed into service that have adopted changes to their business models to address some of the perceived de- ficiencies of the Bitcoin system. Moreover, a number of commentators who remain skeptics about Bitcoin and other digital currencies nevertheless feel quite bullish about the prospects for block- chain technology. You have to remember, it's very early days, both for digital curren- cies and blockchain. I also predict we will see a plethora of variations on the block- chain come to market, again with each suc- cessive one correcting a flaw in the earlier system. Accordingly, given their inevitable future growth and usage, it is important to understand the legal implications of both, to which we turn next month. WITH TRADITIONAL payment methods, trust is generated by a system overseen by highly regulated banks and other intermediaries keeping detailed records. With blockchain, the distributed ledger system generates the trust, because all information is transparent