1. Blockchains and GVCs
Prepared for LAW, MARKETS & GLOBALIZATION
March 20, 2018
Nelson M. Rosario

2. Presentation Roadmap
1. Why should you care?
2. Introduction to blockchain technology concepts
3. Application to GVCs
4. Legal considerations
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3. Why should you care?
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4. 4

5. 5

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8. 8

9. Blockchain is about Trust and
Consensus, and impacts the way we
exchange things of value
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10. Introduction to Blockchain
Technology Concepts
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11. What is a blockchain?
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12. Blockchain
•No agreed upon definition
•Here’s a wordy definition:
–“A blockchain is a tamper-evident append-only distributed ledger of peer-peer transactions
maintained by a decentralized network of participants.”
–Put another way, blockchains are cryptographically linked blocks of transactions
•Blockchains utilize public-key cryptography, and consensus mechanisms
to establish the veracity of information stored in the blockchains
•Fundamentally, blockchains are about two key concepts: trust and
consensus
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13. Blockchain
•Middlemen?
•Individuals?
•Math?
•Blockchains are “trustless”
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•How do you prove veracity of
data?
•How do you get people to agree
on that proof?
•Blockchains allow for emergent
consensus

14. Blockchains provide a new way to
manage trust without middlemen
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15. Blockchain
•Blockchains are tamper-evident
•Saying blockchains are immutable is imprecise
•As time goes by, previously entered transactions trend towards being
immutable
–Always the possibility of a 50%+1 attack
•The use of Merkle tree’s and cryptography make changes very difficult
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16. Blockchain
•Blockchains are append-only
•You can’t go back and edit previous transactions
•Information communicated on a blockchain is not reversible
–Once information is sent out there is not getting it back
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17. Blockchain
•Blockchains utilize a distributed ledger of peer-peer transactions
•Every node in the network may have a copy of the “ledger,” or blockchain
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18. Blockchain
•Blockchains use peer-peer transactions
•These transactions are broadcast to the entire blockchain network
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19. Blockchain
•Blockchains are decentralized
•Robust blockchains are run by a plurality of nodes where no one party
controls over 50% of the computing power necessary to sustain the
network
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20. Blockchain
•Consensus is achieved over time, accordingly, consensus on the
information in the network emerges as more and more nodes confirm the
data
•Main two approaches to incentivize nodes to maintain the network
–Proof of work
•Nodes solve a cryptographic puzzle to prove they expended a certain amount of computational power
during the process of building a block of transactions to be added to the blockchain
•As a reward miners receive a token for the network, usually a cryptocurrency, when their block is
accepted and added to the blockchain
–Proof of stake
•Blocks are added to the blockchain in a deterministic fashion
•The chance that a block built by a node is added to the blockchain depends on the amount of
cryptocurrency “staked” by that node 20

21. Blockchain Flavors
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22. What can we do with a blockchain?
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23. Any relationship that uses a
middleman might be a candidate
for a blockchain
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24. Blockchain Use Cases
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25. Cryptocurrency
•The first cryptocurrency was Bitcoin
•Bitcoin introduced the first blockchain protocol
•Solved the “double-spend” problem
•Addresses in the network keep track of unspent transaction outputs
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26. Smart Contracts
•Smart contracts were first introduced by Nick Szabo in 1994
•Scripts that automatically execute
•Essentially, they are distributed and decentralized public agreements
•Ethereum was the first public blockchain built specifically for smart
contracts
–Two accounts in Ethereum
•One account that holds a balance of ether
•Contract account that has
–An ether balance
–Functions
–Data, which is the state of the Contract
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27. Decentralized Autonomous Organizations
•Extension of the idea of smart contracts
•Organizations that live solely in code on a blockchain
•Program in all of the functionality of your “organization” using smart
contracts
•Most famous example is the “DAO”
•The DAO was hacked as a result of a bug in its smart contract
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28. Initial Coin Offerings
•Initial Coin Offerings, or ICOs, are overwhelmingly conducted on the
Ethereum blockchain
•Type of crowd-funding, looks like an IPO without all the required
disclosure
•Can be deemed a security by the SEC
•$1.3 billion has been raised through ICOs in the form of cryptocurrency
contributed to projects
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29. Application to GVCs
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30. 30
What is a GVC?

31. GVCs
● A collection of entities
● That communicate information
● Where the information must be validated
● And the provenance of that information is paramount
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32. Sound familiar?
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33. GVCs
● GVCs are global in nature
● They involve multiple parties that may be adverse to each other
● There are economic incentives for participants to cheat
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34. Sound familiar?
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35. GVCs + Blockchain
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● Tokenless blockchains
● Smart contracts
○ Lots of smart contracts
● Oracles

36. IBM - Global Trade Digitization
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37. Maersk IBM Pilot → Now joint venture
● A shipping information pipeline will provide end-to-end supply chain visibility to enable all
actors involved in managing a supply chain to securely and seamlessly exchange information about
shipment events in real time.
● Paperless Trade will digitize and automate paperwork filings by enabling end-users to securely
submit, validate and approve documents across organizational boundaries, ultimately helping to
reduce the time and cost for clearance and cargo movement. Blockchain-based smart contracts
ensure all required approvals are in place, helping speed up approvals and reducing mistakes.
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38. Blockchain Oracles
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39. GVCs + Blockchain
● About managing information flow
● Secure trust in information
● Reducing costs
● Managing relationships
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40. Legal Considerations
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41. Blockchain Legal
● Contracts
● Negotiating
● Smart Contracts
● Liability
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42. Blockchain Legal
● Jurisdiction issues
● Technology issues
● Automation issues
● Regulatory issues
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43. New technology does not
necessarily mean new law
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44. Recommended Readings
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