Tech Insight : What Are ‘Blockchain Identifiers’?

In this insight, we look at what blockchain identifiers are, their roles, users, and relevance to businesses, plus how they could work with the domain name system.

What Are Blockchain Identifiers? 

Blockchain, the technology behind cryptocurrencies, is the decentralised, secure, incorruptible ledger system that enables transparent and tamper-proof transactions. Its value is in providing enhanced security, efficiency, and trust in digital operations

Blockchain identifiers are the unique codes used within blockchain technology to securely identify and authenticate transactions, assets, or participants.

What Do They Look Like? 

Since blockchain identifiers are generated using cryptographic algorithms and each is designed to be unique, they look like long strings of code. For example:

Bitcoin addresses, which serve as blockchain identifiers for wallet locations look like ‘1BoatSLRHtKNngkdXEeobR76b53LETtpyT’.

Ethereum addresses which also act as blockchain identifiers, look like ‘0x323b5d4c32345ced77393b3530b1eed0f346429d’.

Who Uses Them? 

Blockchain identifiers are employed by a wide range of users, including cryptocurrency holders (as shown in the examples above), businesses leveraging blockchain for supply chain management, and developers creating decentralised applications (dApps). These identifiers are essential for anyone involved in the blockchain ecosystem because they ensure the integrity and traceability of transactions.

Blockchain Identifiers And Domains? 

Domain names (part of the DNS system) are, of course, designed to be human-readable addresses that map to the strings of IP address numbers underneath, thereby allowing users to easily find websites without needing to memorise complex strings of numbers. As shown in the examples above, however, blockchain identifiers are long stings of code and not designed to be human-readable, but both domain names and blockchain identifiers broadly serve as tools to navigate and secure the digital world (although they operate in different layers for different purposes).

Since they have this similar purpose, the convergence of blockchain identifiers and domain names is an idea that’s beginning to take shape, offering enhanced security and user control over online identities.

DNS 

The Domain Name System (DNS) is a foundational technology that has shaped how we interact with the internet, making it accessible and navigable through human-readable domain names. This system is crucial for the digital identities of entities worldwide, enabling a seamless connection across diverse devices and platforms, from computers and smartphones to the Internet of Things (IoT). The universality and uniqueness provided by DNS are vital for keeping the internet’s vast network of devices connected and functioning.

An Evolution With Blockchain? 

However, the emergence of blockchain technology introduces a potential evolution for digital identification and transactions. Blockchain, for example, offers a secure, decentralised ledger system, enhancing transparency, integrity, and resistance to tampering. Its application has extended beyond cryptocurrencies to address some of the limitations of traditional DNS, particularly in terms of security and memorability of identifiers.

Examples

Startups like Ethereum Name Services (ENS) and Unstoppable Domains, for example, are bridging the gap between blockchain’s secure, decentralised nature and the user-friendly accessibility of DNS. They create “blockchain identifiers,” effectively linking memorable, human-readable names with the complex, cryptographic addresses of blockchain wallets. This integration retains the DNS’s ease of use while significantly improving security, reducing the risk of fraud, and enhancing user control over digital identities.

Could Be More Secure 

Replacing the centralised control of DNS with blockchain’s decentralised model could mitigate vulnerabilities in the current system, e.g. DNS spoofing and attacks on central registries. Blockchain-based domain names could also resist censorship and provide a more secure, user-owned online identity that is less susceptible to fraud and downtime.

Also, using blockchain could remove the need for management by entities like ICANN and registrars, and remove the need for renewal fees, expirations, or deletions.

Challenges 

Despite blockchain technology’s benefits, it’s important to note that blockchain identifiers have many challenges and potential shortcomings in comparison with the DNS system, including:

– Scalability issues, i.e. blockchain networks can struggle with high transaction volumes, leading to slower confirmation times and increased costs.

– Integrating blockchain identifiers with existing web infrastructure could be very complex, requiring significant technical effort and adaptation of current systems.

– The current user experience of managing blockchain identifiers can be complex and unfriendly, especially for non-technical users.

