Adjourned but Not Dismissed: Is Blockchain’s Takeover of the Legal Industry Inevitable?
Blockchain technology, in its relatively short history, has bulldozed through a number of industries to make their operations more transparent, quick and efficient. Some of the sectors where this emerging technology finds use-cases include supply chain management, real estate, finance, and medical, among others.
Although the technology continues to find success in the industries above, one industry in which it possesses unparalleled potential is the legal sector.
This is not just wishful thinking. Blockchain’s characteristics like the immutability of records and easy accessibility make it an ideal fit to fill in the existing gaps in the long untouched legal industry.
In this Cryptocyclopedia entry, BTCManager will examine in detail the possible use-cases of distributed ledger technology (DLT) in the legal space. We will also discuss some of the individuals and groups that are spearheading the rise of blockchain in the law industry and what does its emergence means for those practicing the profession.
Can Blockchain and Lawyers Co-Exist?
According to data from the American Bar Association (ABA) in 2018, there were a total of 1,338,678 active attorneys in the United States. A decade earlier, the number stood at 1,162,124 while in 1998 it was just under a million at 985,921. This means that within two decades, the number of active attorneys in the U.S. has risen by approximately 36 percent.
However, the pace of technological advancement and the ever increasing automation of traditional professions have bred a number of uncertainties among many existing law professionals.
This fear, however, is largely unfounded.
One thing that often gets overlooked is that the majority of the cases or disputes in the legal sector are those of routine nature. These cases follow a typical path and most of the time proves to be an open and shut case unlike the twisted and dramatic cliffhangers found in Agatha Christie’s literary works. And this is exactly where blockchain comes in.
Mick Atton, VP and Chief Architect at Thomson Reuters Westlaw, recently spoke at Hofstra University’s Legal Tech Boot Camp 2018.
The event touched upon the growing importance of emerging technologies like blockchain in the legal industry and how a new crop of tech-savvy law professionals could lead the next wave of change in the sector.
During his speech, Atton pointed out that despite cryptocurrencies such as bitcoin being blockchain’s most prominent use-case to date, a number of organizations, including the ones in the legal sector, are actively exploring the possibility of deploying the technology in their business to automate day-to-day operations.
He noted that law firms facing challenges such as diminishing demand from corporate clients due to an oversaturated market are considering blockchain for two reasons.
The first reason is smart contracts, which are, in simple terms, small programs residing on decentralized, immutable blocks of data that run on a loop to automate recurring tasks. These contracts are programmed to initiate particular actions upon successful or unsuccessful completion of specific criteria.
“An example of this may be the serial renewal of a lease for real estate. There might be some termination clauses in commercial agreements in which you can automate the execution and invoke. These are repeated functions that don’t need a human to curate and manage.”
This does not mean that future lawyers need to know the nitty-gritty of coding. Instead of having stellar coding skills themselves, lawyers of the future will need to sit with engineers to help them devise the smart contracts.
This is very similar to how user experience designers are not necessarily required to know how to code. Instead, they design an app screen and pass it over to the engineer who then churns out a code that makes the screen interactive and ready for use.
The second reason as pointed out by Atton is the technology’s use to record legal events and terms and conditions over a long period. A prime example of this could be in the form of recording legal data pertaining to intellectual property, copyrights or even criminal charges relating to a specific criminal procedure.
“Perhaps one of the most novel ideas of blockchain was brought to me by a law school student. It was around this idea of fashion law and the ability for blockchain to record copyright of high-value fashion items, such as designer handbags. I had never considered an idea like that before.”
Legal Concerns Joining the Blockchain Bandwagon
Following the first sneak-peek of blockchain technology during the historic cryptocurrency bull run towards the end of 2017, a sizeable number of firms and businesses the world over have begun analyzing the potential of the technology in their daily work.
Judith Rinearson, a partner in K&L Gates’ New York and London offices, believes that blockchain is much more than merely cryptocurrencies and issuing tokens through initial coin offerings (ICOs).
Speaking to Bloomberg Law, Rinearson said that currently, she’s spearheading an in-house initiative in her law firm geared towards creating an internal blockchain. She added that the innovation could be used to automate a slew of routine jobs and tasks like time-keeping and filing deeds which are responsible for unnecessary spillage of manual efforts that could instead be utilized to accomplish more complex tasks such as handling mergers and acquisitions.
The colossal growth in interest towards blockchain technology is also reflected in the increasing number of professionals across the law industry who have turned their attention towards it.
The Wall Street Blockchain Alliance, a nonprofit organization on Wall Street, aims to foster the adoption of blockchain technology and digital assets across global financial markets.
Ron Quaranta, Chairman of the Wall Street Blockchain Alliance, told Bloomberg Law the organization has typically witnessed a major influx of people with a background in law.
In the same vein, Aaron Wright, Chairman of the legal working group at Enterprise Ethereum Alliance (EEA) told the publication that about 25 of the top 100 global law firms have joined the nonprofit blockchain initiative.
“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.”
Critics Stand their Ground
For all the love and appreciation the brainchild of Satoshi Nakamoto gets all over the world, some critics continue to remain unconvinced about its potential.
Acclaimed economist Nouriel Roubini aka “Dr. Doom,” believes that blockchain is “one of the most overhyped technologies ever.”
Responding to claims that blockchain could speed up the process of executing legal contracts by eliminating a large amount of unnecessary paperwork, Roubini said that because permissionless blockchains require all transactions to be verified cryptographically, they end up being significantly slower than traditional processes.
Further, Roubini also expressed his disagreement with the argument that blockchain could essentially wipe out the intermediaries involved in financial contracts and transactions. To this, Roubini retorted:
“This is absurd for a simple reason: Every financial contract in existence today can either be modified or deliberately breached by the participating parties. Automating away these possibilities with rigid ‘trustless’ terms is commercially non-viable, not least because it would require all financial agreements to be cash collateralized at 100 percent, which is insane from a cost-of-capital perspective.”
Whether blockchain will be able to reshape the legal industry as we know, it remains open for argument. And unlike law courts, the answer to this looming question can only be answered by time.
However, the generally positive sentiment towards the technology coupled with human being’s internal wiring to re-skill themselves with time could help propel the technology to new heights. Until then, the case stands adjourned.