Understanding the Risk of "Immutable" Blockchain Applications

Risk Management Magazine

PUBLISHED ON: October 10, 2018

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When faced with new technological risks and problems that they pose, courts have historically risen to the challenge. Take electricity, for example, and more particularly, the liability for exposure to uninsulated electrical wires, which was the subject of a case decided by the Kentucky Supreme Court in the first year of the 20th century. Although the fact pattern was new, the court was still able to rule. It presented the issue thus: “Did the fact that the gas company supplied the harmless wires with the force that converted them into a death-dealing agency make it responsible for the injury which resulted in the death of the intestate?  The exact question submitted has not, so far as we are aware, been answered by any court of last resort.” (Thomas v. Mayville Gas Co. 108 Ky. 224 (1900)). The court applied existing precedent and concluded that the gas company should have insulated the wires and was in fact negligent.

Risk managers have it harder than courts, who sit in judgment after the fact. One of the challenges a corporate risk manager faces is to anticipate risk and responsibility without clear precedent or a specific fact pattern. This task is made easier by understanding how new technology operates and where unanswered questions may exist. To that end, we focus here on emerging technology risk associated with blockchain technology, in particular the creation of so-called “unstoppable” and “immutable” blockchain-based software.

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