How Blockchain Will Transform Your Legal Practice

What Is Blockchain Technology?

Blockchain is a decentralized, unhackable, and immutable ledger that consists of individual blocks of data that are chained and connected together. When a block of data is updated or added, the entire network reflects this change, making a central repository unnecessary and giving hackers the virtually impossible task of hacking every single block in the network. Since these changes to blockchain occur in real time and cannot be altered, blockchain provides a permanent and authentic record of the data it stores.

For example, instead of storing court records in a file room or cloud-based server, the court could upload records to a blockchain. If privacy or anonymity was an issue, like in cases involving minors, additional encryption could be implemented. Court records would be safer because they would not be stored in a central location; neither a fire in the records department or a hack on the court’s servers would alter the blockchain. Storing court records on a blockchain would also increase the public’s access to the courts. Instead of traveling to the courthouse to retrieve files, parties with an internet connection could instantly download court records whenever necessary.

The potential of blockchain expands further with “smart contracts.” Smart contracts are automated computer programs that run on blockchain. The terms of a contract (e.g., price and quantity of Coca-Cola per warehouse pallet) would be preprogrammed alongside the buyer and seller’s contact and banking information. When the Coke arrives and is scanned in at the buyer’s warehouse, the blockchain is updated based on how many pallets of Coke arrived. The smart contract then automatically transfers the appropriate funds from the buyer to the seller’s bank account—all without a paper trail of purchase orders, contractual clauses, and invoices.

There is no limit to the ways that blockchain technology and smart contracts can transform the legal profession. This technology will continue to evolve and expand as it integrates with artificial intelligence, the Internet of Things, and an increasingly digital society. There are, however, certain applications of blockchain that are expected to disrupt particular legal practices, including corporate, intellectual property, criminal, insurance, and real estate law.

Corporate Law

Corporate lawyers advise their clients on how to draft, negotiate, and manage their legal agreements. Artificial intelligence (AI), however, has now surpassed humans in analyzing legal contracts. AI and automated smart contracts running on blockchain can now be more efficient and accurate than human lawyers in handling a corporation’s contracts. Familiarity with blockchain and smart-contract programming will be essential for future corporate lawyers. Transactional attorneys will need to monitor their clients’ use of blockchain as the law and their clients’ goals evolve. Litigators will need a similar familiarity as disputes over how to interpret the “four corners” of a contract expand into the intent of the code in smart contracts.

Intellectual Property Law

Blockchain can provide parties with a transparent, reliable, and decentralized ledger for tracking IP rights and registrations. A blockchain ledger could provide a timestamped record of the first use of a trademark or immediately document evidence of creatorship when a designer completes an artistic work. The ledger could also show not only ownership rights but who is an authorized licensee, providing consumers and authorities the ability to distinguish counterfeiters. Smart contracts operating on blockchain could automate payments and licenses for IP in real time and simplify the tedious legal process of using copyrighted content. Future IP lawyers will likely need extensive knowledge of blockchain to protect their client’s work and identify infringers.                   

Criminal Law

At the heart of a fair criminal justice system is the security and validity of court data and evidence. Governments and companies know this and are attempting to patent the use of blockchain within the court. Blockchain not only provides courts with a way of storing data that is secure from hackers, but it also streamlines the storage of evidence while establishing origin and authenticity. Prosecutors and defense attorneys will need an understanding of blockchain to take full advantage of the information included—or suspiciously absent—in the court’s chain-of-custody record stored on blockchain.

Insurance Law

Blockchain has the potential to revolutionize insurance law by streamlining data retrieval and automating claims administration. Records stored on blockchain can provide claimants and insurance companies quick and reliable access to medical bills, medical records, accident reports, insurance policies, and claim histories. With these records just a click away, policy-specific smart contracts and AI-powered claims-adjusting programs could quickly approve property damage and low-value injury claims without the involvement of an adjuster or attorney. New businesses are already offering this seemingly futuristic service. Insurwave, the world’s first blockchain enabled insurance platform, tracks marine shipments in real time, calculates risk accordingly, and pays out claims in just a few hours.

Real Estate Law

Blockchain-enabled databases and smart contracts are the future of real estate transactions. An immutable and public multi-listing-service (MLS) database on blockchain would provide parties with the ability to search, post, and view listed properties. Individuals and assets would have digital blockchain identities that would streamline due diligence—quickly addressing concerns about everything from credit and rental histories to liens, zoning permissions, and title clarity. Payments and agreements would be completed with smart contracts, allowing many parties to complete the purchase or leasing process without the need for real estate agents, attorneys, and escrow or title companies. Clients with complex and high-volume work, however, would still likely need lawyers to transition existing agreements to blockchain and manage future digital transactions.

Blockchain, Arizona, and the Future of the Legal Profession 

Despite previous doubts about the promise of blockchain, business leaders still expect it to be essential to organizational innovation. Most executives believe that implementing blockchain is a top-five strategic priority and critical to their organization’s success, and are adjusting investment, hiring, and training accordingly. Law firms, too, must prioritize the study and use of blockchain, as those with the strongest knowledge and skillset with this technology will outpace competitors with superior client service.

This progress will likely be even more prevalent in Arizona, which recently deregulated law firm ownership. Technology companies and the Big Four accounting firms can now acquire law firms and develop more teams of lawyers, computer programmers, data scientists, and project managers. As blockchain and technology transform business and law, these multidisciplinary teams will have a sizeable advantage over traditional law firms. Gone will be the days where lawyers completed a successful career without acquiring technological expertise. To thrive in the 21^stcentury, particularly in Arizona, law firms and lawyers will need to adapt, learn, and innovate as new technologies like blockchain become more essential to modern life.