Over the past several years, blockchain technology has gained significant buzz mostly in regard to its application in new tech areas like cryptocurrency, non-fungible tokens (NFTs), and Web 3.0. What is less recognized is the impact that blockchain technology could have on traditional industries, such as conventional finance and even legal services and practice. In this article, you will find a brief guide to blockchain technology and an overview of how it could impact the legal landscape in the coming years.
Blockchain Technology: Explained
As a starting point, it is important to understand what blockchain is and how it works. For newcomers, getting a handle on blockchain concepts and technology can be daunting. Many of the descriptions are incredibly technical and complex. Here’s a step-by-step overview of how blockchain works in plain language:
- Blockchain Really is a ‘Chain’ of ‘Blocks’: Blockchain is so-named because it really is a chain made up of blocks– of data. Each block on the chain is a record of information about recent transactions. Those blocks are then sequenced together into a chronologically-ordered chain.
- Blockchain is a Digital Register of Transactions: From a bird’s eye view, a blockchain is simply a digital record of transactions. A wide range of different information can be recorded within the data that comprises the blocks on the chain.
- Blockchain is Decentralized: When described as a chronological record of transactions, the blockchain may not sound very exciting. What makes it revolutionary is that it is fully decentralized. No third party is responsible for keeping track of the information. Instead, a vast network of computers each has the same history and are collectively and continuously updating and validating the blockchain.
- Blockchain Data Is Secure: The other key aspect to understand is that all data on the blockchain is encrypted and incorruptible. As transactions are linked together, it is virtually impossible for any party to alter or disrupt the flow of information.
Blockchain technology has a much longer history than many people realize. What we now think of as blockchain was first described by cryptographer David Chaum in a 1982 paper titled Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups. It took decades for blockchain technology to be implemented in a meaningful way.
How Blockchain Technology Could Impact Attorneys, Law Firms, and Legal Practice
When you think about blockchain technology, the first thing that comes to mind is probably cryptocurrency, for good reason. Bloomberg reports that the total global value of blockchain-based cryptocurrencies now exceeds $3 trillion. However, it would be a mistake to infer from this that cryptocurrency is the only use for this new technology. Here are four ways in which blockchain technology is likely to affect lawyers, law firms, and legal practice in the near future:
- Smart Contracts: As noted previously, the blockchain is fundamentally a way to securely record information. This has some important implications for contracts. Over the last few years, smart contracts have become more popular. As described by IBM, a smart contract is a digital contract that is stored on a blockchain and automatically executed– without human involvement– when certain required conditions are satisfied.
- Intellectual Property (Copyright, Trademark, etc.): The popularity of non-fungible tokens (NFTs) has exploded. The NFT market is worth more than $40 billion. Notably, NFTs exist on a blockchain, which provides unfalsifiable verification of who ‘owns’ the digital asset in question. This could have major implications for intellectual property, especially in copyright and trademark areas.
- Estate Planning (Wills, Trusts, etc.): Blockchain technology could also have major implications for estate planning, many aspects of which are often contingent on the time, date, and verification of a particular record. There could be a future in which certain types of wills and trusts are verified via blockchain technology.
- Medical Record Protection: The blockchain technology offers ultimate preservation and security, without having to trade off one for the other like many other methods. This could have important implications for medical record-keeping, especially as more and more sensitive patient records are digitized. Federal patient protection laws, including the Health Insurance Portability and Accountability Act (HIPAA) will play a key role as medical records transition to blockchain-based storage.
It is no secret that law is considered to be a relatively conservative, traditional industry. Some professionals and legal service providers may be slow to accept and adjust to new technology that changes how they work. Those who embrace the potential of blockchain will find many opportunities open to them.