There is a lot of hype and confusion surrunding Blockchain technology. Terms like “bitcoin,” “cryptocurrency,” and “blockchain” have penetrated mainstream media to further confuse matters. However, there is still a lack of clear understanding of blockchain. Here we talk about what exactly is Blockchain, and aim to provide some ‘food for thought’ with regards to how will it affect the legal industry, from replacing cumbersome legacy processes, through to impacting the types of services offered within the industry.
Just so we are all on the same page, What is Blockchain?
In its simplest form, it is It is a database, which stores transactions performed within its network onto a trust-less digital ledger. Simply a decentralized transaction and data management technology developed first for Bitcoin. As it has evolved it can be used for all sorts of transactions that can be transformed to hold a digital value. Such as financial transactions, digital IP records, Land registry, property transactions to name a few.
It is seen as the most significant emerging tech in recent years, recognised as a ‘game changer’ for business in a manner similar to the way the Internet revolutionised digital innovation.
“Blockchain has the potential to make processes more secure, transparent, efficient, and democratic – disrupting multiple industries in its wake.”
It has two common uses, to date, such as utilising smart contracts and cryptocurrencies to transact. Smart Contracts are an exciting development with many use cases showing they are viable in transforming a number of legacy processes. In its simplest form, one would define a smart contract, as a piece of computer code that is capable of monitoring, self-executing and self-enforcing an agreement. They can be used to automate business logic, or fully encode complex commercial contracts. For instance, let’s consider a smart contract on a public blockchain, this would mean control over the execution of the agreement would no longer reside in the hands of a single party such as a bank. Any interaction would no longer be limited to closed systems, such as centralised bank ledgers.
With potential uses including property ownership being transferred automatically upon receipt of cleared funds; credits under service level agreements paid automatically at the point of violation; and securities traded without the need for central securities depositories, smart contracts will revolutionise the way business is done.
Recently, Deloitte took their first steps in advancing Blockchain in legal. They were able to:
In this particular use case they set-up a smart contract based lease between a landlord and tenant. The contract had a simple Q&A which would fill in basic information about the tenant, date of move-in and move-out were automatically populated into the document with the contract automation software. Once the tenant and the landlord agreed to the terms, they pushed a button to digitally sign the agreement. This, in turn, created a unique string assigned to that agreement, which was then saved to the Blockchain. If either party ever wanted to reference that document they could use their private key. In the event of any minor/major change in the document, the entire hash would be invalid and the document rendered null.
Another significant scope of this technology expands to ICOs [Initial Coin Offerings]; how a company raises funds via their own website in a crowdfunding-like manner. Fundraising leverages the Blockchain to store the information about who contributed, how much and when. The process of storing this information securely on the Blockchain uses “Smart Contracts”. The amount of money invested in ICOs is remarkable. The recent value of all companies’ combined tokens or coins was pegged at more than $100 billion dollars.
There is a tremendous opportunity with ICOs for law firms and in-house counsel. Blockchain practices within law firms have emerged across the globe, specializing in assisting companies with the process of the ICO. Cooley, PerkinsCoie and Holland & Knight are leaders in this space as firms who have highly specialized practices working in this space. With the recent approval by the local securities regulator in the United Arab Emirates of the use of ICOs as a way of raising funds, this is a space to watch closely. Obaid Saif al-Zaabi, head of the UAE’s securities body states:
“The board of the Emirates Securities & Commodities Authority has approved considering ICOs as securities. As per our plan, we should have regulations on the ground in the first half of 2019.”
These are just some of the snapshots on how Blockchain technology will impact the Legal industry. In this series of articles, we will deep dive into some of the use cases to give our audience ‘food for thought’ on what should they be doing in their professional development to take advantage of this new technology era. Whether it is a view to add the skills to become more of a ‘Smart Lawyer’, or ensure your firm has the right strategy to embrace this technology and introduce new service offering, and replace legacy processes.
We have to take caution that the Legal technology industry is still in its infancy when exploring feasible use cases in this space. However, with the introduction of bodies such as the Global Blockchain Consortium, and the Dubai courts pushing for a smart contract-based system, there are a number of proofs-of-concept which are proving to be game changers. Once realised, this technology tool will be essential to remain competitive.