Bench & Bar

SEP 2018

The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.

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9 BENCH & BAR | H O W D O E S B I T C O I N W O R K ? It's complicated. A useful but simplified illustration is to think of Bitcoin users each as their own, personal bank. All users work with the same set of recorded Bitcoin trans- actions, known as the "blockchain." ink of the blockchain as a public ledger record- ing all transactions and ownership of every Bitcoin in circulation. If a user wants to transfer a Bitcoin (or yes, even a very small fraction of a Bitcoin) to another user, that transaction is recorded on the public block- chain—just like an entry in your checkbook or bank statement. e difference is that the blockchain notation is then shared with all other users of the blockchain, who can verify that the transaction was in fact made. Bitcoin's blockchain is not currently believed to be susceptible to manipulation because the blockchain ledger is public, recorded, and copied over and over on users' own computers. A clever computer guru could not simply create counterfeit Bitcoins and then pass them off to others because there would be no record of those Bitcoins existing on the blockchain "ledger." When a transaction is submitted to the block- chain, it is essentially cross-checked against other copies of the ledger existing on other users' computers. Ideally, any forged Bit- coin would not be verified when legitimate copies of the blockchain ledger were refer- enced. e fake Bitcoin would be rejected and the fraud revealed as soon as the public blockchain ledger was referenced, which is done as part of any transaction. Many experts believe that the blockchain tech- nology that makes Bitcoin "work" is where the true value of Bitcoin lies. e reasons for that belief are speculative and mostly outside the scope of this article, though some are mentioned at the end. the plaintiff went through an arbitration process and then sought to enforce the arbitration award. 7 Lexington attorney Kevin Palley believes he may be the first attorney in the United States to obtain a judgment based on a Bitcoin loan. 8 Kentucky lawyers would do well to rec- ognize that Bitcoin is no longer reserved for computer hackers or techies in Silicon Valley. Technologically savvy Kentuckians are already using Bitcoins—you just may not have realized it. As the value of Bit- coin continues to rise, its appearance in more Kentucky courtrooms is more and more likely. ink Bitcoin will never make its way to Kentucky? ink again. It's already here! In 2013, Fox News reported that both the mayor and police chief in Vicco, Ky., were being paid in Bitcoin. 4 Kentucky's United States Senator Rand Paul accepted Bitcoin donations as part of his fundraising efforts in 2015. 5 Bitcoin is in Kentucky courts, too. e Breathitt Circuit Court made headlines in 2015 when it granted summary judg- ment to a Plaintiff seeking to recover over $67,000 after the defendant failed to repay a loan consisting entirely of Bitcoins. 6 When defendant failed to repay the loan, W H A T K E N T U C K Y L A W Y E R S S H O U L D K N O W BITCOIN IS ALREADY IN KENTUCKY.

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