Blockchain technology is an advanced database mechanism that allows
transparent information sharing within a business network. A blockchain database
stores data in blocks that are linked together in a chain. Blockchain derives
its name from the digital databases or ledgers where information is stored as
"blocks'' that are coupled together forming "chains".
Blockchain technology serves as the foundation for the digital cryptocurrency,
bitcoin. It is a distributed network of servers where information is mirrored on
all participating computers and verified through laborious calculations.
To ensure security, blockchains make considerable use of cryptography.
Blockchain is said to be more secure and resilient against hacking and other
manipulations than other centralised servers. A distributed ledger that is open
to anyone. Some data is recorded in a blockchain so it is difficult to change
it. Each Block has a hash that stores unique information.
Hashes are useful when you want to change the information inside the block or
know what changes have been made. Hash of the previous block creates a chain of
blocks and this technique makes it secure. First block is called the genesis
block. Changing a single block will hamper all the others and tampering with one
hash creates a problem with the others.
One can tamper one block and also change the others or create a new block.
Therefore, to avoid this and mitigate it, a blockchain has a ' proof of work '
method which slows down the creation of new blocks. Another method by which
block chains secure themselves is by distributing. instead of centralisation, a
node is created, therefore when a new block is created it is to be verified by
all the members of the node and is known as the P2P network.
Simple programs stored on the block chain can be used to automatically exchange
coins, with respect to certain conditions. Distributed ledger to store
contracts. Tiny computer programme stored in a block chain. Enforceable by code.
some common smart contract platforms like Ethereum, Solana, Polkadot,
Hyperledger fabric, etc.
The Legal Sphere:
The legal and judicial frameworks have both benefited from the application of
Blockchain Technology. In India, there is currently no legislation that
regulates and keeps a check on blockchain technology and its numerous
applications. However, the existing sector-specific regulators may have the
authority to govern the use of blockchain-related technologies, depending on the
many sectoral applications.
The Hon'ble Supreme Court of India in Internet and Mobile Association of
India v. Reserve Bank of India
has brought the attention of the legal sector
to the distributed ledger technology that provided the fundamental foundation of
Cryptocurrencies (bitcoin, dogecoin). The Court held that the RBI did have the
necessary powers to regulate virtual currencies in its role to secure India's
Banks and other financial institutions which are regulated by RBI are no longer
prohibited from provisioning bank related services in relation to dealing of
cryptocurrencies. This was derived as the RBI could not clearly tell the damages
that the economy would face if cryptocurrency was not banned and therefore the
Supreme Court declared restrictions to be unenforceable. In India, there is
currently no legislation that regulates and keeps a check on blockchain
technology and its numerous applications.
However, the existing sector-specific regulators may have the authority to
govern the use of blockchain-related technologies, depending on the many
sectoral applications. Meanwhile, The Department of Economic Affairs, Ministry
of Finance has drafted the 'Banning of Cryptocurrency & Regulation of Official
Digital Currency Bill, 2019' ("Draft Bill").
The Draft Bill intends to outlaw a wide variety of cryptocurrency-related
activities in India. The bill highlights difficulties such as holding, selling,
disposing of, or any type of cryptocurrency exchange. The specified prohibition
only applies to dealing in cryptocurrencies; it does not apply to the usage of
distributed ledger technology or the use of cryptocurrencies for research
Under the Draft Bill, Mining, holding, selling, issuing, transferring, or using
cryptocurrencies is punishable with a fine or imprisonment of up to 10 years, or
both. As per the draft bill, the central government, in cooperation with the
RBI, considers approving the digital rupee as legal money.