Ethereum's Impact on Digital Contracting Creates R&D Tax Credit Opportunities



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Ethereum
        Blockchain technology offers more security and encryption for our global market than previous technology. The first and most widely known implementation of blockchain was in 2008, known as Bitcoin cryptocurrency. The pseudo-anonymous creator of Bitcoin, Satoshi Nakamoto, interpreted it as a ledger for currencies. He also foresaw the possibility of making contracts via a scripting language enforced by a network consensus. The network consensus exists because of the decentralized, open-source foundation of blockchain technology.

        In recent years, however, security researchers identified flaws in the Bitcoin scripting language; these features were removed in 2011. Despite this change, the dream of digital contracting was not eliminated, and in 2015, some researchers released Ethereum, promising to make cryptographically secure contracts a reality. Embedded in Ethereum is a programming language called Solidity, which is one of several programming languages used to write contracts for the Ethereum Blockchain.

        Ethereum contracts require expertise in computer science as well as an understanding of legal ramifications to ensure smart contracting is safe, secure, and of proper legal intentions. Now, Ethereum is bringing change to almost every industry that requires contracting, transactions, and other services that can now be digitized. With it comes an implication for the future of blockchain, network security, data integrity, and law. As of August 8, 2017, the Bitcoin market value was up 3.85% at $3,432.27, blockchain market value was up 61.59% at $353.75, and Ethereum market value was up 3.6% at $276.43.  They are expected to continue growing and influencing the global marketplace. In July, Bitcoins were trading for $2,550, which is a 170% increase from the beginning of 2017. Similarly, Ethereum increased from $10 to $300 since the start of 2017, representing a 3,000% increase.  

        Institutions and researchers involved in innovative efforts to program and encrypt digital contracts via Ethereum and blockchain technology may be eligible for federal and state R&D tax credits.


The Research & Development Tax Credit

        Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent.  On December 18, 2015, President Obama signed the bill making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax and startup businesses can utilize the credit against $250,000 per year in payroll taxes.


Blockchain Defined

        Blockchain is one of the fastest up-and-coming technology sectors in recent years. It is a trustless and distributed database system that offers secure payments and data management. Blockchain technology is, in a way, a triple entry accounting system in which each transaction is given a unique signature that is immutably stored along with references to inputs and outputs.  Blockchains most often use public-private key encryption to secure and verify the ability to create a transaction with funds stored within the blockchain. Companies can also build custom chains to perform internal tasks more efficiently. Otherwise, the majority of companies rely on the public blockchain ledger.

        In the cryptocurrency industry, Bitcoin is “a purely peer-to-peer version of electronic cash” that is not added to the blockchain until the transaction is confirmed and validated.  This adds a layer of security to the blockchain ledger, which contains values for thousands of existing transactions. A transaction can only be confirmed when it is part of a block that meets the cryptographic rules enforced by the network. If it does not conform to these rules, the blocks will become invalid.

        The blockchain employs a proof-of-work (POW) system to deter denial of service (DoS) attacks and network spam. A DoS attack is a form of cyberattack in which the hacker makes a machine or network resource unavailable by disrupting the services of a host connected to the Internet or that network. POW validates each new group of transactions. Regarding cryptocurrency, the Hashcash POW is utilized in block generation of Bitcoins. The POW must be completed before the block is accepted by network participants. The chain is made in such a way that each block contains the hash of the preceding block; therefore, each has a chain of blocks. As a result, it is supposedly impenetrable and secure. The blockchain is protected from alterations by a ‘safety lock.’ In other words, to change one component on the chain, the block requires a regeneration of all the block’s successors. This additive measure helps prevent against hackers or other attackers. This level of encryption ensures that any infiltrator must jump through hoops to redo the POW of the targeted block and all proceeding blocks, then quickly catch up to surpass the current work on the chain.

        The complexities of the blockchain make it possibly one of the most secure facets for institutions, and individuals, to engage in financial transactions. With its growing popularity, blockchain technology has the potential to revolutionize the world’s economy, but also positively and negatively impact any industry employing it. In a McKinsey & Company interview with Don Tapscott, CEO of Tapscott Group, Tapscott highlights the varying disruptions. Regarding the financial services industry, it can be either transformed or interrupted since blockchain can move, store, lend, trade, and account for any currency. Many banks and other financial institutions already created new standards and protocols to ensure security and encryption of public and private blockchains. This level of security is of upmost priority for financial institutions to succeed in day-to-day operations, smart contracts, and currency transfers. More abstractly, the blockchain also impacts the music industry, in which artists can distribute their music on the blockchain, tacked with smart contracts that highlight usage rights. 

