Whether law firms are prepared or not, blockchain technology is veering its way through the modern legal field.
By liberating users of privacy concerns, extra fees and further paperwork, blockchain is going to be relied upon as its adoption becomes more accepted.
This change has already heightened the externalities of larger firms with higher budgets to hire experts that can relieve potential fears surrounding this technology. As blockchain progresses, it will become extremely important for firms of all sizes. Some expect that medium-sized firms will begin to work with separate larger firms to piggyback off their operations and collaborate together, a revolutionary idea for lawyers. The ideal way to work with change is to embrace it, and accepting blockchain may be the next best thing in legal tech.
How does blockchain work?
Blockchain is an anonymous public transaction. It begins with one user requesting a transaction from the other user or users. The requests are channeled through a peer-to-peer network that is then transferred to each involved computer, or node. Once the individual computers have received the requests, they validate via an algorithm. The approved transactions are noted as “blocks,” which are each added to the public ledger that is then created into a chain. The transactions are then finalized and permanent.
While the public can see the item that has changed hands and how much it is worth, the users are kept anonymous. While this may seem slightly dangerous in theory, there are many situations where anonymity is crucial for the parties involved. This can include an important document changing hands from lawyer to client, or a Bitcoin transfer from client to lawyer.
Using Blockchain Technology
Blockchain use encompasses all types of value exchange, working with everything from strengthened security against hackers and malware to banking and payments with Bitcoin. Bitcoin is a form of blockchain technology with balances kept with public and private keys. A public key similar to a bank account number, whereas the private key is like an ATM PIN. As blockchain technology gains momentum, it may be more expected that legal firms accept Bitcoin transfers as a form of payment. With more adoption of blockchain, it will be easier to use Bitcoin transmissions to relieve lawyers of complex transactions like escrow accounts.
For law firms, blockchain can heavily benefit exchanges of important documents through smart contracts. Smart contracts are self-performing contracts that the two parties encode in blockchain. With the agreements accessible to involved parties, the participants can exchange money, property or anything else of value. Smart contracts remove the previous necessity for escrow agents and notaries.
“Many businesses lack current familiarity with such technology, [but] we anticipate that smart contracts will be utilized with greater frequency going forward,” says Todd Kartchner, an attorney at Fennemore Craig, P.C. in Arizona. “Although blockchains have challenges of their own, they are often faster, cheaper and more secure than traditional transactional mechanisms.”
Moving forward with blockchain technology, lawyers are still going to be necessary. Though there is a slight shift away from lawyers as modern technology advances, in-house legal teams will benefit greatly from blockchain technology. There has been a rise in legal operations for larger clients, and lawyers will continue to be necessary in digesting documents and information for their clients.
It remains important for lawyers to keep their minds open to modern technology. To make a positive impact on the legal industry, lawyers need to engage in arising advances. Blockchain should not be left out.