GEORGETOWN LAW TECHNOLOGY REVIEW VOLUME 1, ISSUE 2 SPRING 2017 VOLUME I 2016-2017 ISSUE II FOUNDERS Sara Ainsworth, Co–Editor-in-Chief Andrew Schreiber, Co–Editor-in-Chief Lindsey Barrett, Managing Editor Stephan S. Dalal, Technology Editor Edward George, Articles Editor Spencer Williams, Notes Editor CASE COMMENTS EDITOR DIRECTOR OF OUTREACH Tariq Javed Jack O’Gorman EDITOR OF LEGAL NEWS & DEVELOPMENTS LITERATURE REVIEW EDITOR Anne Giomi Taryn Smith ASSISTANT ARTICLES EDITOR ASSISTANT NOTES EDITOR ASSISTANT TECHNOLOGY EDITOR John Douglass Camille LoPresti Alex Dunn ASSISTANT CASE COMMENTS EDITOR ASSISTANT LITERATURE REVIEW EDITOR Jeffery Gary Charles Bell ASSISTANT EDITOR OF LEGAL NEWS & DEVELOPMENTS ASSISTANT DIRECTOR OF TECHNOLOGY Kelsey Meany Michael L. Daniels STAFF Shelly Berry Jody Karol Dina Moussa Thomas Staccio Tyler Bridegan Melissa Keech Jenadee Nanini Kyle Swan Jessica Burke Sang Ah Kim Michelle Ovanesian Samuel Swoyer Elaine Cheng Ashley King Lisa Passarella Mohammad Tashakor Julianna Coppage Hannah Koban Gina Pickerrell Seth Teleky R. Harrison Dilday Elliot Kudisch Sydney Reade Jordan Thompson Deena Dulgerian Samuel Lewis Amanda Rodriguez Gabrielle Whitehall Damon Ferrara Perry Li David Rodriguez Garrett Windle Jeremy Greenberg Boris Lubarsky Elizabeth Rogers Jacob Wittman Saurabh Gupta Michael Mazzella Philip Ruppert Johnny Wong Kathleen Hyer Spencer McManus Christopher Sakauye Caroline Zitin David Houck Octavian Mitu Ruth Siboni Vetone Ivezaj Melina Montellanos Kevin Spinella FACULTY ADVISORS Tanina Rostain Paul Ohm ADVISORY BOARD Julie Cohen Hon. John M. Facciola Jonathan Frankle TABLE OF CONTENTS ARTICLES ............................................................................................................................... 273 Smart After All: Blockchain, Smart Contracts, Parametric Insurance, and Smart Energy Grids .................................................................................................................... 273 The Law and Legality of Smart Contracts ..................................................................... 305 STUDENT NOTE ................................................................................................................... 342 Protecting Privacy in our Financial Transactions: An Alternative Method to Thinking about our Privacy in the Digital Era .............................................................................. 342 CASE COMMENTS ................................................................................................................. 371 Bitcoin: Reacting to Money with Non-Money Attributes............................................ 371 Back and Forth: An Analysis of the Business Method Exception to Patentability ... 388 U.S. v. Sarao: The Flash Crash and a new effort to prosecute market manipulation and deceptive trading practices .............................................................................................. 396 LITERATURE REVIEW .......................................................................................................... 401 Privacy, Tax Evasion, and the Development of Cryptocurrencies ............................. 401 TECHNOLOGY EXPLAINERS ............................................................................................... 417 Smart Contracts: A Smart Way to Automate Performance ......................................... 417 Machine Learning and Fintech ....................................................................................... 428 LEGAL NEWS & DEVELOPMENTS ...................................................................................... 436 Fintech Meets the Telephone Consumer Protection Act ............................................ 446 This Little Piggy Went to Wall Street: Privacy Law When a Toy Becomes Your Child’s Banker .................................................................................................................. 458 Fintech and Trump Tech: How the New Administration is Shaping the Technology World Demands ............................................................................................................... 477 Breaking the Law by Using Venmo? Trends in P2P Payments and U.S. Foreign Policy ........................................................................................................................................... 486 Insurtech: An Industry Ripe for Disruption ................................................................. 491 Tribal Sovereignty and FinTech Regulations: The Future of Co-Regulating in Indian Country ............................................................................................................................. 