        Other industries that will be impacted by blockchain technology include healthcare, academia, voting, real estate, insurance, and security. In healthcare, the blockchain would create new opportunities to securely share data across different platforms and networks. This would not compromise patient or data security and integrity. In fact, there is a startup called the Gem Health Network which uses an Ethereum blockchain platform with multi-signature and factor authentication technology.  

        A similar application would be in academics, in which blockchain technology would authenticate academic certificates, transcripts, and diplomas. Voting would greatly benefit from the blockchain, because it would prevent against voter fraud and lost records. The blockchain would ensure casting, tracking, and counting of votes is done more securely, efficiently, and effectively. The real estate industry would see obvious benefits in a reduction of reliance on paper-based recordkeeping. When purchasing homes or signing leases, there is always an extensive amount of paperwork that slows down the transaction process. Blockchain, however, can help record, track, and transfer everything from land titles to property deeds and liens. Not only would this speed up the overall process, it would ensure that documents are accurate, verifiable, and free from potential fraud. Finally, advances and applications in the insurance industry are a little less clear than in others. However, blockchain can help individuals enroll in micro-insurance so that high-value items exchanged between individuals in the blockchain as part of a contract are insured.

        Ensuring continuous success and development of blockchain technology does raise some topics of discussion. One regards how the blockchain will be governed. As mentioned in a McKinsey report, “Unlike the Internet, which has a sophisticated governance ecosystem, the whole world of blockchain and digital currencies is the Wild West.”  It does not help that the blockchain is open source, because at least if it is handled by a private institution, that institution can set the groundwork for regulation. When it is open source, the blockchain can only rely on democratic mass collaboration that should steer clear from chaos and continuous debate all while reaching a consensus. In this regard, some form of leadership is required to ensure the blockchain remains enforced, continuously improving, and secure.

        Another risk with blockchain concerns security. Although this is a pressing issue for future transactions, the blockchain is actually currently used to prevent and mitigate cybersecurity risks in trade finance. Guardtime is a software security company that created a digital signature system derived from blockchain technology. It has the Keyless Signature Infrastructure, which runs on a private blockchain to ensure authentications “are not tampered with, and are timestamped, and stored in the cloud. By doing this, such as application components, log files and firmware, the system can provide real-time alerts to any compromises…allowing organizations to identify and manage breaches in real-time.”  This new form of authentication is not only more secure but also faster to process than relying on two-factor authentication and traditional RSA cryptosystem digital signatures. The blockchain also ensures that the stored records maintain their integrity, which is less possible when employing traditional databases where records can be altered, deleted, or updated on a whim.

        As one can see, the benefits and applications of blockchain technology are limitless. It does raise many questions concerning its ability to reduce risk and benefit cybersecurity and potentially any industry in the market. The inherent risks and challenges can only be anticipated as blockchain technology continues to develop and become more incorporated in Ethereum and digital and legal contracting.


What is Ethereum?

        Ethereum is an open source decentralized platform geared more specifically towards smart contracts. Since it is built on a blockchain, it avoids downtime and third-party interference, thus ensuring more security and integrity. Ethereum offers a simple application called Ethereum Wallet for users to hold and secure ether and other crypto-assets developed on the Ethereum network. The user can also code, deploy, and use smart contracts. Now, users can even create their own currency in the form of a tradeable token which can “use a standard coin API, so your contract will be automatically compatible with any wallet, other contract or exchange also using this standard. The total amount of tokens in circulation can be set to a simple fixed amount or fluctuate based on any programmed ruleset.”  In essence, users have the ability to completely manipulate and create their own virtual worlds and markets. Never before was it feasible for individuals to create their own currencies that can be transferred and converted to other forms of currency while maintaining underlying network value and security.

        Despite the ability to customize a market and currency types, Ethereum holds much of its pride in its democratic and autonomous organizational structure. Most notably the DAO, or Distributed Autonomous Organization, was created to fund development of the crowd fund platform on the Ethereum network. DAO runs smart contracts directly on the Ethereum blockchain. Already, it raised $150 million in virtual currency and gives its funders digital voting rights on potential projects. The announcement of DAO increased the digital value of Ether by 50% since May 2016. A hack of the DAO in June 2016 raised many questions about the integrity of smart contracting. Eventually a solution to the hack came in the form of resetting the ledger so it appeared as if the hack never occurred. As a result, the funding was restored to the DAO. The hack was merely a mistake in the code that permitted users to withdraw unlimited amounts. Since the hack, institutions are slightly more reluctant to rely on smart contracting, especially for financial services.   

