How Blockchain Disrupts The Legal Industry: Introduction
Smart contracts replacing the lawyer involvement in creation of binding legal agreements, reducing the back office costs.
Everything from smart contracts to the chain of custody, blockchain technology revolutionizes much of the legal industry.
At the heart of the disruption there is the blockchain, a way to create an immutable and transparent shared ledger where you can store shared information.
Law As A High-Tech Industry
You hardly think of the legal sector as a high-tech industry. Lawyers still deal with stacks of papers and much of the legal industry is called paper chase.
Blockchain technology can disrupt precisely this paper-heavy aspect of the law practice.
Smart Contracts For Law
Even today, legal contracts still involve the use of a physical piece of paper where they are written up and signed.
It requires a fair amount of time to draw up a legally binding agreement because of the number of people who need to physically meet.
Blockchain technology could change this because of how it will turn this into a digital process known as Smart Contracts. Lawyers won’t need to get as involved when you generate contracts through a trustless digital process between the relevant parties.
Through blockchain technology, the friction and cost of a legally binding document will be lowered.
In addition, blockchain provides you with the storage of the agreement, and you don’t have the requirement for the intermediaries.
Because lawyers could be eliminated from the process altogether, this technology will likely interfere with the legal profession but ultimately, lawyers will not disappear. They will be required to know how to review the logic of smart contracts instead.
Most lawyers probably first heard about cryptoassets when the anonymous or pseudonymous nature of some of them encouraged criminals to use them, with legal startups on the blockchain there is now another use-case opening up.
No matter how you look at it as cryptocurrency goes mainstream, lawyers will have the need to understand how cryptocurrencies work even before they will make use of them for document storage or transactions.
Legally speaking, protecting intellectual property has always been a challenge.
But through blockchain technology, companies have a new way to register their intellectual property in a way that will anchor it to a blockchain which is immutable.
The end result of blockchain technology for intellectual property is how you have a system that will prove twice as hard to corrupt. Blockchains get held in servers from all over the world, and a big advantage of them is their programmability.
You always have a high level of automation with blockchain.
In the same way, this will make the trading of intellectual property belonging to different companies much easier, and it will diminish the lawyer expenses. That is important for smaller players who have less than infinite funding.
There are already blockchain tech companies such as Lexit that work on this particular solution: A decentralized marketplace to do mergers & acquisitions on the blockchain, re-selling proprietary technology of a startup or even the trading of whole startups that have been discontinued.
Mergers & acquisitions are becoming important in the nascent blockchain space now that the ICO hype has worn off and it is no longer as easy to raise funds as it was in 2017.
The lack of funding has its consequences: While large corporations have the funds they tend to stay away from disruptive technologies because they are unproven and risky.
Small startups are the disruptors but they lack the resources to scale, market themselves and pay legal fees to stay compliant.
That is why many startups get bought by a large company once they have raked up a solid user base. The corporation can see the new technology has potential and invests to stay at the top of the industry, the startup does not need to solve the problem of competing with a a business that has far larger resources.
Tracking Property Transaction
How property gets sold, bought and rented for now means visiting your local government property office, and you can tell this industry remains in the last century. Piles of paper deeds, ledgers and property cards; all of this to track the ownership of property.
When the system goes digital, however, the immutable database will keep everything organized with much less back office effort; and that not only in property trade data but also for instance in legal documents needed in court cases.
That is at least true about the Western world.
The problem in the developing world is the general lack of infrastructure. Protecting individual property rights is more difficult and disputes arise often, human lawyers are required.
Considering how some of India’s land records, for example, stretch back to the colonial ages, the blockchain should offer everyone far more security through the digital storing of these documents, but there is still a long way to go.
India was still the most appropriate country to host the international conference of Blockchain Property Governance in 2017, which addressed some of the issues that people face with property rights.
Store and Secure Legal Documents
Just like with trading of intellectual property, any other kind of transaction can be recorded in a transparent immutable way on a blockchain.
The immutability of blockchain is an advantage here as it diminishes the risk of tampering compared to traditional storage of digital data. At the same time, documents can still be labeled and categorized as easily as in any other digital storage, which means even older data can be easily retrieved and reused when needed.
The decentralized blockchain KYC/AML platforms such as Civic, Sefkey and Traceto.io make use of the secure and easy cataloging feature of blockchain to store personal identities.
Blocknotary seeks to use this technology for fingerprinting for media files. It eliminates the need of a rubber stamp that the notary public still uses today.
Will Testament and similar projects have cropped up to deal with testaments on the blockchain, a pressing issue in times when early crypto adopters have large sums stored outside of bank accounts or other properties linked with their citizen identity.
The legal implementations of blockchain are still in an very early experimental phase. It is still a use case worth watching to see what kind of changes will be coming to the legal industry and which of the emerging blockchain tech companies in the space will make a breakthrough.
Disclosure: This article is not sponsored by anyone in any form.
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About the author
Written by Lisa Henderson
Opinions are author's own.
Edited by: Diana Trang
Diana Trang is the editor of The Business Of Crypto.
Author | Filed under Blog