Chief among Bitcoin’s many accomplishments was an ingenious solution to a problem that arises when one tries to “digitize” an asset. A physical banknote cannot be spent twice: once you hand it over to the payee you
no longer possess it and as a result you can’t spend it again. The
vast majority of money in circulation in a modern economy is
digital in that it only exists on a bank’s ledgers, but it can’t be spent
twice because of the settlement and clearing process run by third
party intermediaries such as banks and credit card processing
companies. However, before blockchain was invented, a true digital
asset that does not require a third party intermediary was not
possible because it could be copied easily in the same way that you
copy a picture every time you send it to another person over text.
In this series on the blockchain, we examine certain legal challenges
By Adam Armstrong and Marko Trivun
“Blockchain Assets” as Collateral
to the use of the blockchain for recording asset ownership, including
securities laws and privacy laws. We begin our series by examining
the challenges a lender would face in trying to take security over a
What is a blockchain?
A blockchain is a decentralized network of computers otherwise
known as nodes which collectively process, maintain and distribute
a digital record of activity. Blockchains operate on a computer
protocol that uses ingenious cryptography that replaces the function
third party intermediaries would otherwise play in verifying transactions.
Given the potential of the blockchain technology to revolutionize
how parties transact with one another, a lot of brainpower is spent
Bitcoin was conceived in a 2008 white paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System,
Blockchain Technology Part 1
authored by one or more persons using the pseudonym Satoshi Nakamoto. But it wasn’t until
the launch of Ethereum in 2013 that excitement and appreciation for the true potential around the
technology underlying Bitcoin, the blockchain, went mainstream.