503 ARTICLES SMART AFTER ALL: BLOCKCHAIN, SMART CONTRACTS, PARAMETRIC INSURANCE, AND SMART ENERGY GRIDS Alan Cohn, Travis West, & Chelsea Parker* CITE AS: 1 GEO. L. TECH. REV. 273 (2017) https://perma.cc/65YT-PRTC ABSTRACT Blockchain technology—the technology behind Bitcoin—is a secure and resilient mechanism for conducting peer-to-peer electronic transfer of anything of value, with a resulting immutable transaction record. While blockchain is best known for payments and digital currency, one of the blockchain’s “killer apps” will be blockchain-based smart contracts. Blockchain-based smart contracts can be used to automate and execute “if- then” contractual relationships by coding these relationships onto the blockchain in order to automatically trigger their secure execution. The potential use cases are limitless; blockchain-based smart contracts can be used for everything from automobile leases, to voting, to recording of land titles. A threshold question for the wide-scale use of blockchain-based smart contracts is whether such smart contracts are legally enforceable. This Article argues that existing laws, specifically the federal Electronic Signatures in Global and National Commerce Act (“ESIGN”) and state laws modeled on the Uniform Electronic Transaction Act (“UETA”), render blockchain-based smart contracts enforceable and therefore immediately usable. With the enforceability of blockchain-based smart contracts established, this Article examines potential applications in the insurance and energy industries, in order to demonstrate the utility of such contracts. In the insurance industry, blockchain-based smart contracts can enable the automation of simple life insurance policies, thus reducing costs of administration, and provide a platform for new insurance products such as *Alan Cohn is Of Counsel at Steptoe & Johnson LLP and Adjunct Professor, Georgetown University Law Center; he is also an advisor to several blockchain technology companies. Travis West is an Associate at Steptoe & Johnson LLP, Harvard Law, J.D. 2016, and Chelsea Parker is a Project Assistant at Steptoe & Johnson LLP, Princeton University, B.A., 2014. Cohn is co-chair, and West and Parker are members, of Steptoe’s Blockchain and Digital Currency Practice. © 2017, Alan Cohn, Travis West, & Chelsea Parker. 274 GEORGETOWN LAW TECHNOLOGY REVIEW Vol 1:2 blockchain-based parametric insurance contracts. Within the energy industry, blockchain-based smart contracts can further enable the adoption of microgrids and technology such as smart meters, which can expand accessibility to different models of electric power distribution and provide resilience against accidental or deliberate disruption. In this way, blockchain- based smart contracts have the potential to both streamline and increase the efficiency of existing processes and open new models of service delivery. ABSTRACT .............................................................................................................................. 273 INTRODUCTION .................................................................................................................... 274 PART I: WHAT IS A BLOCKCHAIN AND WHAT IS A SMART CONTRACT? ....................... 277 Blockchain Defined ......................................................................................................... 277 Blockchain-Based Smart Contracts ................................................................................ 280 PART II: SMART CONTRACTS, UETA, AND ESIGN ......................................................... 284 UETA and ESIGN .......................................................................................................... 286 How Do UETA and ESIGN Apply to Blockchain-Based Smart Contracts ............. 288 PART III: SMART CONTRACTS, PARAMETRIC INSURANCE, AND THE SMART GRID ..... 290 Insurance .......................................................................................................................... 290 Smart Contracts and the Energy Industry ..................................................................... 297 CONCLUSION ........................................................................................................................ 303 INTRODUCTION Before 2016, blockchain technology was known, if at all, as the technical underpinnings of virtual currency. However, in the past year, blockchain technology has come into its own. It is now seen as a groundbreaking advance that can both reduce frictional costs in existing transactional systems and enable new, previously-unworkable models of social and commercial engagement.1 A “blockchain,” as the name implies, is in its simplest terms a “chain” of previously-validated “blocks” of transactions that constitutes an immutable digital ledger and the distributed, resilient foundation