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Blockchain is an emerging technology hitting the headlines. 'Bitcoin', commonly seen as the first 'Internet currency', is perhaps the most well-known and prolific innovation built on blockchain technology. It even hit headlines recently for reaching record value per coin, something speculators could not have foreseen just a few months ago. But what exactly is the blockchain and why is its impact on law so important? Join us this month as we take a high level look at the potential of law transactions and new areas of knowledge in the near future.

What is the "blockchain"?

Simply put, a blockchain is a method which can be used to record data, akin to a database or a ledger, where we can keep a record of transactions, contracts or indeed anything that needs to be recorded as having 'occurred'. What makes it unique from your run of the mill database though, is that the information (the record of transactions) is not stored in one place or one organisation's servers... It's distributed across thousands of computers all over the planet.

When thought of in terms of a 'cryptocurrency' (e.g. bitcoin) this means that there is a record of what you have transferred to and from your personal 'wallet' address, which is secured in a decentralised way across the public blockchain (on every computer running the bitcoin client). This in turn means you are not beholden to any centralised and bureaucratic authority (i.e. a bank) for a record or transfer of your money. You are more in control, you have more anonymity and you can pay for things faster. 

 

The word "blockchain" comes from the way a current 'block' (the current part of a series of blocks chained together in linear chronological order) records all of the recent transactions and then joins onto the rest of the blocks in a linear "chain", connected by a timestamp and link to the previous blocks. 

 

This in itself is a disruptive technology that's going to need to be closely regulated by the law, but there's more... 

 

What are the implications of this? 

One could assume the blockchain is just a glorified database, and you wouldn't be 'wrong' per se, but the impact is in many dimensions. Recently the Harvard business review affirmed the potential of blockchain to increase the validity and security of data, while at the same time cutting the time and financial costs of the centralised bureaucracies that govern many of our social and financial transactions. 

 

"With blockchain, we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision. In this world every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared. Intermediaries like lawyers, brokers, and bankers might no longer be necessary. Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction. This is the immense potential of blockchain."
-Harvard Business Review, January 2017

 

Though it sounds like a science fiction, it's worth remembering that cars that drive themselves and virtual reality headsets actually exist right now. Like...right now. A major paradigm shift— like blockchain— is therefore reminiscent of when the Internet became a 'thing' in the mid 1990's. 

 

Smart Contracts and Disruption in Law

ClearPeople have a trusted pedigree in providing digital workspace and knowledge solutions to the legal sector and we understand the significant changes IT systems face in the industry today. We see blockchain technology promise to be a massive disruptor especially so in the legal sector since happens to be naturally interwoven in the daily interactions of people and businesses. Be it government or finance, lawyers will most likely be involved.

 

Relationship with Clients and becoming Knowledge Centers

Just as blockchain threatens the work of law professionals, so too does it present an opportunity for lawyers to pivot themselves into a more strategic position with their existing clients. Blockchain is a foundational technology, meaning it's still in it's early days. There exist at this point in time an enormous amount of regulation and legal restraints that are "unknown" to the evangelist looking to leverage blockchain technology in their organisation and this is where lawyers should seek to become knowledge advisors in this new landscape.

Just as IT professionals will provide the technical know how of how to use the technology within the company, lawyers must contextualise this use in the external, regulated environment. For instance, it is well and good if a government uses blockchain technology to prove deed/property ownership but knowing their constraints and limitations from a legal perspective is not something that a programmer can account for.

 

Smart Contracts

Smart Contracts can be seen as automation of an agreement coming to fruition (a very simple example being "if X occurs, do Y"), effectively reducing the interaction of law professionals and firms in the fulfilling of contracts.

They are another place where lawyers are both excluded from the transaction and at the same time very much needed. In a world where we have an "Internet of things", decentralized gadgets and artificial intelligence/ machine learning, the smart contract becomes an inevitability in operating and holding parties to account. To use a common example, through a smart contract a person could rent an apartment at their holiday destination, pay and agree to the terms and time of your stay (the "contract") and finally execute it through sensors in the room which know exactly how long you stayed and when to lock the apartment after you've left.

Smart contracts require the know-how of veteran lawyers well versed in the constructs of law and software developers/programmers who are able to translate those constructs into actionable code. While smart contracts exist today, the lawyers role will likely pivot from writing such contracts to actually help building them as computer applications in the new blockchain era of smart contracts.

 

Parting words 

Blockchain promises to be something that sticks around for a while and will redefine a lot of the ways people work as well as the work they do. 

 

Today we briefly covered how it could affect the legal sector but the truth is that it will most likely change the way a lot of industries 'work'. As already mentioned at the beginning of the article the financial industry is perhaps the most ready to be upset with decentralised currencies just being one of the avenues through which this will happen but there's also rights management for music, property/deed ownership records held by governments...to paraphrase Captain Kirk, the future of blockchain truly is an undiscovered country.  

 

We'll be keeping a close eye on the technology as it matures, but in the meantime get in touch to talk with us more on our expertise with the legal sector.

Author bio

cplogo
Faizan Shaikh
User Engagement Analyst
Faizan is a User Engagement Analyst

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