How will blockchain change the legal industry?
Eleven years ago, Satoshi Nakamoto, whose true identity is still unknown, released a white paper entitled Bitcoin: A Peer to Peer Electronic Cash System. The paper outlined the concept of Bitcoin, a “purely peer-to-peer version of electronic cash”, and blockchain, the technology that runs it.
Blockchain potentially has the ability to impact the world in a way not seen since the internet made its debut. This ground-breaking technology will affect and possibly transform every industry, including law.
In this article, we will examine the benefits blockchain technology can provide to the legal industry.
But first, here is a simple explanation of what blockchain is.
In the article A Very Brief History Of Blockchain Technology Everyone Should Read, Bernard Marr quotes FT technology reporter Sally Davis, who states:
“Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.”
Simply put, a blockchain is a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) are secured and bound to each other using cryptographic principles (i.e. chain).
No one can steal data contained inside a blockchain. It is unhackable. It is also anonymous and unchangeable. Transactions are recorded across millions of computers, and each data block is linked to the block which came before it.
As you can imagine, for legal matters, this provides a massive advantage to law firms, currently fighting a ceaseless battle with hackers and other cyber-criminals.
Aaron Wright, a professor at Cardozo School of Law, has been quoted as saying:
“We can use blockchain as a ‘spine’ to manage the entire legal industry, build more efficient systems, decrease the cost of legal services, and make sure people get the legal services they need.”
One of the key ways blockchain technology is being used is in smart contracts, a topic we have covered in depth. Other ways blockchain has the potential to alter the way law is delivered includes:
Land registration and property deeds
Blockchain technology is already being employed in the United States’ real estate sector having the most effect on MLS data, title records, and transactions. In the UK, it was announced in October 2018 that HM Land Registry is partnering with software company Methods to explore the benefits of blockchain.
Graham Farrant, Chief Executive of HM Land Registry, said in the press release:
“Our ambition to become the world’s leading land registry for speed, ease of use and an open approach to data requires HM Land Registry to be at the forefront of global innovation in land registration. By working with Methods on Digital Street we are taking another step toward that goal, as we explore how new technologies like blockchain can help us to develop a faster, simpler, and cheaper land registration process”.
In April 2019, the Land Registry announced it had completed its first successful blockchain property transaction as part of its Digital Street project which is to continue until at least 2030.
Due to holding vast silos of sensitive, valuable data, law firms are a prime target for cyber attacks. Blockchain eliminates silos as all the information is decentralised, making it impossible for hackers to locate and target a central source for the information they seek.
The Global Legal Blockchain Consortium now has over 225 members and, according to its website, is focused on the following goals:
• 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.
As law firms move to blockchain technology, attacks such as the one that hit DLA Piper in 2017 will become increasingly difficult, if not impossible, for cyber criminals to execute.
Given its inherent security, blockchain technology provides an opportunity for organisations to be confident that there IP registrations cannot be tampered with by hackers. Also, Blockchain can be utilised to detect/ retrieve counterfeit, stolen, and parallel-imported goods.
By recording IP rights in a decentralised location, ‘smart IP rights’ can be created. This would allow for a complete lifecycle of the IP right to be recorded; for example, when a patent, trademark or design right was first applied for and the history of the application.
There is little doubt blockchain will bring about revolutionary change, not just to the law, but to every other industry. And for cyber security purposes, the prospects blockchain offers for protecting sensitive data are considerable.
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