By definition, a blockchain is a system, within which transactions made in a cryptocurrency are recorded and maintained across several computers, which are linked in a peer-to-peer network.
These records are referred to as ‘blocks’ and are linked using cryptography.
Each block contains a cryptographic hash of the previous block and transaction data and once recorded, the data in a block cannot be changed without affecting and changing the subsequent blocks.
Thus, this quality ensures that a blockchain is secure and is based on decentralisation, eliminating any risks associated with the reliance on one central authority to transact with other users.
Blockchain has the potential to impact various aspects of life, both in personal and professional terms. In Malta, the legislative framework of blockchain has been divided into three acts: the Virtual Financial Assets Act (VFA Act, Chapter 590 of the Laws of Malta), the Malta Digital Innovation Authority Act (MDIA Act, Chapter 591 of the Laws of Malta), and the Innovative Technology Arrangements and Services Act (ITAS Act, Chapter 592 of the Laws of Malta).
The use of blockchain technologies may be applied to a number of different legal spheres. When it comes to maritime and shipping law, Malta is a key player in this field, due to its strategic position and maritime diversity.
When analysing the application of blockchain in the field of shipping and maritime law, it is evident that it could impact a large number of aspects, including logistical, contractual and traceability aspects. It could also impact the manner in which ships are registered and the way in which documentation is stored.
Effectively, it could impact the entire process involved in transactions, making each transaction more efficient and possibly even cheaper. Its potential in the field of shipping and maritime law is an extensive one, which could completely revolutionise the way in which things are currently being done, and would provide a more secure and tamperproof platform for transactions to take place.
In terms of bills of lading, blockchain technology can improve the process involved in registering and transferring the ownership of goods, facilitating the process of trade for all parties involved, increasing efficiency, reducing costs and reducing paperwork.
Firstly, it would provide a secure trading platform with no central storage system. Secondly, it would also make the entire process faster and more efficient, as it would create an instant and immediate transaction, without any couriers or middlemen. Moreover, smart bills of lading would create a paperless system, while also reducing the costs of couriers.
It could impact the entire process involved in transactions, making each transaction more efficient and possibly even cheaper
When discussing the application of blockchain technologies to the shipping sphere in Malta, it would also be necessary to analyse whether there is the willingness of the authorities to actually shift from using traditional methods of carrying out transactions, to the use of blockchain platforms. Although blockchain has a number of benefits, there are also certain risks which may discourage authorities and individuals (such as ship owners) from wanting to convert from traditional methods, to blockchain technologies.
First of all, decentralisation is sometimes difficult to guarantee, and is often expensive due to the large amount of electricity which is required. Users of the blockchain use a cryptographic key in order to define their identity, however, this key could easily be copied, which could lead to the impersonation of the user.
Furthermore, if the key is lost, then all the other users would also lose control over the assets on the blockchain.
In the maritime and shipping industry, all transactions are still being made through intermediaries.
If blockchain technology were to start being applied in Malta’s shipping industry, this would allow firms to transact directly between each other, without the need of using intermediaries and still ensuring secure transactions.
Furthermore, the industry in Malta is currently very paper-heavy, which also involves more administrative work. All this could be avoided with the application of smart contracts, which would not only reduce the amount of paperwork but would also make the process faster and more efficient.
Additionally, digitisationalso has the potential of changing the manner in which environmental conservation is traditionally being done. It is often said that maritime transport activities are very polluting in nature, however, through the process of digitalisation, this could provide for more sustainable development in the industry.
The future of blockchain is definitely an uncertain one, with many opposing views on the matter. Although it is currently very topical and its application seems to be on the rise in a number of countries and also in Malta, certain critics and high-profile individuals do not see a positive future in this regard.
Nina Fauser is fourth year LL.B (Hons.)student