With the rapid technological developments and innovation of systems that reshape the way transactions are recorded, verified and enforced, it is important for us to understand what these systems are and what they do. Blockchain is one of those systems and although it is frequently mentioned, it is often misunderstood. The term, blockchain, has become synonymous with Bitcoin. While Bitcoin is an application of blockchain technology, conflating the two obscures the broader significance and versatility of the underlying system. This article aims to break down what blockchain is and its practical applications particularly in the legal sector.
Blockchain
Blockchain is a form of distributed ledger technology that records transactions across a network of participants in sequential blocks linked through cryptographic hashes. Each block contains a cryptographic hash of the previous block, creating a secure chronological chain. This makes it so that any change created is visible consequently creating a helpful audit trail. One of the advantages of using blockchain is lowering the use of intermediaries because of the audit trail which makes it easy to keep track of what is happening during the transaction. Additionally, the accessibility of the trail reduces the chances of unilateral changes as any modification made creates a transparent and time-stamped record.
Nonetheless, blockchain is not tamper-proof, just tamper-evident. The misconception that the system is immune to tampering is misleading. There are protective mechanisms like the use of cryptography which is a practice of techniques for secure communication in the presence of adversarial behaviour but, there are still risks available. Blockchain relies on cryptographic hashing to secure data and link blocks together, which ensures that data integrity is maintained and any changes are detectable.
Therefore, the need to understand the system in depth and the regulatory framework around it becomes a key strength for anyone working with blockchain. Additionally, it is important to distinguish between blockchain and distributed ledger technology (DLT) which are sometimes used interchangeably. A DLT is a broad system and generally refers to the methods in which databases are shared, maintained and accessed by multiple users while blockchain is a type of distributed ledger that defines how the data is structured. This means that DLT is concerned with the collective sharing and upkeep of a ledger, whereas blockchain is one of the ways that the ledger can be maintained.
Blockchain application in the legal sector
Smart Contracts
Smart contracts are contracts that have performance of certain obligations arising under a legally enforceable agreement automated. There are three often recognized smart contracts and these are contracts with some obligations automated by code, contracts entirely written by code and all obligations are automated and hybrid contracts which are a mix of both. Smart contracts are commonly used to enable trust between parties and to streamline transactions by reducing the need for manual verification (although it is still prudent to review). For example, payment
may be released automatically once goods are confirmed as delivered through a verified digital input. This automation reduces counterparty risk, minimises delay, and lowers transaction costs which is particularly useful in areas such as trade finance. Being stored on a blockchain is a great advantage as it helps mitigate the risk since the system is tamper evident and open to audit.
However, one of the challenging aspects of smart contracts is that if there is a problem with how the code is written, it may lead to unintended outcomes and might have dire consequences on a transaction. Because execution is automatic, errors can be difficult to reverse.
Smart contracts reveal blockchain’s capacity to transform contractual execution while NFTs highlight its ability to reshape proprietary rights and digital asset markets.
Non-fungible tokens
Non-fungible tokens (NFTs) are non-interchangeable digital certificates that are stored on a blockchain and represent ownership or control rights over a digital asset which can range from artwork to virtual real estate. The value proposition of NFTs relies in part on the blockchain’s transparent and tamper-evident record of token ownership. When the NFT is created, the token is unique to the specific asset which has made it possible for innovations such as NFT backed loans. However, NFTs carry risks such as the creation of fake NFTs since blockchain records the transfer of a token but, it does not verify whether the creator had the legal authority to create it. Additionally, it causes copyright confusion since the purchase of an NFT does not automatically transfer copyright in the underlying work unless explicitly provided for in contract. Lastly, the uniqueness of the NFTs only applies to the specific blockchain, therefore, if the creator decided to create multiple NFTs on different blockchains then the token’s value depreciates.
This demonstrates the challenge that faces regulators: to balance innovative creations such as the creation of alternative loan securities while creating frameworks to mitigate risks relating to fraud, intellectual property infringement and consumer protection. From both smart contracts and NFTs, the benefits are welcome, but they do have risks associated with them.
Hedera: Case Study
You cannot discuss innovation without discussing the UAE. Tejouri, a digital asset and document management platform operating within the DIFC ecosystem, leverages the distributed ledger technology of Hedera to provide secure and tamper-evident authentication and verification services. The DLT is used to provide secure and tamper-proof services such as document authentication, supporting solutions like the Digital Assets Will, which addresses gaps in estate planning for cryptocurrencies and NFTs by using non-custodial wallets to distribute assets and offering secure and tamper-proof dispute resolution especially in mediation services. The leveraging of a distributed ledger technology in a fast-paced digital economy, like the one in the UAE, becomes paramount to ensure that the system is safe, trustworthy and risk-averse and appeals to foreign investors.
By adopting these systems, the UAE continues to prove its emphasis on innovation and its flexibility to adapt to the changes while still maintaining regulatory control through legislation such as Dubai Law No. 4 of 2022 that introduced the Virtual Assets Regulatory Authority (VARA) the dedicated regulator for virtual asset activities. VARA was recently recognized as a competent authority by Ministerial Decision No. 336 of 2025 which was issued by the UAE’s Ministry of Finance.
Blockchain is no longer a speculative concept confined to cryptocurrency discourse; it is an evolving infrastructure reshaping how transactions are done, how the documents are stored and authenticated and how assets are held. From smart contracts automating performance in trade finance to NFTs redefining digital ownership, blockchain applications are expanding the boundaries of traditional legal frameworks.
Yet technological capability does not eliminate legal complexity. Issues of enforceability, intellectual property, fraud, and liability remain central to the responsible integration of blockchain-based systems. As demonstrated by the UAE’s proactive regulatory approach, particularly through institutions such as VARA, innovation must operate alongside structured oversight.
References
Ross P Buckley, Anton N Didenko and Mia Trzecinski, ‘Blockchain and its Applications: A Conceptual Legal Primer’ (2023) 26 Journal of International Economic Law 363
World Economic Forum, ‘A Digital Economy at an Inflection Point: What to Expect for Digital Assets in 2026’ (13 January 2026) <What to expect for digital assets in 2026 World Economic Forum> accessed 04 March 2026
DIFC Courts, ‘DIFC Courts to Permit Next-Generation Digital Custodian and Blockchain Intelligence Capabilities for Court Users’ (15 December 2025) <DIFC Courts to permit next-generation digital custodian and blockchain intelligence capabilities for court users DIFC Courts> accessed 04 March 2026
DIFC Courts, ‘DIFC Courts launches new Mediation Service Centre and Notary Service to expand support for UAE businesses and residents’ (2 September 2025) <DIFC Courts launches new Mediation Service Centre and Notary Service to expand support for UAE businesses and residents DIFC Courts> accessed 04 March 2026
Securing Digital Legacies with Hedera (Tejouri Case Study) <tejouri Hedera> accessed 04 March 2026
