Blockchain has finally started to revolutionize the world. As Amazon, IBM, and Oracle started to offer enterprise-grade Blockchain systems, it has suddenly become more scalable and secure. Connections between ledgers are no longer a barrier, and businesses can genuinely begin experimenting.
Despite some significant use cases in the sector, the legal industry has still been slow to adopt Blockchain technology. The challenges tend to be around technological illiteracy and aversion to investment without a fast return on investment. Without a base level of understanding of blockchain technology, it is substantially more difficult to pitch the concept to traditional sectors.
This article looks at what blockchain is, how it could be used in law and some of the barriers that need to be overcome for the technology to accelerate.
What is Blockchain?
When you think of blockchain, you tend to think of cryptocurrency. The two were almost synonymous in the early days, and it probably still is the best example of the technology. Blockchain is a decentralized public ledger that records transactions without needing any third-party interference or oversight. Transactions are linked to a unique ID and logged. Trades are always anonymous and indisputable, meaning exceptional security and verification benefits.
Essentially, in the case of a cryptocurrency exchange like Bitcoin, blockchain technology eliminates the need for a bank as the third party.
Why is blockchain important in the legal industry?
The ability to store records in a transparent ledger with a high-level of security is advantageous to the legal industry. Below are some of the top applications that blockchain looks set to transform over the next decade.
Digital information can be stored securely within the blockchain and shared with the relevant parties in real-time. Within this process, all data can be verified to avoid fraud and completely negate the need for drawing up contracts when in a courtroom. Beyond this, given the blockchain’s data is totally immutable, there do not need to be concerns about tampering with documents.
Smart contracts can execute themselves upon the completion of specific criteria. If we think of it as a ledger, you cannot move to the next transaction until the previous one has been completed. When an action is not met, there is no remuneration. Simple.
Imagine a world where all case documents were stored in a ledger that could not be tampered with, was highly secure, and could be accessed by all necessary parties. That is precisely what Blockchain technology has the potential to do. Millions of pounds are spent on cases that never even make it to trial, with evidence always being misplaced and lost in the UK. There are so many documents that require a tremendous amount of administration time. It is the fault of outdated systems and not the people doing it.
A Blockchain could provide a shared ledger to all necessary parties, massively reducing cost and speeding up its time to resolve cases. In fact, some could even be resolved instantly in time.
If you have a trust that is due to be released upon an agreed date, blockchain could automatically apply that criteria without any intervention or dispute. In a seamless process, the funds could simply be released to the relevant parties once the ledger entry is triggered by a specific event occurring. How wills are arranged could change dramatically in the years to come.
There are several startups, namely Stampery, Stampd, and Blocksign, who have developed Blockchain technology to offer notary services. The idea is that they can prove that a particular document existed at a point in time in an independently verifiable manner. Stampery includes a direct add-in for Microsoft Outlook.
Land and Property Data
Blockchain technology could be used as a ledger for all land and property ownership information. This could make it incredibly easy when trying to conduct real estate transactions with the potential to do them all as part of the virtual ledger. As we know, the property market could change very quickly if the technology were deployed and commercialized for this purpose.
Challenges to Blockchain adoption in law
We have only really touched the surface of the potential benefits that Blockchain technology can bring to the legal industry. It is quite clear that in certain areas, it will be quite revolutionary. However, there are barriers that need to be addressed.
Firstly, the industry by nature is not technologically savvy. When you start trying to integrate new systems into an age-old industry, it is tough to make it catch on. Many find it hard to see the return they will get on investment if they decide to take the plunge and are not rushing to adopt any changes.
There are also legal issues around blockchain, which we have also seen in the world of AI whereby there isn’t any proper governance and regulation around using the technology. In heavily regulated industries like law, this will naturally mean it takes more time for new ideas to be accepted.
A further hindrance is the scalability of blockchain technology. As blockchains depend on miners to validate smart contracts, they can be costly to build and operate at the start. With a lack of client demand for blockchain, it is challenging to convince legal professions that they need to invest, even if there are significant benefits.
Arguably the biggest problem for legal adoption is the threat that blockchain creates to their livelihood. Blockchain technology’s objective is to disintermediate transactions that would generally require a lawyer to be present and review contracts. If that is automated, roles where lawyers provide expertise, could ultimately be eliminated.
Legal professionals need to be better educated on the potential impact, but this does take time. Those firms that are trying to use Blockchain technology are coming up with new and novel ideas, and it will become increasingly important to follow suit.
Blockchain is a foundational technology
In the last decade, we have seen such massive growth in the use of artificial intelligence (AI) such as Amazon Alexa, Google Home, Nest, and countless other innovative products. With that, when we hear about a new technology, you expect it to have a similar impact. However, blockchain is what we might call a foundational technology. We mean by this that it fundamentally changes the foundations of how an economic or social system works. You could put the Internet into a similar bracket. Neither could be deployed overnight. On the flip side, AI products are disruptive. Consumers could start using Alexa instantly and hence the immediate boom. It would be impossible to go from using cash to a cryptocurrency within a short space of time.
Without a doubt, blockchain does have a future in the legal industry, but it will fundamentally change how the system operates, and given the barriers mentioned above, it will be slow.
Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.
The co-author of this text, Robin Trehan, has a Bachelor’s degree in Economics, a Master’s in International Business and Finance, and an MBA in Electronic Business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.
The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.
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