– Despite the security of blockchain, high-profile hacks and thefts in the cryptocurrency space have led to concerns over the security of blockchain-based systems.

– The association of blockchain with volatile cryptocurrencies may have eroded confidence in blockchain identifiers as a stable and reliable system for domain management.

– The lack of widespread understanding of blockchain technology among the public could hinder trust and adoption.

– Blockchain-based domain names could conflict with existing DNS names, leading to confusion and potential security risks.

– The decentralised nature of blockchain could make it challenging to resolve disputes over name ownership or to enforce naming conventions, increasing the risk of name collisions.

– Without a centralised authority to enforce trademark rights, blockchain identifiers could lead to increased incidents of squatting and trademark infringement.

Not Replacing DNS, But Bridging A Gap

Therefore, some commentators have pointed out that instead of replacing DNS, blockchain technology and crypto wallets can be supported by DNS, e.g. users registering .eth domain names with ENS, while .art DNS domains provide the platform to integrate crypto technology. Blockchain technology could, therefore, be used by domain registries and registrars to bridge a gap, thereby improving the security and integration of the Internet.

What Does This Mean For Your Businesses? 

UK businesses are familiar with domain names and perhaps, to extent to the fact that there’s an underlying DNS system to the Internet. Blockchain technology, however, is still relatively new to many, and its image may have been tarnished by association with volatile cryptocurrencies. That said, businesses leveraging blockchain for supply chain management, and developers creating decentralised applications (dApps), as well as any businesses who’ve dabbled in/are involved with cryptocurrency may already be familiar with blockchain identifiers. Broadly speaking, blockchain identifiers offer the benefits of enhanced security, decentralisation, and transparency in managing digital identities and transactions.

Some think they promise a more secure and user-controlled alternative to traditional DNS, potentially mitigating vulnerabilities like spoofing and centralised control. However, currently, due to their challenges, they are more of a bridge to gaps in the DNS system than a viable replacement. For example, the challenges to blockchain identifiers replacing the current DNS/domain system include problems with technical scalability, integration complexities, and the need for broader user understanding and confidence. Also, the decentralised nature of blockchain could lead to name collisions and trademark issues.

That said, although blockchain technology is still evolving and has its challenges, it does have important benefits that have meant it has been adopted in many different industries and fields, and blockchain identifiers have proved to be vital to the integrity and traceability of transactions.

Tech Insight : Blockchain Bill

In this insight, we look at the introduction of the Electronic Trade Documents Act 2023 (ETDA), what it means and why it’s so significant, plus its implications.

The ETDA 

The Electronic Trade Documents Act 2023 (ETDA), which was based on a draft Bill published by the Law Commission in March 2022, came into force in UK law on 20 September. This Act allows the legal recognition of trade documents in electronic form and crucially, allows an electronic document to be used and recognised in the same way as a paper equivalent. The type of trade documents it applies to include a bill of lading (a legal document issued by a carrier, or their agent, to a shipper, acknowledging the receipt of goods for transport), a bill of exchange, a promissory note, a ship’s delivery order, a warehouse receipt, and more.

The Aims 

The aims of the ETDA, which gives the electronic equivalents of paper trade documents the same legal treatment (subject to criteria) is to:

– Help to rectify deficiencies in the treatment of electronic trade documents under English law and modernise the law to reflect and embrace the benefits of new technologies.

– Help the move towards the benefits of paperless trade and to boost the UK’s international trade.

– Help in the longer-term goal to harmonise and digitise global commerce and its underlying legal frameworks, thereby advancing legal globalisation.

– Complement the 2017 UNCITRAL Model Law on Electronic Transferable Records (MLETR). This is the legal framework for the use of electronic transferable records that are functionally equivalent to transferable documents and instruments, e.g. bills of lading or promissory notes.

Why The Reference To Blockchain In The Title (‘Blockchain Bill’)? 

The development of technologies like blockchain (i.e. an incorruptible distributed ledger) technology that allows multiple parties to transfer value and record forgery-proof records of steps in supply chains and provenance in a secure and transparent way has made trade based on electronic documents possible and attractive.

What’s The Problem With A Paper-Based Trade Document System? 

