Blockchain and its Impact on the Legal Industry
Many experts say that the blockchain revolution is in full swing. Google search requests for the keyword “blockchain” have skyrocketed, cryptocurrency—blockchain’s most well-known tool—was the focus of a public discussion held by the U.S. Senate, and about a dozen companies have added blockchain to their name earlier this year and, in turn, saw their share prices soar.
So, what exactly is blockchain and how will it impact the legal industry?
As the name suggests, a blockchain is a chain of blocks, explains Kyle Fournier of CryptoManiaks, a cryptocurrency and blockchain education platform. “With the aid of cryptography, each new block in a blockchain holds information about the block that came before it, continuing all the way to the first block, which is the ‘genesis block.’ Since each block validates the previous block, blockchains are virtually immutable; they cannot be changed, rewritten, or tampered with in any way without something going seriously, seriously wrong.”
When we hear the word ‘blockchain,’ we typically think of using them to store financial transaction data, but because blockchain technology is so powerful and versatile, its potential is vast and it is being adapted for many different uses.
“The legal industry, for example, has a reputation for being bogged down by gross inefficiency,” says Fournier. “When people think of law firms, reams of paper and cumbersome time delays come to mind. Blockchain technology gives us the means to make all of our processes more efficient. Once they are widely adopted, blockchains are sure to drastically cut inefficiency from the legal industry.”
According to Todd Kartchner, vice chair of litigation at Fennemore Craig, P.C., in Phoenix, “One way in which law firms will see increasing use of blockchain is through smart contracts. Smart contracts are self-executing agreements that parties encode into blockchain, which is decentralized, but accessible to all participating parties. Parties can exchange anything of value, including money, property, stocks, etc., while eliminating the need for intermediaries like escrow agents or notaries.”
Kartchner anticipates that smart contracts will soon be utilized with greater frequency because they are often faster, cheaper, and more secure than traditional transactional mechanisms. Impressed by the secured power of the technology, he expects that eventually many types of legal matters such as property records, court filings, and transfer of funds to clients will leverage blockchain.
Another important process that Fournier predicts will be radically improved and streamlined thanks to blockchain technology is the cataloging and attribution of intellectual property. “Currently, lawsuits and disputes over the ownership of intellectual property like patents, songs, and books are commonplace,” he says. “A number of blockchain-based projects are making it their goal to allow their users to easily register their intellectual property. Once registered, the permanent nature of the blockchain will make ownership over a piece of intellectual property indisputable.”
Alan Majer, CEO of Good Robot, a Toronto-based company that develops tech solutions for businesses, and contributor to the Blockchain Research Institute, also believes in a future of blockchain. “Blockchain offers a very powerful way to implement agreements, exchanges, and transactions in an automated way that you can trust. And because these contracts can handle transfers of assets, titles, and currency, they have real ‘teeth’ that extends to real world participants.”
What about putting your will on the blockchain? Majer proposes, “Imagine selling your assets, putting the proceeds in a cryptocurrency account, nominating a trusted person to signal the smart contract in the event of your death, and having the proceeds automatically dispersed to the wallets of your spouse or children exactly as you see fit.”
And what about consummating a real estate transaction? According to Majer, “A blockchain-based system could not only turn the title of a home into a digital asset, but it also could automatically link to things like credentials (indicating bank loan pre-approvals), and even distribute commissions to the relevant agents (whose relation to buyers and sellers could also be encoded on the blockchain).”
Over the long term, blockchain could serve to mitigate the more painstaking and time-consuming processes of law which could, in turn, reposition the role of a lawyer. “It may be less about going through the motions involved in fulfilment of contract, and instead helping to architect of trusted systems of exchange that support personal and business relationships,” says Majer.
Kristin Johnson is an executive and corporate communications professional, and founder of KSJ Communications, a communications and public relations firm. She consults with a diverse roster of clients spanning the technology, professional services, financial services, public sector, consumer, and healthcare industries. In addition to Rocket Matter, Johnson writes for various other publications as well.