How Will Blockchain Technology Change the Practice of Law?
The blockchain is the technology behind "cryptocurrencies" like Bitcoin and it could quickly make its way into the legal tech sphere. No, don't worry, blockchains aren't another "robots will replace lawyers" fad. Nor are they another way to ease your eDiscovery woes.
Instead, blockchains are being touted as a way to aid encryption and authentication in legal documents and within firms. And that could have a significant impact on how you actually practice law.
A Block-What-Now?
Blockchains came up in a recent forum on the "newest and coolest" legal tech at the annual LegalTech conference in New York. But it's not the first time they've been hailed as a revolutionary legal technology. Back in June, Joe Dewey and Shawn Amuial, a partner and associate, respectively, at Holland & Knight, declared that blockchain technology could radically change how some lawyers practice.
Here's how Dewey and Amuial describe the tech:
The term "blockchain" refers to a decentralized digital ledger that combines powerful cryptography algorithms with a system of decentralized computing power that redundantly verifies transactions, which are ultimately recorded on a public digital ledger available to the world.
Totally clear, right? This might help:
What Might Blockchain Tech Look Like in the Law Firm?
While blockchain technology has been popularized through Bitcoin, its use in the legal realm is largely hypothetical at this point. Beau Mersereau, director of applications, development, and support at Fish and Richardson, recently theorized about blockchains' legal applications at the LegalTech conference. Here's his take, as reported by Legaltech News' Ricci Dipshan:
Let's say you have a piece of paper, and you have some information and you staple another piece of paper on it - but now imagine the staple is unique in the sense that everyone knows that transaction happened and it's immortalized in the system.
And where it has value is for a practice management. Think of it as a general ledger of the accounting system - if you really don't want to be able to change that ledger. And if anyone tried to hack into the information, it would be readily apparent that someone changed that block chain and it would invalidate it.
Legal Drafting? More Like Coding.
The spread of blockchain technology could have a significant effect on how lawyers -- or at least some lawyers -- work. Dewey and Amuial write that, in a blockchain-filled future, "transactional lawyers may draft contracts that resemble how developers code software applications." A credit agreement might look something like the following:
#include credit library
#include blockchain library
Var Debtor = ABC Corp.
Var Creditor = ABC Lender
New Document = new Credit Agreement.create {debtor:Debtor, creditor:Creditor, type:working capital}
New Document.interest = Libor(30 day)
New Document.fincovenants = Debt_Yield(4), LTV(65)
But it's not just that lawyers will have to be more code-savvy. Smart contracts can be written to be self-executing, Dewey and Amuial explain, so that "smart contracts are coded to be self-executing, so if conditions A and B occur and are verified by the blockchain, then cryptocurrency is automatically unlocked and becomes controlled by the other party." (In fact, blockchain-based smart contracts already exist.)
But blockchain is a technology with anonymity as at its core, despite the public logging of transactions. You can't go to the bank when a deal goes awry, meaning that parties may have difficulty identifying each other when it comes time to sue. That will take some significant policy, tech and possibly legal developments to solve.
Will blockchain truly transform how things are done? Only time will tell. Bitcoin hasn't exactly lived up to its promise to transform world currencies, yet, but it's still trucking along nonetheless. Even if blockchain technology doesn't truly rewire legal practice, it too will stick around and, sooner or later, make its mark on the legal industry.
Related Resources:
- Why the Block Chain Matters (Wired UK)
- The Most Disruptive Legal Technologies of 2015 (FindLaw's Technologist)
- Will 2016 Be the Year of Automation for the Legal Industry? (FindLaw's Technologist)
- It's Official, Bitcoin is Money, Honey (FindLaw's Technologist)