        The benefit of Ethereum for any organization or individual is the elimination of middlemen that manage organizational assets and governance. With Ethereum and its unique blockchain foundation, a user can build:

  • A virtual organization where members vote on issues
  • A transparent association based on shareholder voting
  • A country with an immutable constitution
  • Democratic voting and shareholding systems
  • Platforms for prediction markets
  • Energy billing and distribution networks

        Ethereum invoked the idea of more decentralized applications. Unlike the traditional blockchain, Ethereum creates its own blockchain protocol with a unique and native programming language predicted to surpass Bitcoin. For example, in March 2017, its digital currency, called Ether, reached $30, boosting the market cap for Ethereum to $2.57 billion.  Corporations like JPMorgan and Microsoft are joining the Enterprise Ethereum Alliance to further develop Ethereum and ensure its popularity amongst various industries.


Companies Utilizing Ethereum

        Many companies already use Ethereum to resolve issues and identify solutions that will prevent future problems from arising.

        KYC-Chain Ltd: This Hong Kong-based company uses Ethereum to build protective measures around online consumer data. Cryptographic protocols protect user data while permitted ‘gatekeepers’ can retrieve and authenticate customer documents.

        Weifund: This decentralized crowd funding organization takes advantage of smart contracting. It offers customizable solutions to contributors, making it possible to contribute unique things to development while complying with transparency and contract limitations.

        Everex Inc.: This company intends to create a global economy that facilitates cross-border transactions. Customers can use varying agencies to manage personal finances while engaging in global investment opportunities. In simple terms, it is a blockchain credit and money transfer platform relying on Ethereum.   


Ethereum DApps

        Currently, over 545 DApps are listed on ethercasts.com.  DApps stands for decentralized applications, and must comply with several rules. The following rules apply:  

  • The application must be open source; all changes must be decided upon by user consensus and no single party controls a token majority
  • All data and records are stored cryptographically in a public and decentralized blockchain
  • A cryptographic token is used
  • Tokens are generated via a standard algorithm demonstrating proof of value nodes

        Ethereum is considered a DApp that uniquely employs its own blockchain. Below are some DApps that either use their own blockchain, use existing ones, or create a two-fold layer of customized and existing blockchains.

        Augur: This is an open source prediction and forecasting market developed using Ethereum. A user may enter into an agreement with other parties about the results of an outcome. Due to the Ethereum network, no counterparty risk is involved. It is intended as a self-sustaining computer program that does not require a corporation for operation.

        WeiFund: As mentioned previously, WeiFund is a decentralized and open source crowd funding platform. Since it is built on Ethereum, counter party risk present in services such as Kickstarter and GoFundMe are eliminated. The WeiFund contract system is currently in early alpha stage.

        BAT for Brave: The Basic Attention Token (BAT) received $36 million in crowd fund revenue in less than 30 seconds to develop a token used by advertisers on the Brave browser. Brave was founded by Brandon Eich, the creator of Javascript. With the BAT he hopes to remove middle parties from the advertising business and provide better compensation to content creators.


Ethereum’s Impact on Cryptocurrency

        In simple terms, any Ethereum user can write smart contracts and DApps with their own rules and transaction formats. As a result, each user can have his currency that automatically becomes compatible with any Ethereum-based contract, exchange, or wallet. Each account contains a nonce, or counter checking that each transaction occurs once, an ether balance, contract code, and the storage space.

        Ethereum offers many advantages over Bitcoin that can change cryptocurrencies in the future. It employs a token system with a simple algorithm which benefits contracting but also sub-currency dependency. In other words, transaction fees are directly included in that currency, which is not possible with on-chain Bitcoin-based meta-currencies. Therefore, “the contract would maintain an ether balance with which it would refund ether used to pay fees to the sender, and it would refill this balance by collecting the internal currency units that it takes in fees and reselling them in a constant running auction.”  Furthermore, with smart contracting capabilities integrated in Ethereum, a hedge contract can address cryptocurrency volatility so that tokens do not lose value but rather build trust and fraud prevention.

