“Blockchain” is one of the biggest buzzwords in technology right now. The rise of cryptocurrencies like Bitcoin has helped to fuel awareness of the technology that makes it possible, but do you actually know what a blockchain is?
Blockchain applications aren’t limited to cryptocurrencies trades; blockchain technology is steadily making its way into virtually every industry. Big investments in blockchain from companies like JP Morgan Chase, Wallmart, Disney, and Alphabet Inc. illustrate the faith business leaders have in the tech.
We believe (and this isn’t a stretch) that the attorneys who develop an understanding of what blockchain is, how it works and how it will impact the legal industry now, will be reaping the rewards long into the future.
So to help you get familiar with blockchain, we wrote this article to answer the questions, what is blockchain technology? How is being used now? And what are some ways it could affect the legal field?
If you have questions about this article or would like to share your thoughts, please reach out to us directly or on twitter.
A blockchain is a decentralized, distributed and incorruptible digital ledger used to record transactions across a network of computers (nods). It records every transaction in a verifiable and permanent way.
A blockchain works by linking a series of information blocks together. Each transaction is cryptographically secure (incorruptible) and linked to previous transactions. Altering a single hash causes a discrepancy in the chain and renders all the previous blocks useless, so it is extremely difficult for any source (outside or inside party) to disrupt the flow of information because it would require the nearly impossible task of adjusting all hashes back through all linked blocks.
Blockchain transactions offer levels of transparency, security, and efficiency that surpass those of traditional transactions because it is not dependent on a central information hub (it’s decentralized). Blockchain systems also enable more robust and virtually real-time tracking of resources.
The benefits of blockchain have put the technology on the radar of a lot of smart people, many of whom are figuring out ways to use it to optimize systems and solve tuff problems.
Some of the most immediate and intriguing applications of blockchain as it relates to attorneys are:
Blockchains ability to offer fast, secure transactions has helped facilitate the rise of crypto assets and initial coin offerings and with them the various rules governing initial coin offers (ICO) sales. To keep up with these changes law firms like Baker Mckenzie and Cooley LLP are developing new practice areas and building crypto legal services teams.
Smart contracts, which operate via blockchain, are gaining popularity. While a standard contract outlines the terms of a relationship (usually one enforceable by law), a smart contract enforces a relationship with cryptographic code (protocols that verify, facilitate, or enforce a contract). Law firms that wish to accommodate clients that want to pay in crypto-assets will need to familiarize themselves with smart contracts.
Law firms are already using smart contracts to get paid and to facilitate large transactions (e.g., an overseas investor who wishes to make a large real estate purchase using bitcoin), but as smart contracts evolve and require more legal guidance to draft, smart contract generation could become another stream of revenue for savvy law firms.
By facilitating more robust digital content distribution tracking, blockchain will be able to be used to beef up copyright laws around digital content downloads, ensuring the creators and/or owners of content being purchased online receive a fair share of the proceeds from a sale. Blockchain will also be able to provide real-time and transparent royalty distribution data to content creators.
Blockchains allow for better storage and distribution of medical records. With a blockchain system, a patient would be able to control who has access to their medical records and more easily share files with various medical professionals or insurers. This system would cut down on medical cost and likely lead to better patient care, but wide-scale adoption will require strengthening and restructuring the HIPAA laws that protect patient privacy.
Rather than drafting a paper will, people could have the option of creating and storing their digital will on a blockchain network. When used in conjunction with smart contracts, inheritances could be distributed when specific criteria are met (e.g., a beneficiary comes of age or graduates college). Wills that are powered by the blockchain could be considered more clear than traditional methods. They would help to eliminate questions as to who should receive what assets when someone passes away. Attorneys that choose to offer these services will likely be able to capitalize on an emerging market, and probate lawyers who challenge inheritances will need to do their homework on smart contracts to better argue cases.
Blockchain technology is currently being used to reinforce workers rights around the world. Coca-Cola, in partnership with the U.S. State Department and other parties, is working on a blockchain enabled smart contracts to improve local labor policies and coerce employers to honor contracts with their workers.
Broad adoption of blockchain systems would allow more efficient cataloging, tracking, and access to evidence. A system powered by blockchain would enable defense attorneys to monitor evidence from the moment it is collected all the way through the chain of custody until it is presented in the court of law.
Those examples are just scratching the surface; blockchain has the power to transform virtually any industry in which information is transferred or tangible goods exchange hands, which is to say it has the possibility of finding its way, in some capacity, into every industry.
The likelihood that large law firms and even solo practitioners will encounter the blockchain in their work increases every day.
Because or blockchain’s advantages and rapid adoption across multiple industries, more jobs for attorneys who understand how to leverage the technology are being created. In the short term, this means positions representing or collaborating with chain code vendors, application vendors, and compliance vendors, and overseeing contract work related to ICOs and crypto-assets.
As of right now, the blockchain industry is starving for legal help. The adoption of the tech is being hindered by the lack of experts in the field and those of you who remember economics 101 know that when demand is high, and supply is low, prices go up. Already, professionals working in this industry are paid much higher than those still using the typical financial structures.
Blockchain technology is still in its infancy and could be a few years away from entering into the mainstream of law practices, but make no mistake it is coming, its uses and benefits are only going to grow over time. It is crucial that members of the legal industry begin to understand blockchain technology and its applications now, so they can better serve clients in the future.