Blockchain: How it’s going to impact the Legal Business
There is a new technological concept that has taken the global markets by storm, it even has usurped the pedestal that AI once stood on. This concept is known as Blockchain and its applications in all spheres of business has the industry experts scrambling to identify its potential impact. The market leaders in the legal industry are attuned to the relevance of this technological development in delivering of legal services. Recently at an International Legal Technology Association Conference event, “the panel all agreed that blockchain might be the most important addition to the legal infrastructure since William the Conqueror gave rise to common law.”
So, in order to better understand Blockchain, we need to take a look at the constituents of this technology.
Hash function is a method to convert data of arbitrary size into a digital string of predefined fixed length, called hash. The best known cryptographic hash functions are MD5, SHA1, and SHA2.
Hashchain is a sequence homogeneous data chunks, or simply blocks, linked together by a hash function. It has the important property that no data can be modified at any block without affecting the integrity of the subsequent blocks. For example, if the payload of the first block is changed, then the hash of the second block must be changed as well, and hence the hash of the third, and so on.
After, understanding the underlying components of this technology, we can define Blockchain as particular organisation of hashchains inside another hashchain. The external hashchain has to be based on a set of rules that make balance between usability, simplicity, incentive, and trust and authority. Its purpose is to replace the central access point that can be controlled and possibly abused by a human.
Application of Blockchain
Banking and Finance: The most important application of blockchain is in the banking and finance industry. Banks around the world are looking to transform their industry with blockchain. The advantages of increased transparency and efficiency along with simplified processes and decreased costs are hard to ignore. According to a report from the IBM Institute for Business Value, 91 percent of banks are investing in blockchain solutions be 2018. Blockchain is going to transform this industry in the near future.
Smart Contracts: This application of blockchain is revolutionizing the Legal Industry. Smart contracts can be stored securely and accessed by all parties through a decentralized system. They are used to digitally implement or facilitate a legal contract. This helps to share anything of value, be it money, property or shares in a transparent and conflict free manner.
Supply Chain Management: Blockchain have wide application in supply chain and logistics. It can increase the efficiency and transparency of supply chains and positively impact everything from warehousing to delivery to payment. It offers a shared ledger that is updated and validated in real time with each network participant.
File Storage: Blockchain can be used for decentralised file storage. Applications like Sia and Storj offers this service to rent and use shared storages across a decentralized network. The emerging blockchain-based distributed storage market could challenge traditional cloud storage services, such as Amazon AWS and Dropbox, for a cut of the cloud storage market.
Governance and Voting: Blockchain can be implemented in governance and voting procedures for a faster, efficient and corruption less system. On the blockchain, each group of transactions is hashed together, along with a hash of the previous block, and the entire blockchain would be publicly accessible. Using a blockchain for digital voting could record both voter and candidate ID, as well as the time.
Healthcare: There are several areas of healthcare and well-being that could be enhanced using blockchain technologies. These include device tracking, clinical trials, pharmaceutical tracing, and health insurance. Within device tracking, hospitals can trace their asset within a blockchain infrastructure, including through the complete lifecycle of a device. The information gathered can then be used to improve patient safety and provide after-market analysis to improve efficiency savings. Along with artificial intelligence and IOT blockchain is a magical combination for the healthcare industry. It can be used in storing medical history of a patient.
Blockchain and Legal Industry
Blockchain Technology has engulfed every major industry in the world and the legal landscape is due to be similarly affected in the wake of rapid technological advancements.
Though there are still certain uncertainties regarding the future of Blockchain, it has not impeded the rising interest in use and application of Blockchain Technology. The legal industry comprising of law firms, courts and legal technology providers have steadily increased their exposure to this blockchain and are ready for a Blockchain revolution. According to data pulled by financial research platform Sentieo, there were nearly 1,500 blockchain-related mentions in SEC filings, transcripts, and company press releases in the first nine months of 2017. This represents an increase of more than 65% over the prior full year. Growth in interest and investment ballooned after investors began shifting their focus from cryptocurrencies to the underlying blockchain technology.
With such keen interest pouring from all corners of the corporate sphere, the legal industry has also identified the major sectors that will be influenced and disrupted by Blockchain. With that in mind, it led to the establishment of Global Legal Blockchain Consortium (GLBC). It is comprised of approximately 40 large companies, law firms, software companies, and universities that have joined together to develop standards to govern the use of blockchain technology in the business of law.
Specifically, the consortium is focused on:
Data integrity and authenticity for contracts, documents, and similar data.
Data privacy and security for contracts, documents, and communications.
Interoperability between large corporate legal departments and law firms.
Productivity improvements and cost savings in the operation of legal departments and law firms.
Use of blockchain to fortify and augment existing legal technology investments adding important functionality to legacy systems to extend their useful life.
Legal Impact and possible uses of Blockchain
The common misconception among many is that legal businesses are not massively affected by technological advancements or innovations. This is certainly not the case in modern times, where the legal fraternity are not only expected to be updated on the technological developments, but also be on the forefront of prospective applications of any game changing technology.
The principal areas where this technology can disrupt the existing legal market are:
Smart Contracts: A Contract between two entities intending to do business is paramount for them to proceed. Management of these contracts is labour intensive and time taking, especially when there are a large number of these contracts. The Legal industry has been waiting with bated breath for any technological solutions for management of these contracts. Thus, a concept first published in 1995 by a computer scientist (Nick Szabo) pertained to implementing and storing Smart Contracts.
A smart contract is a coded program that contains the terms of agreement and triggers, allowing the provisions of a contract to be carried out upon notification. For example, the delivery of an asset, a shipment of goods or other promised completion of services can automatically trigger a payment or other exchange defined in the contract. Blockchain provides a decentralized ledger that stores and replicates documents and agreements, giving them a certain security and immutability.
Its benefits over regular contracts are plenty, such as;
Direct dealings with customers.
Intellectual Property: There are obvious uses of Blockchain in IPR, from evidence of creatorship and provenance authentication, registering and clearing IP rights; controlling and tracking the distribution of unregistered IP to providing evidence of genuine and/or first use in trade and commerce; digital rights management; establishing and enforcing IP agreements, licenses or exclusive distribution networks through smart contracts; and transmitting payments in real-time to IP owners. Blockchain may be also used for authentication and provenance purposes in the detection and/or retrieval of counterfeit, stolen and parallel-imported goods.
Property Rights: Real Estate transactions are steeped in traditions that have hardly changed over hundreds of years. Today, as computer-based property recording systems are prevalent in our cities but roll out at a snail’s pace in rural areas (often hindered by strained municipal budgets), and e-signatures are little used (due to legitimate fears of fraud), arguably the real estate closing process has lagged in its use of computer aided technology. A public blockchain ledger can keep reliable records of property titles, deeds and ownership changes as they occur. Property owners, banks, insurance companies, title companies and municipalities would all have access to clean records of ownership and title transfers, reducing future title search time and increasing transparency.
Document Notarization: Currently, notary publics (or general notaries) are used to confirm and verify signatures on legal documents, such as deeds and contracts. Using blockchain technology, these documents can be preserved digitally as part of a digital ledger.
It is quite apparent that Blockchain has the ability to transform the way we do business, litigate and govern. As the legal fraternity formulates its response on many facets of Blockchain, they must learn more about it and keep innovating to provide the best possible services to their clients.
Ultimately, Blockchain and its applications are similar to any other massive developments in technology, it has unlimited potential to revolutionize our way of life and society, but it is imperative that we understand its potential ramifications and implications before we decide to take the plunge.