        As previously mentioned, institutions, such as JPMorgan, are investing in Ethereum. JPMorgan created a partnership with Zerocoin Electric Coin Company to add Zcash’s private technology to Quorum.  JPMorgan built Quorum as an enterprise blockchain platform on Ethereum, emphasizing smart contracting. Zcash would then use its privacy coin as a true digital equivalent of cash. Before Ethereum, financial institutions were hesitant to use blockchain technology because it lacked privacy and confidentiality features required for market trading. Now, Quorum offers a secure and confidential means for financial smart contracting. Zcash is but one privacy coin used to protect these transactions and promote financial institutions like JPMorgan to use Ethereum.


Ethereum’s Impact on Smart Contracts and the Legal Industry

        Since Ethereum offers customizable cryptographically secure permission schemes for computations and storage, it acts as a trusted authority for digital information and processing. Creating legally binding contracts the traditional way requires an outdated method of written signatures, which has a higher likelihood of being forged. Ethereum, on the other hand, offers the possibility to immediately sign contracts with intrinsic cryptographic identify and robust time-stamping.

        With Ethereum, contracts can be programmed to respond to signed instructions from pre-agreed arbitrators. This helps resolve any deadlocks or conflicts down the road.  Because of the blockchain, a contract’s code as well as its terms are stored in the same ledger and shared with multiple parties. In terms of a buy-sell contract, this ensures the buy-sell contract is executed at the same time as an accompanying payment contract. In the traditional sense of buy-sell contracts, the post-trade settlement (payment contract) often takes a long time to fulfill and may result in a costly process. With blockchain and smart contracts, however, post-trade settlements are automated and recorded in the blockchain for immediate dispatch and automatic execution. One of the greatest challenges, perhaps, is that Ethereum creates regards the ability of lawyers to keep up with changes to the law and digital contracting. Ethereum contracts will require lawyers to understand programming to create and decode future contracts.

        Several legal issues are raised regarding interpreting and advising clients in an age of Ethereum contracting. Simply put, smart contracts implement self-executing code that automatically implements the terms of an agreement via the blockchain. A computer network will execute the smart contract with consensus protocols to affirm the sequence of actions derived from the contract’s code. In so doing, there is minimal risk of error or manipulation in agreement completion. Smart contracting was not feasible without blockchain because parties in agreement would have separate databases. Nonetheless the blockchain now bridges differences in databases and offers a universal playing field to make seemingly different values and databases compatible with the terms of a single agreement. Because Ethereum offers a shared database running a blockchain protocol, smart contracts self-execute so that all parties can validate the agreement without bringing in a third-party intermediary.  

        Smart contracting offers a variety of benefits. Some are listed below:

  • Accuracy with minimal manual error
  • Minimized manipulation and nonperformance execution risks because of a network-governed decentralized execution process
  • All documents are encrypted on a shared ledger to increase trust and transparency
  • Contract backups are made constantly on the blockchain
  • Minimal human intervention translates to reduced costs
  • Creates new avenues for businesses and operational models

        Smart contracts are anticipated for adoption in many industries. For example, in financial services, they can be employed for trade clearing and settlement, coupon payments, insurance claim processing, and micro-insurance. Smart contracts can also expect adoption in royalty distribution, public sector record keeping, supply chain and trade finance documentation, product provenance and history, peer-to-peer transacting, and voting. Smart contracts are already used by several organizations around the world.

        UNICEF Ventures Corp.: This branch of UNICEF employs Ethereum’s smart contracts to transfer assets over the internet. This increases public transparency and better secures funds transferring. Tracking international transactions prior to smart contracts presented numerous threats and compromised transparency. Now, with smart contracts, partners of UNICEF receive ether tokens so long as they are validated account signers.  Furthermore, such a shift to smart contracting lets the public govern over the contracting system and audit the transfers and progress of UNICEF Ventures. This will undoubtedly increase transparency, trust, and aid to children around the world.

        Protostarr: This Virginia tech startup uses Ethereum’s smart contracting to allow fans and investors to fund up-and-coming Youtubers and Twitch Casters in return for a share of channel revenue. This DApp uses smart contracts to automatically distribute revenue to fans and investors when the star earns on his channel.  Each contract is negotiable, depending on the interests of the star and the individual investors/fans. The intended goal is that the model to donate is transformed to one specifically for investments as it “gives fans the ability to see a real payoff for their loyalty, while investors looking for new, exciting opportunities could see payouts better than traditional investment avenues.” Beginning on August 13, 2017, investors will be given tokens to gain percentages of incomes of all stars on Protostarr—specifically 2% of every smart contract an investor signs.  It is scheduled that for each subsequent week, one ether token diminishes in value regarding the number of investor tokens purchased.

