Understanding Distributed Ledger Technology from a Legal Perspective

Abstract

Distributed Ledger Technologies (DLTs) have been widely endorsed in various areas and by numerous entities. With the promises of decentralisation, taking out the middlepersons and cost-efficiency, DLT-implementations seem desirable in various fields, from finance and copyright to health. However, all pros come with cons. DLTs’ architecture may by nature run counter to some data protection principles; this could limit or even halt innovation. Moreover, there is a tendency for (re)centralisation contesting the very nature of DLTs and risking having centralised systems serving the economic interests of the few big players, instead of the fundamental rights and freedoms of the many. Last, contemporary forms of DLTs, allowing for smart contracting, appear to challenge traditional contract laws. This contribution aims to address the above challenges. It argues that data protection laws, dynamically interpreted, could raise security thresholds and promote the development of user-friendly and decentralised DLTs, thus avoiding (re)centralisation; and that, while smart contracting appears suitable in various situations, it can be avoided where traditional legal contracts can better satisfy the individual needs and desires of the parties. Finally, the concluding section recommends that regulators wait for scientific advances in the field and carefully balance the fundamental rights and freedoms at stake before introducing DLTs in the public sphere. Keywords: Distributed Ledger Technologies | Decentralisation | Pseudonymisation | Smart Contracts