Blockchain tech affronts lawyers: using is the smart response
By Sophie Amat on ALTCOIN MAGAZINE
The use case for blockchain & smart contracts adoption by law firms
What would Athenian orators of law in ancient Greek times make of blockchain technology’s encroachment into the legal profession today?
Would they share the view overheard in a whispered tone, at a legal symposium last year along the lines of …
“The audacity that tech geeks proffer to evolve legal processes by coding them onto a blockchain! I get that change is inevitable, but do we seriously need this technology?”
And whilst such an anxious reaction is understandable — fairly normal in the face of uninvited change — the stark reality is this. Ignoring blockchain technology, self-executing smart contracts, existing & under development cryptocurrency projects, the ever evolving cryptocurrency ecosystem as a whole and the new emerging regulatory frameworks for encapsulating the whole of it, is about as helpful as “an ostrich burying its’ head in the sand” approach.
The ostrich will eventually have to consider … “Will my skillset — or my law firm for that matter — be wholly relevant in a business environment that is increasingly conducive to disruptive concepts and technologies?”, and “What is the opportunity cost of delayed adoption?”
A quick scan of the first two pages of a casual Google search — using the search phrase blockchain and legal contracts — returns twenty forthright and compelling pro-tech-change articles published globally within the last fifteen months, with titles such as “7 ways blockchain will change the legal industry forever”, “Can blockchain smart contracts level the legal playing field for SMEs?”, “Legal contract blockchain platform Monax launches public beta”, and “New blockchain-based smart legal contracts for Australian businesses”.
The information merry-go-round is aflood with an emerging technology context vastly beyond smoke and mirrors, and unsubstantiated fly-by-night geeky tech narrative? The legal profession is clearly impacted by blockchain tech and automation through machine learning. Uncertainty is rife, yet there is a way through.
Global blockchain education firm The Blockchain Academy , based in New Jersey (USA), predicts that legal professionals risk being “marginalised from many aspects of business” if they resist adopting blockchain technology & offering smart contracts as a new way of doing business. We can add to this process automation through machine learning technology that trawls through behemoth piles of written law precedent content at an alarmingly fast and accurate rate.
Admittedly, such a glum prognostication can only be proven in hindsight. However, what is known right now, is that huge opportunity is ripening for agile and forward-thinking law firms!
Once a new technology rolls over you, if you’re not part of the steamroller, you’re part of the road. — Stewart Brand
the Australian National Blockchain vs OpenLaw Blockchain
Enter centre stage of this emerging legal blockchain landscape, the Commonwealth Scientific and Industrial Research Organisation’s (CSIRO) major news release on 29th March, last week.
CSIRO, an independent Australian federal government agency responsible for scientific research, announced that a consortium comprising law firm Herbert Smith Freehills, Data 61 and IBM will be building the Australian National Blockchain (ANB).
ANB will be Australia’s first cross-industry, large-scale, digital platform to enable Australian businesses to collaborate using blockchain-based smart legal contracts.
Once completed, the ANB will enable organisations to digitally manage the lifecycle of a contract, not just from negotiation to signing, but also continuing over the term of the agreement …
[ANB] will provide organisations the ability to use blockchain-based smart contracts …
Natasha Blycha, Blockchain and Smart Legal Contract Lead from Herbert Smith Freehills commented about the Australian National Blockchain thus …
“Technologies like blockchain are set to transform the legal industry and the wider business landscape as we know it,”
“This presents a huge opportunity for agile and forward-thinking firms and has potential to deliver significant benefits to our clients and the business community as a whole”.
Going forward, this project will involve regulators, banks, law firms and other Australian businesses, who’ll be invited to participate in the pilot which is expected to start before the end of 2019.
It appears that the Australian National Blockchain has amassed all the components for creating an industry flagship for the adoption of blockchain technology and smart contracts. One resultant upside is that Australian law firms in particular can observe developments close up and risk free. For now we can only wait and see whether what actually gets produced will benefit the legal sector, businesses and clients equanimously.
It’s important to note that many other smart contract “community” blockchain platforms are operational right now! They might not be perfect, nor have big brand industry players onboard. Nonetheless they work.
One smart contract blockchain platform involves a global community of members (lawyers, technology developers, and enthusiasts) using the open source system OpenLaw.io. OpenLaw’s source code, or intellectual property, is available for inspection at code repository Github. View it here.
OpenLaw legal platform offers lawyers and non-lawyers alike, basic template tools to build dynamic, smart contracts that are enforceable and understandable.
Founded by Aaron Wright (Professor at Cardozo Law School, NY, USA) and David Roon (Creator of java virtual machine based tools to integrate Ethereum development), OpenLaw invites us all to ...
Imagine a world in which every single human being can freely participate in a just legal system. Building the future of law, one legal agreement and contract at a time.
Is this sounding like an idealistic, utopic vision worthy of propagating? Probably! And why not? After all the popularity of blockchain technology is based upon Bitcoin and it’s fashioning decentralisaton of trust amongst thousands of unknown participants (nodes and/or miners) who maintain the integrity of the currency’s transactions according to hard coded software rules.