        Creating a smart contract is rather simple and only requires basic programming knowledge and an understanding of Ethereum’s native language. Bitcoin is more limiting because it has a restrictive language in which developers cannot write their own programs. Ethereum offers unlimited processing capabilities which makes it the most suitable blockchain for contracting. An example of a method in Ethereum that allows another contract to spend tokens on a party’s behalf is depicted below:

function approve(address_spender, uint256_value) returns (bool success){

Allowance[msg.sender][_spender] = _value;
return true;

}

        In this example, the function, or method, called approve will collect the address of the spender. The allowance of the spender will be equal to the int (integer/numerical) value brought in as a parameter in the function calling. As a result, the function will return a Boolean value, which can be true or false. If a value of true is returned, it signifies a success of the spender spending the number of tokens stored in _value. In all the contract code, the function entitled approve must be called upon within the main body of code. Other functions are developed to approve and communicate about contract signings, money transfers, attempts to collect coins, and messages when someone attempts to send ether to another party.  

        In the future, as smart contracts become more popular, code libraries ought to exist with functions that are widely applicable to varying types of methods required in a contract. Lawyers will be able to choose appropriate code out of the library and directly apply it to their contracts. Once the contract is confirmed, it will be self-executing, which makes it operate outside the confines of the coercive powers of state. Policymakers will have to consider whether this presents an issue and how it can be resolved to make smart contracts acceptable and popular regardless of the legal issue it addresses.

        Several legal issues will arise. The first regards the ether, or Ethereum’s main form of token. It is uncertain yet how authorities will judge and react to people transferring ether to each other to gain access to DApps on Ethereum. Another issue confronts the issue if Ethereum contracts are legally recognized as components in legally binding contracts. Finally, another concern is the amount of additional work Ethereum creates for lawyers. As of now, it is not expected that smart contracts will replace the need for lawyers. If anything, it will require more attention from lawyers because they will need to do more than just traditional legal assessments. This new form of contracting creates opportunities for lawyers to grow in their field and learn how to code, create, and translate information from Ethereum contracts.

        Lawyers will transgress from writing traditional contracts to making standardized smart contract templates. The transition to full reliance on smart contracts will take time, but for now it is probable that lawyers will use a hybrid of paper and digital content in which contracts are verified by blockchain and substantiated by a physical copy.

        Just as Bitcoin and blockchain change the face of the financial industry, Ethereum brings similar changes to the legal industry. For smart contracts to be accepted, they must comply with existing laws. They will have to embrace the concepts of contract law in the event that auto enforcement coding fails (which is highly unlikely at the time). Smart contracts will have to be flexible to allow for rescissions, modifications, and reformations.  There will be additional pressure to find engineers who know the law but also lawyers who code in the contracting language to build compliance in the earliest stages of the contract.  

        Smart contracting may benefit Intellectual Property rights management the most. With smart contracting, a publicly accessible and indisputable ledge for each IP filing is made but also affirmed throughout all global jurisdictions. As a result, clear and concise rights of use for all parties are exemplified. An algorithm can be developed to identify incoming trademark and patent applications and compare them to those existing.  This way, pending patents and trademarks can more accurately and quickly be granted or dismissed. This would resolve many of the issues the IP industry currently faces.

        One way in which the legal industry will be changed concerns equitable principals. Since smart contracts are self-executing, when conditions in the contract occur and are verified by the blockchain, the cryptocurrency will be immediately unlocked and delivered to the other party. As a result, such transactions are irreversible and more verifiable than traditional paper contracts. In some instances, parties will not know the other parties involved. If one party feels something was amiss with contract execution, smart contracting makes it less likely that redress in our court system is feasible. Policymakers will have to find ways to regulate pitfalls such as this one. However, this makes finding a resolution more challenging because of blockchain’s, and specifically Ethereum’s, decentralized nature. There is no one individual that the coercive power of state can be exercised on.  A steady adoption of peer-to-peer economic relations increases anonymity and makes it more challenging to find the party responsible for a misrepresentation of the law or contract.

        As of now, smart contracts are best regulated by existing legislation and legal policies. However, initiatives such as CommonAccord are instantiated to create global codes of legal transacting by codifying and automating legal documents. This will attempt bridging any gaps in contracting, from differing jurisdictions to party languages. The benefit of smart contracting on a global scale is to “automate routine transaction functions while the legal text provides a frame for legal enforceability.”  

