Blockchain promises to cause some fundamental changes in the legal industry. Long an industry that has been slow to change and entrenched in deep roots, this change may or may not happen smoothly. So how, then will it happen?
Much of the talk surrounds “smart contracts,” whereby contracts are written by code and obligations due under them will trigger and be performed automatically. For instance, an employment agreement can be created between two parties in the form of a smart contract by coding various parameters that set the terms. The employer contributes to the contract to hold in escrow. Then, whenever the agreement dictates, funds are automatically transferred from escrow to employee. All details of the contract and payments will be tracked via blockchain so any disputes can be resolved by looking at the chain of custody. As funds are dispersed automatically, use of payroll companies and other third party intermediaries may become obsolete and everything will become streamlined for all involved.
How involved lawyers are in the creation of the contract remains to be seen — as lawyers automate more and more of their functions, an employer and employee (or two sides to any contract) can work out terms on their own and set the parameters of contracts that automatically fill. Legal startup, Agrello, is developing AI orchestrated smart contracts to allow users “without coding or legal skills to form legally-binding agreements on the blockchain” as well as to “streamline production processes through the automation of resource allocation”.
Another area of the law ripe for disruption by the blockchain is intellectual property. The technology can create a publically accessible ledger of patent filings, copyrights, trademarks, etc, which can track who viewed them on a global scale. Musicians can create and enforce their rights to songs played via streaming devices and downloads via pirated sites that keeps them from being rewarded for their efforts. Ascribe, an IP startup, aims to create permanent digital deeds for artists and their creative work that can then be traded, tracked or loaned. Another startup, Bittunes, provides a marketplace for artists to track digital rights and control who gets to listen to their music. Infringement can be monitored as information would offer clean and clear rights of use for all parties, and by using algorithms and the like to monitor use, property holders can monitor and enforce their rights further.
Record keeping with regards to other property rights, too, will change how the legal industry operates. In developing countries, land ownership is often an area of disputes due to poor or non-existent ownership records and government corruption to take advantage of the poor. Property deeds can be kept on a public ledger and disputes over them will disappear as true ownership of any parcel will be known to all. One example is Bitland, a real estate startup utilizing blockchain technology for land title protection in Ghana. No more would there be human errors, lost papers, endless waits in file rooms, and many other inefficiencies that frustrate so many. The same can be applied to maintaining a chain of custody over a rare Rolex, or Picasso painting, or car registrations. Imagine a world where the DMV ran in an orderly fashion? Keeping censuses, voter registrations, and identities safe would make life so much easier for everyone. A blockchain ecosystem could eliminate any confusion in who owns what digital property and prevent piracy which means it will be much easier for lawyers to facilitate proof of ownership and other due diligence associated in transactions.
There is no denying Blockchain technology will revolutionize the legal industry. “Blockchain technology will align law firms, clients and technology companies to transform the business of law,” said Bob Craig, the CIO at Baker Hostetler. Craig and his firm, along with a group of law firms and technology companies, such as IBM Watson Legal and Integra Ledger, formed the Global Legal Blockchain Consortium. The Consortium (GLBC) aims to push forward blockchain technology adoption and standardization of blockchain in the legal industry.
All the above, though, may hurt the legal industry on the whole. With less confusion and potential for disputes regarding the above, litigators’ business may take a hit. Fret not, though, because as one door closes, another opens. A whole new world of services for blockchain technologies will open up. ICOs, which are similar to IPOs will need their own unique services, which will keep lawyers gainfully employed as they grow exponentially. So too will areas like matrimonial law, where a lawyer will have to carefully guide clients through equitable distribution rights of cryptocurrencies and whatever asset is stored on the blockchain. Divorce lawyers, in particular, will need to know how to track down some cryptocurrencies that may be hidden from plain sight that clients are duly owed. Wills and estate planning — yup, they’ll need legal maneuvering too. Gains and losses from cryptocurrency transactions will need tax law advice, and regulatory needs like AML compliance will need its own set of guidelines unlike those that currently exist in the banking world that lawyers will need to help clients through. The banking industry itself is facing its own disruptions, one that will need lawyerly guidance. Stock markets may one day be entirely run on blockchain and all stock ownership may be tracked on a publicly available ledger.
In sum, the emerging state of affairs that is blockchain technology is as exciting for the legal industry as it is for all the other ones. Where it will take us, nobody knows, but one thing is certain, a whole new branch of law and its applications is developing along with it. To remain relevant, lawyers will need to be blockchain-savvy and ensure that they are involved in all stages.
Co-authored by Mark Ghatan and Kyle Cheung
Originally published at crypt0bits.com(that’s Crypto with a zero) on November 1, 2017.