Led merely by the same desire to discover more about what lies behind the undeniably ingenious invention of blockchain, a group of BSI associates had the pleasure to participate at the 17th Ethereum Milano meetup, which took place at Deloitte’s Greenhouse on March 6. The event was structured in two parts: first a conference was held to discuss the applications and challenges of blockchain technology, with particular attention to the legal framework; this was followed by a friendly networking session, in which the students could enjoy a bounty buffet and speak with professionals in the field. In such a hyper-connected digital world and highly volatile market for cryptocurrencies, people are looking for alternative ways to manage their transactions. Lately, Blockchain is raising a lot of interest, simply because it has all the characteristics we are looking for: it is transparent, immutable and decentralized, but most importantly, it allows us to pay for a small online transaction such as the purchase of a train ticket with no transaction cost whatsoever. But Blockchain is not only the record-keeping technology behind Bitcoin. Its power is much more disruptive, it will decentralize the structures that rule all our economic transactions and ultimately challenge our concept of trust.
Given the complexity of the issue and the challenges lawyers are currently facing to integrate such a technology in our legal sphere, some very remarkable speakers were invited for the occasion: Federica Caretta, IP and IT Attorney at Deloitte Legal, Fulvio Sarzana, attorney in the Italian’s Supreme Court and member of the national Strategy Blockchain, Carlo Piana, IT lawyer and Digital liberties advocate, and Giorgio Donà, head of the legal department at ArtWallet.io. The discussion was guided by Stefano Leone, who managed to ask thought-provoking questions and extrapolate various insights from the guests on the development of blockchain in the public and private sector, both in Italy and abroad. The conference focused on various topics: intellectual property and smart contract, the activities carried out by MISE in the Security and Utility Tokens area, the legal difficulties related to the launch of an ICO abroad, in particular in Singapore and Dubai, the importance of Open Source for the Blockchain and the problem of energy consumption connected to the operation of the Blockchain.
A crucial point upon which most of the discussion centered is the fact that technology must be incorporated into policy making. The hurdle is that the Italian system and its lumbering burocracy is quite slow in trying to understand what these new technologies are and, as Mr. Sarzano pointed out, sometimes it might be better not to intervene rather than doing it poorly. The Italian government has decided to establish two commissions of experts, one for artificial intelligence and one for blockchain. Following a public call, 30 people have been selected to elaborate a national strategy for blockchain with the aim of identifying this new reality and regulating it in the best possible manner. A new legislation has come into force in early February, which introduced a first definition of blockchain that provides for two large macro-areas: the first is time stamping (which defines that the transaction that takes place on the blockchain is under particular conditions valid and legal, even though this conditions are not yet public), the second recognizes the legal value of smart contracts. Mr. Sarzano is in charge of regulating ICOs (Initial Coin Offering) and STO (Securing Token Offering). The regulation governing them are already present in other countries, such as Singapore, Switzerland, San Marino, Malta. Italy’s ambition is to be at the forefront of technology without fearing innovation and at the same time exploit this opportunity to raise a large amount of capital. The aim is therefore that of making Italy a hub for the issuance of these digital and financial tokens.
Nevertheless, smart contracts can be used for a variety of applications that can differ from being purely financial. For example, Federica Carretta explained that there are problems that they often encounter with customers in the mapping of the copyrights themselves, because they are not registered (it is not known who created what and when). She clarified that there are two main phenomenon that damage the owners of intellectual property rights the most and these are the counterfeiting and the grey market (something put on the market with the consent of the owner but that ends up circulating somewhere where it shouldn’t). Perhaps a blockchain that is able to record the various steps of an event or even trace a product from beginning to end of the supply chain may help in this regard. But is the blockchain the right technology or are other tracking systems more effective?
Another challenging question raised was whether to use public or private blockchains. The code of the public blockchain is open source, making it possible for everyone to see it and exploit it. But, why is it important that the protocols are open? Mr. Piana explained that it is fundamental to know if the developer has correctly implemented the rules when writing the code, without taking shortcuts or issuing black doors. This is easier to check, both legally and technically, if the code is open source. In the case of errors or inconsistencies, more independent implementations are allowed. Moreover, the requirements must be “open-standard”, meaning that more than one person should contribute to its formation, different stakeholders should be able to manage it and it should be entrusted to a third party without stakes in the company for further supervision.
However, there is the so-called “blockchain trilemma”: a public blockchain cannot be secure, distributed and scalable at the same time, so if you want to have more scalability you inevitably have to reduce security or move towards private blockchain. Examples of the importance of open source are cryptographic theories that are implemented in blockchains, that protect our wallets in the execution of a smart contract that is public and visible to everyone. Often a browser called Brave is used that guarantees privacy through a shield offered by the browser. Its peculiarity is that of wanting to ensure the protection of user data, sharing as little as possible with advertisers.
Another important point is that some of these new technologies are protected by patents and this could be a problem because they erode the incentives for further improvement, and as a consequence decrease the value of the invention. This is one of the dilemmas of intellectual property. It is nevertheless important to have the right balance between regulatory intervention on one hand and stepping back on the other by providing just a general framework of the mandatory information that is required.
Overall, the event provided BSI members with very relevant information and allowed them to understand a little more about the future of blockchain in Italy and abroad. At the end of the conference, students could enjoy good food and wine offered by Deloitte and engage in open conversation with the speakers of the event and the other extraordinary guests that were invited.
By ANNA MARTINELLI
March 8, 2019
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