Five ways blockchain will change the legal profession


Date: 2 December 2020

A lawyer signs a digital signature

Across the globe, business and organisations are rushing to adopt blockchain technology. This is especially true in the legal industry.

Blockchain was invented in 2008 to act as a virtual ledger for Bitcoin transactions, but the tech has evolved in ways that could not be imagined when it was launched. The creation of an immutable and transparent public ledger to store information makes it perfect for any organisation that needs to hold sensitive data. It looks certain that blockchain will be an enormous force for change across multiple industries, and the legal profession is no exception.

Here are five ways blockchain will change the legal industry.

Smart contracts

Legal contacts today are still very much as they have always been – written in hard copy with physical signatures from all required parties to create a legally binding agreement. With piles of accompanying administrative work (imagine the endless reams of paper and the constant hum of scanners and photocopiers) this makes the process of creating a contract a very time-consuming and costly process.

Blockchain offers the potential to completely digitise and disrupt this process with "smart contracts", where the contracts are written by code, with obligations being triggered and performed in an entirely automated manner. Contracts can be made and auto-executed directly between the relevant parties, with minimal intervention from legal third parties. Payment disputes as we know them could become a thing of the past. Smart contracts automatically trigger payments of funds agreed at the outset when contractual terms are met; or apply penalties or cease services should this not happen.

Lawyers will have far less work to do to enforce agreements, and the streamlined nature of smart contracts makes it likely that fewer cases will end up in court. On the face of it, blockchain could be a scary prospect for lawyers. However, despite the automated nature of the technology, it stills require human intervention at the start to create and agree terms and conditions. Getting contracts right at the outset will become more important than recovery when things go wrong, and lawyers will be a vital part of that process.

Intellectual property

The digital age has created huge problems associated with intellectual property (IP), particularly when it comes to protecting the rights of the individual concerned. Millions of internet users believe that everything on the interest should be available free of charge, and the law has struggled to come up with a solution for this.

Images, audio and video files, symbols and other copyrighted material which are available online are routinely downloaded, illegally streamed, or otherwise used without the permission of the individual who created it, often without payment of royalties. Blockchain offers a way out of the mire, offering a publicly visible record of copyright ownership. It can also track who has viewed or downloaded the material in question.

Artists have better control over who views or uses their IP. Smart contracts also provide a system for frictionless and immediate payment for use of the material while allowing the artist to better enforce their rights. For example, failure to pay could automatically trigger a follow-up charge. Using blockchain could also end any confusion as to who actually owns the digital property, making piracy more difficult and also meaning lawyers will be able to quickly confirm proof of ownership.

Chain of custody

What happens to evidence in criminal cases is essential to the success or failure of cases. If the chain of custody is not water-tight, then cases can be lost. Unfortunately, it's not that uncommon for cases to be compromised due to evidence being lost or accidently destroyed. As law firms would attest, maintaining chain of custody on physical evidence is tricky enough, but it's even more difficult to contend with digital evidence found on hard drives or sundry mobile devices.

Blockchain tech offers an ideal solution for these problems. Not only can the virtual ledger be used to track the custody of documents, but it can also be used to store the documents themselves in a very stable and secure environment. Everything is recorded chronologically and time stamped, and the data structure is append-only, meaning it is impossible to alter or delete any records. Data cannot be lost, and there is no longer the need for testimony with concern to the preservation of the chain.

Property rights

Establishing property rights can be a minefield, and disputes are commonplace. The majority of records are held in hard copy form, with reams of ledgers, deeds, and similar paperwork, often going back decades. Even when the information is held in a digital format, more often than not it is comprised of scans of the original hard copies, filed in whatever database the organisation in question deems most logical for their needs. In practice, this means poor transparency, data being misfiled or destroyed, conflicting records and masses of time spent locating what you need.

Blockchain offers a secure, chronological, and immutable method of storing this data. This makes is far easier to discern the history of a particular piece of property. All concerned parties can work from the same information too, reducing confusion and making disputes far less difficult to resolve.

Financial transactions

The inexorable rise cryptocurrencies and online trading, facilitated by blockchain technologies, will have an increasing impact on the legal profession. As more people use crypto-assets in financial transactions, they will become more mainstream and lawyers will increasingly find they need to contend with them in their dealings.

Although far from ubiquitous, banks are becoming increasingly crypto-friendly and are gradually allowing transactions to take place. Again, as customer demand increases, banks will look to accommodate crypto-assets. Given the current lack of regulation and legislation, it's likely lawyers will have a great deal of work to do to guide banks through the evolving scene.

There are many other legal services that will also open up. For example, lawyers will need to handle crypto-assets stored on a blockchain in cases of death for purposes of equitable distribution. Lawyers specialising in divorce will certainly need to know their way around the system to pursue hidden assets to ensure clients get what they are legally entitled to.

Governments around the world are looking at ways to better regulate cryptocurrency and as legislation comes into force lawyers will be required to advise and guide their clients, especially concerning tax law.

Closing thoughts

It seems incredible that a piece of tech designed to power cryptocurrency a decade ago and to support forex trading in the UK will have such a profound effect on the way organisations of all sizes and types operate. Time will tell how far the blockchain revolution will affect the legal industry, but it seems certain it will play a major role in its future. Long used processes will change (or end) and it is likely many firms will end up with more streamlined operations. However, while old doors close a whole world of new opportunities will open up.

Copyright 2020. Featured post made possible by Muve Media & Marketing Ltd

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