Innovative technologies such as Blockchain can appear daunting, so the first step to unravelling their complexities is to study the concept, functionality, aims and areas of application. Following the financial crisis of 2008, the IT world created a revolutionary technology whose distinguishing characteristic was the principle of disintermediation.

Operating via the pseudonym of ‘Satoshi Nakamoto’ whose real identity remains unknown, a virtual payment system known as Bitcoin was created. This system permitted transactions between two users and possessed three radical characteristics: no limits in terms of distance, no need for personal identification, and no intermediary intervention.

The blockchain system is composed of a group of connected ‘blocks’ represented by a series of public, shared information registers (a single decentralized ledger). These registers are able to automatically update all of the participating operators’ servers listed in the chain. The figurative ‘links’ of the chain are represented by a highly performant calculation computer network that processes verifications, approvals, settlements and the archiving of all completed operations inside the system.

All of the operations taking place inside the blocks are peer to peer i.e. without intermediary intervention, made possible through the use of automatically executed software that creates smart contracts which avert any form of default. To make a real-life comparison, consider an automatic vending machine where the insertion of coins allows you to either purchase goods or receive your money back. In this example, both parties implicitly agree to interact with the system without knowing or trusting each other.

Applying the concept to Blockchain technology, special purpose computer “programmes” avail themselves of hash cryptography (composed of unidirectional mathematical algorithms that are neither modifiable nor replicable) which serves to ratify the unchangeable and integral nature of the information contained therein.

Various types of Blockchain functions are in existence, those strictly connected to financial transactions and others that also circulate data and information. The latter are being widely exploited in the sectors of Insurance, Risk Management and Agribusiness: from product traceability that generates enormous benefits in terms of security and cost containment, to the protection of company know-how and industrial secrets.

This innovative technology raises new financial and legal challenges that require competent advice. At IUSINTECH, we assist our clients to take informed decisions in light of such innovative technology, and propose appropriate legal instruments to fully represent the inherent risks and opportunities of each project.

To provide an example IUSINTECH, in collaboration with our tech partners, advises companies In the agro-industrial sector how to enhance the value of the ‘made in Italy’ brand using certified traceability made possible with blockchain technology. Through key data insertion such as origin of the raw material, packaging and distribution, the entirety of the production process is unalterable and transparent.

Companies who decide to invest in this process gain an important competitive advantage when prospecting new international and yet unexplored markets such as China. By having a complete set of production data at one’s fingertips, consumers can verify product quality and inform themselves on all stages of production and elaboration. The initial investment made by the company is thus transformed into an efficient instrument with manifold rewards: optimized production, improved cost control and strategic customer loyalty which denotes them from competitors.