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2 Eur. Data Prot. L. Rev. 422 (2016)
Blockchain Technology and the GDPR - How to Reconcile Privacy and Distributed Ledgers?

handle is hein.journals/edpl2 and id is 448 raw text is: 422 I Reports Practitioner's Corner Blockchain Technology and the GDPR - How to Reconcile Privacy and Distributed Ledgers? Matthias Berberich and Malgorzata Steiner* Blockchain technology raises a multitude of legal questions that are still in early stages of discussion. While legal research is so far mainly focused on financial regulation of cryp- tocurrencies, distributed ledger technology in general brings considerable privacy implica- tions. While the EU Commission expects the new General Data Protection Regulation and its technological neutrality to enable 'innovation to continue to thrive under the new rules,'1 some features of Blockchain pose questions under EU data protection principles. I. Technical Core Features and Use Cases of the Blockchain Technology Blockchain (BC) is widely depicted as the most dis ruptive technology since the advent of the Internet. While this technology was used at first for the virtu al currency Bitcoin, its current applications go far be yond cryptocurrencies, and its potential is compared with the TCP/IP protocol that forms the backbone of today's Internet. A vast scope of business models can be built upon BC, ranging from FinTech products like cryptosecurities or 'smart bonds' over 'smart proper ty' registers, to so called 'smart contracts' with trans actional protocols which assume the formation, per formance and execution of a fully electronic contract. In essence, BC is a distributed ledger technology with three constituting elements.2 Firstly, BC is a con tinuously amended and persistent ledger, which means that all transactions effected on BC are perpet ually stored. New transaction information is added in a new block and connected to the previous block Dr Matthias Berberich, LL.M. (Cambridge), is Attorney-at-Law and visiting lecturer at the Humboldt University Berlin; Malgorzata Steiner, MPP (Harvard), is former Head of Department in the Ministry of Administration and Digitisation in Poland and Senior Advisor at the Stiftung Neue Verantwortung in Berlin. 1 European Commission, 'Questions and Answers - Data protection reform' (Press release, 21 December 2015) <http://europa.eu/ rapid/press-release MEMO-15-6385_en.htm> accessed 13 Au- gust 2016. 2 For technical details cfJeni Tennison, 'How might we use blockchains outside cryptocurrencies?' (21 May 2015) <http:// www.jenitennison.com/2015/05/21/blockchain.html> accessed 13 August 2016; especially on BITCOIN cf Satoshi Nakamoto, 'Bitcoin: a peer-to-peer electronic cash system' (Bitcoin, 2012) in the chain, so that a BC will grow over time and in clude all transactions ever made. Secondly, BC is a distributed peer to peer ledger, stored on every node of the system as a complete BC copy. If new transac tions are effected, the majority of nodes must verify the legitimacy of the effected transaction and, if con firmed, every BC copy is updated accordingly. With this distributed authentication process, the core fea ture of BC is the lack of a central entity or intermedi ary. And thirdly, BC is asymmetrically encrypted and requires private and public keys to effect transactions. The recent enactment of the General Data Protec tion Regulation 2016/679 (GDPR), which shores up the level of data protection throughout the EU and expands its territorial scope (II.), might bring a ten sion between general data protection principles and the core features of BC technology3: If encrypted, BC transactions involve personal data and are not fully anonymous (III.), the decentralised BC nature with out a central entity as data controller will pose a chal lenge for regulators (IV). Moreover, the persistence <https://bitcoin.org/bitcoin.pdf> accessed 13 August 2016; Michael Nielsen, 'How the bitcoin actually works' (DDI, 6 De- cember 2013) <http://www.michaelnielsen.org/ddi/how-the -bitcoin-protocol-actually-works> accessed 13 August 2016. 3 For privacy as a general issue for blockchains see also Markus Kaulartz, 'Die Blockchain-Technologie, Hintergrwnde zur Distrib- uted Ledger Technology und zu Blockchains' (2016) Computer und Recht 474, 479; Donald B Johnston, 'More on the Law of the Blockchain' (Lexology, 11 April 2016) http://www.lexology.com/li- brary/detail.aspx?g-eel Oaa0f-3447-4088-81 dd-7521244fecb3 ac- cessed 13 August 2016; Gregory Brandman and Samuel Tham- papillai, 'Blockchain- Considering the Regulatory Horizon' (Uni- versity of Oxford, 7 July 2016) https://www.law.ox.ac.uk/business- law-blog/blog/2016/07/blockchain-%E2%80%93-considering-reg- ulatory-horizon accessed 13 August 2016. EDPL 312016

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