Blockchain and cryptocurrencies are here to stay. The technology might yet still be new when compared to the Internet as a whole, but it has already proved it’s ready for wider usage.
With the dawn of the 21st century, many new and exciting technologies arrived, promising to take off the workload, streamline day-to-day operations, and improve finances. One of the hottest innovations in recent years has been the invention of blockchain.
While it may have started as a way to keep a ledger of Bitcoin transactions, blockchain has grown way beyond that. It has been adopted by many industries, including the legal. But, what is it, and how can it be implemented in a law firm environment? Let’s find out.
Before we delve into its applications, let’s first see what blockchain actually is. By definition, it’s a shared digital ledger, a distributed database that stores the information about all transactions made on its network. This database is interlinked, with each new block of data pointing to the previous one, creating a chain of information. With the way it’s all structured, it’s possible to pinpoint the exact block when an update to a document or e-wallet happened.
One great thing about this technology is its complete transparency. For example, Bitcoin’s blockchain contains information about all the transactions made with it since the cryptocurrency came into existence in 2009. This helps verify the validity of every single transaction and prevents double-spending.
Another important feature of blockchain is that it’s not centralized – all that data is not stored on a single server or a computer. Instead, various participants on the network hold an exact copy of the entire blockchain or a portion of it that’s updated whenever a new block is added. This helps with data consistency and preventing document tampering.
Benefits for the Legal Industry
The application of blockchain technology can positively impact legal firms. There are more than a few areas where it can prove beneficial in the long run, ranging from accessibility to cost cuts and increased security for both the firms and their clients.
Accessibility and Automation
Working with paperwork is inevitable for every lawyer. But with blockchain technology, instead of creating every contract from scratch, lawyers can leverage various sorts of automation, reducing the amount of time needed to prepare all the documentation for their clients. Furthermore, they can digitally sign the documents and store them on a blockchain. This would allow clients to verify the authenticity of each document and, ultimately simplify the legal system for the benefit of all parties.
It’s not just about efficiently spending time, but also about cutting down your costs. Once your firm makes the transition from performing manual tasks to blockchain automation, productivity will skyrocket, reducing the time required for every task and, with it, the final costs. And a client who saved some money on legal services is a happy client. Competitive prices would naturally bring in more clients over time, and legal services would become accessible to more people. It’s a win-win situation.
Security and Transparency
Data breaches are more common than ever. Hackers are always on the lookout for the next “honey pot,” an unsecured connection that would let them extract tons of sensitive data they can afterward sell on the black market or use to blackmail their victims.
Legal documents can become those honey pots very quickly, especially if your law firm uses potentially unsafe data transfer methods like email. Moving confidential data onto a blockchain creates a near-impenetrable wall of defense, as hacking the data stored there is so difficult it would take thousands of years to break into just one of the blocks. At the same time, the blockchain structure guarantees the clients’ peace of mind because every change, no matter how slight, is recorded, so it’s easy to check version history and verify whether the document is valid.
Blockchain Implementation for Law Firms
We’ve seen how adopting this revolutionary new technology could prove beneficial in the legal industry. Now, let’s take a look at some possible use cases. These are just some of the ways blockchains could help law firms, and companies are constantly finding new ways to leverage this technology.
We’ll start with the most obvious and also the most common use of blockchain. Using blockchain is a great way to process all financial transactions. Crypto payments have gotten really close to becoming mainstream, with thousands of physical and local venues accepting Bitcoin and Ethereum alongside other, more traditional payment methods. An advantage cryptocurrencies have over fiat currencies is the protection against double payments. Besides, it has become more cost-effective to make a payment with crypto than use a wire transfer, as banks’ fees keep growing.
Currently, official financial institutions all over the world are trying to wrap their heads around cryptocurrencies. The potential adoption of cryptocurrencies opens up an entirely new line of work for law firms. Before implementing cryptos, governments would need to extensively revise the current legislation. In short – a perfect opportunity for law firms that already have experience with blockchain technology to get high-profile clients in one fell swoop. On top of that, the age of digital ownership is coming, bringing with it new types of legal cases, for example, a split of a Bitcoin wallet that needs to be settled during a divorce case.
Chain of Custody
Lawyers, especially those who work on criminal cases, often have to deal with establishing chains of custody – chronologically documenting the trajectory of evidence from the point of collection until it’s presented in the court. Although it’s time-consuming and perceived by many as tedious, this process is indispensable to prove the evidence hasn’t been tampered with. Having a properly established chain of custody wins cases, and its importance can’t be stressed enough.
As all lawyers dealing with chains of custody know, the process can be rather tricky, especially when electronic devices and digital property are thrown into the mix.
Cue in blockchain technology. Since every entry – in this case, each instance of the evidence changing hands – is irreversible once recorded, and each subsequent entry is linked to the previous one, the very structure of the blockchain works to safeguard the evidence before the trial. It’s impossible to delete any data, so there’s no fear of losing crucial documents, either.
In a similar fashion, one’s intellectual property can be additionally secured by using a blockchain. Lawmakers are already playing catch up with the evolution of digital technologies, especially with the introduction of non-fungible tokens and fully digital items.
The problem with digital art is that the original and every copy of it are identical. This would make art collecting as we know it practically impossible when it comes to digital art because collectors are not interested in forgeries and replicas. However, by using blockchain technology, artists can create a digital trail for all their digital property. Thanks to that, collectors can ascertain which of the potentially unlimited number of identical copies of any piece of digital art is the “original.”
Additionally, by employing smart contracts to digitally sign all their creations, artists have more control over them in a time when a bunch of files can be moved across the world in the blink of an eye. This, in turn, helps lawyers analyze whether an IP breach happened and even at which point. Since every file is signed, with an option to automatically activate payments for usage rights, piracy could well become a thing of the past.
Looking Into the Future
Blockchain and cryptocurrencies are here to stay. The technology might yet still be new when compared to the Internet as a whole, but it has already proved it’s ready for wider usage. Hospitals, offices, and governments are switching over to the blockchain database structure to protect data against breaches and improve version control. Lawyers and law firms follow this trend, and so are other industries.
What the future brings is anyone’s guess. The technology is constantly developing, becoming more versatile by the day. One thing’s certain, though – it’s better to get on the blockchain now and prepare for the future than end up as another dinosaur in this tech-driven world.