Law no. 12 of 11 February 2019 has converted in law the Article 8 ter of law-decree no. 135/2018 concerning distributed ledger technologies.
The latter, including blockchain, are defined by the law as technologies and IT protocols “which make use of shared out, distributed, replicable, simultaneously accessible and structurally decentralized on encrypted basis ledgers, allowing registration, validation, update and filing of data, both non encoded, both further encrypted, verifiable by any participant, unalterable and unchangeable”.
For simplicity’s sake, we are dealing with protocols, which allow to list and manage data, making them shareable and traceable in any time, through a linked servers’ mechanism, any of them aiming to verify, validate and file any operation processed by such system, which may be modified only upon each server’s approval.
Such technology implies that linked chain servers’ control and management are assigned not to a central entity, acting as general legal authority, but to any single participant to the chain itself – circumstance that should make the chain safer.
The operation of blockchain, which, as we said, is a kind of distributed ledger, can be summarized as follows: one player who potentially wants to put data into a chain, holds one public key and one private key, which can be used to sign data. Such data, after being laid into a “block”, are sent to each server, which verify signature’s validity through a complex mechanism based on consent. Once the data set has been validated, the containing block is made part of the chain and added to the other archived blocks.
Even if requirement of the consent for data validation is one of the block technology’s crucial element, it is not prescribed by the afore-mentioned legal provision.
Moreover, requisite of data non-modifiability seems to be not completely congruent to the protocol: in fact, as we said, data placed into a distributed ledger are changeable upon the consent from each server.
Until now, we generically referred to “data”, but distributed ledger technology can also be used for other several purposes: to execute cash transactions, control supply chains, file land registry data, set up ICO crowdfunding campaigns, enter into and execute smart contracts, etc…
For example, the possibility that circular economy may be developed and implemented by such protocols – which European Parliament wish for, after all – seems to be noteworthy, since in the Resolution dated 3 October 2018 has highlighted that distributed ledger technologies can “bring new opportunities to the circular economy by incentivizing recycling and enabling real-time trust and reputation systems”.
Moving back to Article 8 ter, such provision defines smart contract as “a computer software operating through distributed ledger technologies whose execution automatically bind two or more parties on the basis of effects previously agreed by the parties themselves. Smart contracts shall be deemed meeting written form requirements previous IT identification of any interested party, in compliance with the procedure to be established by Italian Digital Agency through guide lines to be enacted by ninety days from the conversion of the decree-law”.
In plain words, smart contract is a software, based on distributed ledger technology, which allows automatic execution of the agreement among the parties: it implies that the execution is unlinked to concrete fulfillment of the parties.
Especially in current initial steps, role played by lawyers in carrying on negotiation and drafting smart contracts – to be later translated into IT code – will be crucial.
At paragraph 3, the Article we are analyzing lastly establishes that distributed-ledger-saved smart contracts produce the same effects of electronic time stamps, provided by Article 41 of Regulation (EU) No. 914/2014 of the European Parliament and of the Council. Such Regulation, better known as eiDAS, establishes that electronic time stamp establishes evidence that the latter data existed at that time (see Art. 3, No. 33 of eiDAS Regulation). Also in this case, the Italian Digital Agency must outline necessary technical standards to ensure that distributed ledger technologies can produce electronic time stamp’s legal effects.
Hopefully, introduction of distributed ledger technologies, thanks to its wide ways of applications, will represent a possible factor of economic growth, as long as it will be nationally and internationally clearly regulated, in order to limit any feasible abusive purpose can be chased through such technology.
For example, techniques to guarantee the authenticity of data inserted into the chain are still not clear at the moment: legitimacy is ensured by who and by means of what tools?
Italian legislative reform is surely remarkable since it has quite rapidly taken on changes currently taking place, through the issue of new technologies legal regulation; but, reading such provisions, we must outline their vagueness – rather inaccuracy – which might be only partly fixed by guide lines to be enacted by Italian Digital Agency.
Author: Claudia Franzosi
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