What is blockchain?

A blockchain can be best compared with a digital ledger that is digitally processing transactions in the order in which they occur by entering them into a code of ‘blocks’. This chain of blocks (the ‘blockchain’) is created and maintained in a peer-to-peer network without the participation of a central party such as a bank. All participants in the network have an identical copy of the ledger. Each time a new transaction takes place in the blockchain, it is verified by checking whether the transaction is correct and can be traced back to the initial transaction (the first block).

Once entered, the data in the blockchain can no longer be changed, at least not without the consent of all of the participants in the chain. The advantage is the guaranteed authenticity. The transparent, irreversible and decentralised nature of blockchain also raises the question of how this technology relates to privacy legislation. More information about this can be found in the blog article (in Dutch) ‘Privacy, de AVG en Blockchain, een combinatie die werkt?‘ (‘Privacy, GDPR and blockchain: a combination that works?’).

But there’s more. Payments can be made subject to certain terms and conditions, for example stipulating that a crowdfunding transaction will only pass through once at least 100 other persons have agreed to participate (crowdfunding). Or that a payment requires the written approval of three directors. This type of contractual clause is called a ’smart contract’.

What is a smart contract?

Smart contracts are digital contracts in which the conditions and the way in which the conditions are to be implemented, are programmed into software. Certain values or units (‘coins’) are transported into a protocol, for example the Ethereum Virtual Machine. The protocol then executes the code and can decide for itself whether the value or unit should or should not be transferred or paid.

Smart contracts can be an alternative or supplement to everyday, reasonably standardised contracts used to settle legal matters such as mortgages, rental agreements, registered partnerships, inheritances, copyrights and (neighbouring) performance rights.

Dutch Blockchain specialist

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