Moving goods across borders involves a wide range of different actors, e.g. transportation, insurance, finance, and logistics, all of which require (paper) documentation. For example, it’s been estimated that global container shipping generates billions of paper documents per year. A single international shipment, for example, can involve multiple documents, many of which are issued with duplicates, and, considering that two-thirds of the total value of global trade uses container ships, the volume of paper documents is immense.

The need for so much paper, therefore, can slow things down (costs and inefficiencies), creates complication, and has a negative environmental impact.

Based On Old Practices 

Also, existing laws relating to trade documents are based on centuries old merchants’ practices. One key example from this is, prior to the new ETDA, the “holder” of a document was significant because an electronic document couldn’t be “possessed” (in England and Wales), hence the reliance on a paper system. Under ETDA, an electronic document can be possessed, thereby updating the law.

How Does It Benefit Trade? 

Giving electronic equivalents of paper trade documents the same legal treatment offers multiple benefits for businesses, governments and other stakeholders involved in trade. Some of the notable benefits include:

– Efficiency and Speed. Electronic documents can be generated, sent, received, and processed much faster than their paper counterparts. This can significantly reduce the time taken for trade transactions and the associated administrative procedures.

– Cost Savings. Transitioning to electronic trade documentation can save businesses considerable amounts of money by reducing costs related to printing, storage, and transportation of paper documents. For example, the Digital Container Shipping Association (DCSA) estimates that global savings could be as much as £3bn if half of the container shipping industry adopted electronic bills of lading.

– Environmental Benefits. As mentioned above, the shift from paper to electronic documentation could reduce the environmental impact associated with paper production, printing, and disposal. Also, as highlighted by the World Economic Forum, moving to digital trade documents could reduce global logistics carbon emissions by 10 to 12 per cent.

– Accuracy and transparency. Electronic documentation systems often come with features that reduce manual data entry, thereby decreasing errors. Additionally, digital platforms can provide more transparency in the trade process with easy-to-access logs and history.

– Security and fraud reduction. Advanced digital platforms come with encryption, authentication, and other security measures that can reduce the chances of document tampering and fraud. Blockchain, for example, is ‘incorruptible.’ It’s also easier to track the origin and changes in electronic documents.

– Accessibility and storage. ETDA doesn’t exactly specify any one technology, only the criteria that a trade document must meet to qualify as an “electronic trade document” (see the act for the exact criteria). That said, electronic documents can generally be easily stored, retrieved, and accessed from anywhere with the appropriate security clearances, making it easier for businesses to manage and maintain records.

– Interoperability. Digital documents can be more easily integrated with other IT systems, such as customs and regulatory databases, enterprise resource planning (ERP) systems, or financial platforms, providing more seamless trade operations.

– Flexibility and adaptability. Electronic systems can be more easily updated or modified to reflect changes in regulations, business practices, or market conditions.

– Harmonisation of standards. The adoption of electronic documents can pave the way for international standards/global standards, simplifying cross-border trade and making processes more predictable and harmonised across countries.

– Enhanced market access. For smaller enterprises that might not have the resources to deal with cumbersome paper-based processes, the digitisation of trade documentation could make it much easier to access global markets.

– Dispute resolution. Having a digital (secure) record with a clear audit trail, could make it easier to resolve disputes when discrepancies occur.

What Does This Mean For Your Business? 

The technologies exist now to enable reliable, secure, and workable systems that use digital rather than paper documents and this UK Act, in combination with other similar legal changes in other countries could help modernise and standardise global trade. Accepting digital documents as legal equivalents to their paper counterparts will bring a range of benefits to global trade including cost and time savings, greater efficiency, reduced complication (and making it easier for more businesses to get involved in international trade), environmental benefits, the advancement of standardisation of trade globally, and many more.

For the UK, not only does the Act update existing laws but could bring a significant trade boost. For example, the government estimates it could bring benefits to UK businesses (over the next 10 years) of £1.1 billion. It’s easy to see, therefore, why the introduction of EDTA is being seen by some as one of the most significant trade laws passed in over 140 years.