The Bitcoin whitepaper pointed out inherent weaknesses of the conventional financial system’s trust based model that assumes a percentage of fraud, dispute mediation and other inefficiencies. Removing these is achievable by employing cryptographic proofs. The point is mass participation is paramount to a decentralisation-centric approach, as is offered by the founders of the OpenLaw community platform. There are no real prerequisite barriers to participation for anyone of reasonable intelligence, holding the appropriate crypto and a computer! Impeccable!
I digress to encourage you to read the Bitcoin White paper by clicking here.
So how can law firms with no experience actually start to engage and get onboard?
an obvious and easy starting place …
Law firms — in fact anyone (such as financiers, real estate agents, landlords, even employers) in the business of regularly preparing or signing-off on contracts that detail payments, timeframes and specific work to be performed under them — would well start by asking themselves moderately probing questions, with an openminded attitude to learning, without prejudice.
Here are several to get started with.
- What are smart-contracts?
- What is blockchain or distributed ledger technology that underpins such contracts, and what is the forseeable development path for this technology or other advancements on blockchain?
- How will distributed ledger technology and the cryptocurrency ecosystem as a whole impact transactional contracts, escrow accounts, estate planning, online dispute resolution, litigation, identity verification, business advisory and other service offerings?
- What can we do to proactively manage any aspect of potential business obsolescence to minimise negative effects?
- How can we become skilful users of self-executing smart contracts, and know when to recommend them as a practical solution?
- What bouyant new service offerings are forthcoming in the tech development pipeline that law firms should know about. One example is fractionalised and tokenised ownership (by an massive pool of micro-investors) of tangible assets, such as, micro-ownership of high-end luxury vehicles, and micro-ownership of commercial or development real estate through tradable cryptographic tokens? What do we and our clients need to know about the legal nature of tokenised ownership “instruments” and their fluid tradeability (via specialised digital trading exchanges)?
- How do we feel about equalisation of information and expertise about smarts contracts between our clients and ourselves, given our clients (the public) will have access to as much information about smart contracts, and how to structure & deploy them as our law firm does? Will our role with contracts change to a more collaborative one? Remember, the creators of these tools are not lawyers. They are tech heads on a mission to disrupt the conventional business status quo! They make these products to compete with traditional legal processes because they can, and the technology provides for this. Development teams open source their intellectual property (code) globally, to ensure infrastructural & product development perpetuity and innovation.
- What accredited further education opportunities (CPD’s) exist out there to assist us learn about the law and blockchain tecnology and the cryptocurrency ecosystem as a whole? This is such a paradigm shift and someone has to meet the questions head on!
To rein in this article, I will answer simplistically in plain english speak, the first and last of these questions.
smart contracts technology : a vending machine analogy and an employment contract example
Smart contracts technology can be compared to a simple vending machine transaction. Whereas you would typically go to a lawyer, pay their fee and wait to receive a legal document, agreement or such like, with a smart contract it’s different.
One simply “drops” a bitcoin or several ethereum and contract conditions such as payment amount, contract duration, and default conditions into the vending machine (i.e. a smart contract on a public ledger), and the output / product such as an escrow, tenancy agreement, employment contract, a verified driver’s license, a secure identity verification for a third party or whatever else, lands into the dispenser drawer.
In a simplistic fixed term employment contract scenario, where all the terms and conditions of employment are agreed to prior to “marking-up” or coding the details on the blockchain, here is the view of who does what.
- The employer will use a graphical user interface (GUI) blockchain editor and library to record the contract terms and conditions, in a smart contract. The smart contract itself is held on a private or public blockchain ledger together with the assigned quantum of cryptocurrency placed into an escrow “account”.
- The employer will assign a unique private key (string of code) for the smart contract to the employer.
- The employee will use their private key to unlock the smart contract and agree to the employment terms and conditions point by point (contract start and end date, salary amount, crypto currency for payment, salary payment cycle, role description etc).
- The employer then allows the smart contract to run, and over time the blockchain escrow account is debited, and the employers account is credited.
continuing professional development for lawyers
It would be well worth participating in formal training about Blockchain technology and it’s impacts for lawyers. Accredited continuing professional development (CPD) education programmes for legal professionals are being held now globally as sector demand for how to deal with the disruptive nature of the tech is trending high.
Locally within Perth (Western Australia), Emma Tobias and Julia Buchholz, founders of innovative tech education startup TecStack are leading from the front. They offer certified continuing education programmes for emerging technologies such as blockchain technology, artificial intelligence, automation, robotics and digital currencies. TecStack strives to provide education, research and advisory services to organisations and industries on the impacts and opportunities that will arise from these changes.
You can register for the *new* CPD course ‘Introduction to Blockchain for Lawyers’ here. It will be held on 28th May 2019, 5:30pm – 7:30pm, Perth.
further updates on blockchain technology and the law
Further updates will be available via my Medium channel as I will publish regularly on blockchain adoption within the legal profession, via ALTCOIN magazine. I plan to answer those questions that remain unanswered.
Kind regards
Sophie Amat
NEW TecStack CPD course “Introduction to Blockchain for Lawyers” : Register for this course by clicking HERE!
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