        Lawyers are currently discussing what legal actions would be admissible via smart contracting. Some “non-operational clauses—for instance, the governing law of a contract—are less susceptible to being expressed in machine-readable code. Some legal clauses are subjective or require interpretation, which also creates challenges.”  Unlike operational clauses, non-operational ones are more subjective to human interpretation and are therefore less easily conveyed and managed via programmed contracts. Operational clauses pertain to objective legal actions that, for example, may require payment by a certain date and no other human-based conditions. Some lawyers anticipate that standardized definitions ought to be put in place to resolve complicated terms and activities relating to both operational and non-operational clauses before smart contracts can become more widespread and effective. Otherwise, smart contracts are only valuable in the face of reaching decisions derived from non-operational clauses.

        Some lawyers also argue that smart contracts are not considered legal contracts in the first place. They are merely a set of business rules embedded in software. These rules or principles hardly translate into universally accepted and practiced laws and regulations. It is suggested that one still needs “a separate legal agreement in order to have something that is enforceable. If you are looking at the wider blockchain environment, if those activities cross boundaries, you may need binding agreements regarding whose jurisdiction will be the governing law.”  Since a smart contract is merely self-executing computer code, it can be governed by some existing legal principles. Smart contracts are still in the infancy development phases. They present a challenge to create agreements that are more complex and address a variety of legal issues. As of now, there are no set of standards to directly govern smart contracts. It should only be a short period of time before guidelines and more legal principles are instantiated to address the varying challenges and complexities of smart contracting.

        Perhaps one of the most significant fallbacks of current smart contracts is their inability to work with off-chain systems. Smart contracts are unable to connect with external data fields which limits its ability to function with modes other than blockchain cryptocurrencies. Once smart contracts are integrated with middleware that connects it to off-chain systems, such as banks, the number of available benefits grows significantly. In this regard, a bank, for example, could use smart contracting for more than just digital token transactions.

        If a smart contract is to function more efficiently in the financial sector, it would require knowledge about commodity or equity prices, which are not available on the blockchain. In fact, a startup called SmartContract just began experimenting with enabling smart contract capabilities in real-world applications. It recently underwent one phase of implementation with Swift, permitting a bank’s back office Swift systems to communicate directly with smart contracts. As a result, the smart contract can potentially help the bank send money in any currency, including dollars and yens, not only cryptocurrencies. If the phases of implementation are successful, SmartContract expects to provide services to 11,000 banks.  

        Over the past several years, digital signatures have been more widely accepted as evidence of an agreement in court, thus replacing the traditional requirement of handwritten signatures. Now, cyber contracts are permissible as long as the mouse click is clearly indicative of the agreement. Since the 2001 Specht v. Netscape Communications Corp. case setting this precedent, cyber contracts, including smart contracts, have been divided into two categories: click-wrap and browse-wrap.  A click-wrap agreement is common for software licensing companies. License terms are presented to a user and he must accept or reject them before gaining access to the software. Contract law is applied to such agreements and it is up to the court’s discretion whether or not to declare a click-wrap agreement as void or breaching an established rule of contract law. On the other hand, browse-wrap agreements don’t require active consent from a user; as a result, it is not always enforceable by law. Because enforcing these agreements present inconsistencies, most smart contracts fall under the category of click-wrap, and are therefore governed by existing contract law. As previously mentioned, whether the involved parties and those accused of fraud or some mishap are properly identified becomes a concern for policymakers in this new digitized legal era.  


Conclusion

        Since the first introduction of Bitcoin and blockchain to the global market, rapid advancements have been made to better various industries, namely the financial sector. Open source, decentralized Ethereum was then derived from the original blockchain, offering users the opportunity to create their own currencies and smart contracts. This presents a new realm for business and operational models, creating some challenges to the legal industry and the future of not only the financial industry but also cryptocurrencies in general. Institutions and individuals engaging in research and development of the blockchain, Bitcoin, and Ethereum are now eligible for federal and state R&D tax credits. As the three continue to grow in value and popularity, more advancements and improvements to this already impenetrable network will push it to the forefront of our rapidly digitizing market.

Article Citation List

   


Authors

Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Chloe Margulis is a Tax Analyst with R&D Tax Savers.

Steve Kelly is a Tax Analyst with R&D Tax Savers.


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The R&D Tax Aspects of Big Data
R&D Tax Credit Fundamentals
Los Angeles Tech Boom Creates Large R&D Tax Incentive Opportunities
The R&D Tax Aspects of Software Development