Demystifying Cryptocurrency: A GUIDE FOR LAWYERS, PART I By Daniel Wood
Introduction
In this era of accelerating technological progress, the legal landscape evolves constantly, sometimes leading to confusion and challenges but also presenting new opportunities. One of the emerging frontiers driving changes to a broad array of laws is cryptocurrency and blockchain, a digital revolution that has transformed the way we perceive and experience financial services. Cryptocurrency is, quite literally, the first truly new form of money since paper banknotes, and its potential as digitized value is only a small part of the expected impact of this technology on our lives. This dynamic and complex technology is not just for crypto-bros, speculators, and money launderers. Blockchain technology can drive fundamental shifts in multiple sectors. Like the advent of the internet, it will likely reach its fingers into numerous areas of our lives, sometimes without our realizing it. For lawyers who may not have extensive technology expertise, understanding this complex area may seem daunting but is of growing importance. This three-part series aims to provide an approachable introduction to cryptocurrency and blockchain, breaking down fundamental concepts, legal developments, and practical implications. No prior technological expertise is needed. After all, one does not need to understand mechanical engineering to drive a car. In this first installment, we will walk through the basic concepts of cryptocurrency and the blockchain, with a focus on the use of cryptocurrency as a new form of monetary value. Later in the series we will delve into other evolutions and use cases for this technology as well as some legal and regulatory considerations. The aim of the series is to give attorneys from all practice areas a sufficient grounding to understand how cryptocurrency and blockchain might affect them and their clients, and to better contextualize new developments.
Key Takeaways
• Cryptocurrency is a digital token that relies on cryptographic techniques for security and operability, and can substitute for money. • A blockchain is the underlying technology of most cryptocurrencies, serving as both a network and a public ledger to record cryptocurrency transactions. • Blockchain-based cryptocurrency offers decentralization (also sometimes called disintermediation) that enables peer-to-peer transactions without the need for trusted intermediaries like banks or payment networks. • There are both pros and cons associated with cryptocurrency.
What is Money?
Before we consider how cryptocurrency is revolutionizing money, it may be helpful to pause and contemplate what money actually is. We all use it every day. It’s the lifeblood of modern societies. But many of us would struggle to give a proper definition off the tops of our heads. Going a step further, have you ever thought about why we use money and where it came from? At its most fundamental level, money is a portable and transferrable representation of labor. Early on in the development of human society, social groups typically used a barter system: a fisherman trades some of his fish to a farmer for some of his vegetables so that both people can benefit from having both fish and vegetables. (This may not be an anthropologically accurate scenario, but just go with it.) A barter transaction revolves around the relative value of the goods involved, and core components of that value are the effort, skills, and time that go into the goods being traded. The parties literally trade the products of their labor. Unfortunately, barter economies are incredibly inefficient and November–December 2023 | San Antonio Lawyer® 21
