Many use of blockchain, the innovative technology behind the cryptocurrency Bitcoin, have been suggested in different quarters. Its transformative power on the practice of law is also been talked up by some experts.
This application of the blockchain technology was the focus of a recent piece by attorneys Joe Dewey and Shawn Amuial, who work at the firm Holland and Knight. While a lot has been written about application of the technology to the law, more specifically about concerns over regulation of cryptocurrencies, the lawyers noted that little has been written on the impact blockchain could have on the practice of law.
What is Blockchain?
Presently, most lawyers, including those at top law firms, are not yet really conversant with the blockchain technology. They are unable to define or even describe it. Blockchain is nothing more than a decentralized digital ledger featuring robust cryptography algorithms and decentralized computers that verify transactions. These transactions are recorded on a digital ledger that is publicly available. The technology essentially eliminates the need for a central authority, with every recorded transaction available to anyone with access to blockchain to verify.
Transforming Law Practice
Dewey and Amuial believe those law firms that take urgent steps now to tap into blockchain will be happy in the future that they took such decisions, while those who fail in this regard will find themselves left behind to their chagrin. The technology will not really take the place of lawyers completely, but it will impact several aspects of legal practice, including contract drafting, administration and enforcement. Transactional lawyers will be able draft contracts the same way developers create applications through the use of codes in the years ahead.
The effectiveness of this technology, which seemingly offers impressive transformational benefits to the practice of law, has already made some countries, such as Honduras, to commit to replacing existing records with the blockchain technology. At this rate, people will be able to complete transactions like purchase of property using a smartphone app sometime in the future.
Lawyers will need to undergo special training on how to implement smart contracts using blockchain without issues. They will also need to explain to clients challenges that may be encountered as well as best practices of use.
The application of equitable principals in contracts will be affected if blockchain is used in legal practice. Smart contracts are self-executing and considered completed when two stipulated conditions are met. Once contracts are set as completed, any aggrieved party will not be able to get a redress. A transaction is verifiable as completed and is irreversible. The anonymity characteristic of the technology compounds the problem. If the identity of the parties to a transaction is not known due to absence of a central authority, it then becomes virtually impossible for a court of law to intervene.
The Holland & Knight attorneys, however, think the problem of redress will not stand in the way of blockchain’s relevance to the law practice. Special mechanisms will have to be integrated into contracts at the drafting stage to make arbitration more feasible and easier later on.
Blockchain is being adopted at an impressively fast rate. Financial giants, such as NASDAQ and Goldman Sachs, are among leading companies that have invested several hundred millions of dollars to enable them benefit from the technology.