5 minute read
Forefront
Blockchain, intellectual property and the crisis of crypto assets
uUnderstanding blockchain technology is essential for intellectual property specialists, but the recent cryptocurrency crisis (also known as crypto crash) has made us think that perhaps we have wasted our time studying something that turned out to be a bubble.
To locate ourselves in this matter, let’s start by explaining that blockchain (or chain of blocks) is an encrypted, decentralized and unalterable database that facilitates the registration of transactions on tangible assets (such as real estate) or intangible assets (such as copyright).
Said database, instead of residing on the servers of a particular company or organization, is replicated on thousands of servers at the same time. All of them have the information and can authorize and validate cryptocurrency transactions.
Why is this important for those of us who work in the world of intellectual property? Because companies operate on data and information and the blockchain provides all this raw material immediately and transparently.
8
9
Specifically in intellectual property issues, the blockchain serves, for example, for the preservation of business secrets such as source codes, methods, prototypes, pre-launch prices, finances, budgets, contract terms, business plans, market knowledge, etc. employee salaries, vendor and customer lists, chemical formulas, experiments, positive and negative experimental results, engineering specifications, lab notebooks, recipes, and many more assets.
It’s no secret to anyone that the increased mobility of employees and the digitization of data has considerably increased the risk of disclosure of business secrets, which is why blockchain technology is undoubtedly useful since it serves to demonstrate the existence of a business secrecy at a given time, without compromising confidentiality: When recording information on a blockchain, the only publicly available information is the hash or summary and the timeline indicating when the transaction occurred.
Protecting trade secrets is just one of the implications of blockchain for intellectual property. It is also used for paternity testing, origin authentication, copyright registration and management; evidence the effective use or first commercial use of a brand; electronically manage rights (for example, online music sites); the establishment and enforcement of IP agreements, the existence of exclusive distribution licenses or networks through smart contracts; and the transmission of payments in real time to rights holders.
Blockchain can also be used for authentication and origin determination purposes in the process of detecting or recovering counterfeit, stolen and parallel import goods.
Perhaps for all the above, the World Intellectual Property Organization (WIPO) has pointed out that blockchain technology and intellectual property rights are a perfect match in the crypto space1 .
One of the main developments of the blockchain are cryptocurrencies, which make it easier to carry out all kinds of business, automate the transfer and raising of funds, make it easier to store transaction details, allow the creation of new financing structures, reduce counterparty risk, pay off loans quickly, and provide all kinds of advantages for peer-to-peer financing.
In fact, cryptocurrencies have given rise to a new ecosystem of decentralized finance (DiFI) that has been developing globally, in parallel to the traditional financial industry, but in an environment of little and dissimilar regulation.
The latter has made it easier for the new operations to be subject to a number of operational and financial risks. Among the first (operational risks) we can mention cyberattacks on virtual wallets, loss of resources due to forgetting passwords, and among the financial risks, we have liquidity cuts or abrupt changes in their market value. An example of the materialization of a financial risk occurred in May 2022, when the world observed the “crypto crash”, that is, the collapse of all cryptocurrencies. To say the least, on June 14, 2022, Bitcoin woke up with a value of less than 22,500 dollars, which represented a drop of 67% compared to its historical maximum reached on November 10, 2021, when it reached a ceiling close to $69,000. ASIPI Mundo consulted an expert on the subject, Diana Visser, a Colombian professor of financial law, who told us that the fall of cryptocurrencies occurred in a context of tightening of the monetary policies of the different central banks to combat the high inflation, preceded by a period of excessive liquidity in the market that prompted a wave of speculative purchases and a disproportionate increase in its price. In addition, structural problems of some platforms increased the fear of the holders, who massively carried out conversions or withdrawals, a situation that, due to the interconnection between the different crypto assets, affected the ecosystem in general. Visser considers that the market is undergoing an adjustment as a result of some weaknesses and risks inherent in this type of assets and structures. However, she estimates that crypto assets will not disappear, given the advantages of their use. Moreover, she hopes that its level of adoption will continue to increase, while progress is made in its regulation, as various authorities have been requesting, especially in aspects related to consumer protection, control of criminal activities, global financial stability and environmental impact, all favoring innovation2 .
Leo Elduayen and Gonzalo Patri, Argentine experts from the Koibanx, agreed with Visser. Elduayen explained that the sharp drop in cryptocurrencies can be explained by the speculative uses that were made without generating
1. 2. https://www.wipo.int/wipo_magazine/es/2018/01/article_0005.html Directiva Presidencial Presidente Biden Marzo 2022, Market in Cripto Assets - MiCa Comisión Europea, Financial Stability Board - FSB Crypto-asset markets Potential channels for future financial stability implications
10
real value / utility. In his opinion, the crypto crash is something that simply leads to the debugging of the ecosystem, but in no way means its downfall and end.
Patri, on his side, insisted that one thing is blockchain technology and another crypto assets, although they are related. The blockchain will continue to be an indispensable tool for many processes related to intellectual property while crypto assets will have to choose and reformulate. He added that it is true that in past crises many protocols/tokens/etc., disappeared but “the technology and the projects that really generate value generally remain in the market”.
What’s next? Patri told ASIPI Mundo that it is necessary to continue working or “keep building” as those who work in this area say in jargon, referring to the fact that millions of “companies/developments/individuals are creating value within the crypto ecosystem”.
In short, blockchain is much more than cryptocurrencies. Blockchain will continue to be useful for intellectual property and crypto assets, although they will be perfected, are not going to disappear but will be subject to regulation. The market revealed some weaknesses and risks inherent to crypto assets, but it is very likely that there will soon be a gradual recovery in their price.
This has just begun. Let´s wait and see
11
