immutability

Blockchain and the Law: Opportunity comes for those who are prepared.

Blockchain and the Law: Opportunity comes for those who are prepared

by Ashwin Gupta

In 2014 I remember agonizing over investing in bitcoin or trying my luck in the stock market. I invested in the stock market because, at the time, traditional wisdom dictated that it was a “bubble” and I was unprepared to learn the mechanics.  To offer some perspective, bitcoin was valued at $770 US in 2014, and its current price is over $29 000. Over the years, I watched some of my peers enriched as bitcoin increased in value exponentially. This choice taught me the value of being prepared in an evolving digital future (and that traditional wisdom can be unreliable).

The legal profession has historically resisted digital implementation.[1][2] But as the legal system is forced to adopt a digital future by the pandemic[3] and technological advances,[4] professionals who are prepared for these changes will have the most opportunity to set the standards for this adoption. The standards set this juncture will impact countless aspects of the legal system like access to justice and legal procedure. As an incoming law school graduate, my interest is no longer merely financial. I see opportunities in improving our legal system through this adoption —assuming I’m prepared.

Preparation

In ushering in the digital future, it’s imperative that legal professionals familiarize themselves with digital tools. I foresee three tools that will drive changes in the legal system:  1. Blockchain 2. Artificial intelligence and 3. Software development. Since this blog isn’t going down anytime soon, I predict that in 20 years or less some level of familiarity will be required with each of these tools for lawyers. At least, in the same way that lawyers are expected to be familiar with the interface of E-mail, but most do not understand what an e-mail provider like Gmail does behind the scenes to keep it all running. I’ll explain why I think so with regards to Blockchain, and I’ll justify my prediction for AI and Software development in the comments to keep the post short.

Blockchain

A blockchain is a distributed database that is shared among the nodes of a computer network.[5] Nodes could refer to multiple systems across the world or a localized system depending on the structure. But essentially, it’s a digital cloud without a centralized storage. The main advantages of having a blockchain to store data is that its immutable and transparent meaning that no one can tamper with the data without leaving a trail and verifying their right to access. Since the data is stored on nodes instead of a centralized system, it’s secured from cyber-attacks. Decentralized security has become an invaluable feature due to a recent increase in cyberattacks.[6] Blockchain could have countless applications to the law, which takes advantage of these features. A few obvious applications which come to mind are: blockchain land title registration, smart contract storage, tokenization, and chain of custody tracking.

Land title registration is a fitting use for blockchain. Currently a property lawyer is tasked with sourcing and verifying all the transfers of title leading up to a novel transfer to verify the integrity of the novel property (liens, covenants, easements, fraudulent transfers etc.). A blockchain storage utilized by the Land Title Office would be able to build those requirements into the system, eliminating needs for lawyers to go through the verification entirely. Although there are significant challenges here, like labor required to digitize those documents in a manner appropriate. If done correctly, this would significantly decrease legal costs for property buyers.

Smart contracts automate the execution of an agreement when all predetermined conditions are met, so that all parties can be certain of the outcome without any intermediary’s involvement or time loss. A corollary to the utility of smart contracts is e-signing. Ethereum currently runs a e-signing feature that costs less than that of DocuSign, and the signatures are independent of the contract being signed which guarantees that all parties receive and sign the same document regardless of timeframe.[7] The smart contract feature has tremendous utility in supply chain, as orders require all parties to be on the same page and typically hinge on conditions that can be predefined for a smart contract purpose. Blockchain based contracts have baked in compliance and there’s no room for misinterpretation. Use of smart contracts reduces legal disputes with vendors, freeing up legal resources for other matters. Use of e-signing reduces costs and frees up time for lawyers and their clients. [8]

Tokenization is fascinating and has the potential to change the landscape of property rights. It allows us to take real world or digital products and place their rights in a digital token. These tokens are traded via smart contracts and are stored on the blockchain. This allows token holders to liquidate and invest in segments of assets otherwise indivisible such as artifacts, artworks, collectables like bottles of wine and many others. This includes many other real and digital world products in the investing market.[9] For perspective, the court could’ve tokenized and divided that infamous Popov v Hayashi[10] game ball instead of forcing a sale. These tokens are already being used for a wide variety of purposes and I’d suggest property lawyers should get very comfortable with how these Non-Fungible Tokens (NFTs) work. [11]

These are just some of the obvious use cases of blockchain in law, but it’s my logical inference that integration and day to day use of these utilities will require local legal professionals (judges too) with some level of blockchain based education. Osgoode hall has a certificate program intended for lawyers called “Blockchain Law”, University of Windsor & UofT offer blockchain courses, and most critically University of Ottawa has a blockchain legal lab (with a twitter account). Passionate students that make good use of these opportunities will be prepared to seize any blockchain opportunities throughout their careers and could help shape a transforming legal system.

Citations

  1. “Impeding Technology – Legal Culture and Technological Resistance” (2020), online: https://theitcountreyjustice.wordpress.com/2020/06/28/impeding-technology-legal-culture-and-technological-resistance/
  2. Ben Mears “Legal Innovation: 5 Experts Predict Future Challenges and Opportunities” (2020), online: https://www.collectivecampus.io/blog/legal-innovation-5-experts-predict-future-challenges-and-opportunities
  3. Clive Rich The Future of Law: Rise of the Digital Lawyer (2021), online: https://www.law.com/international-edition/2021/05/27/the-future-of-law-rise-of-the-digital-lawyer/?slreturn=20211019231524
  4. Vivek Wadhwa, “Laws and Ethics Can’t Keep Pace with Technology” (2014), online: https://www.technologyreview.com/2014/04/15/172377/laws-and-ethics-cant-keep-pace-with-technology/
  5. Luke Conway, “Blockchain Explained” (2021) online: https://www.investopedia.com/terms/b/blockchain.asp
  6. Mirdula Shan, “Blockchain & Healthcare: How CyberSecurity Saves Lives” (2021), online: https://harvardtechnologyreview.com/2021/08/23/blockchain-healthcare-how-cybersecurity-saves-lives/
  7. “Blockchain in the Legal Industry”, online: https://consensys.net/blockchain-use-cases/law/
  8. “What are Smart Contracts on Blockchain”, online: https://www.ibm.com/topics/smart-contracts#:~:text=Smart%20contracts%20are%20simply%20programs,intermediary’s%20involvement%20or%20time%20loss.
  9. Riddle & Cole “TOKENIZATION 101: HOW TOKENIZATION OF PHYSICAL ASSETS ENABLES THE ECONOMY OF EVERYTHING”, online https://www.riddleandcode.com/tokenization-101
  10. https://www.lexisnexis.com/community/casebrief/p/casebrief-popov-v-hayashi

12.Supra note 9.

[1] “Impeding Technology – Legal Culture and Technological Resistance” (2020), online:  https://theitcountreyjustice.wordpress.com/2020/06/28/impeding-technology-legal-culture-and-technological-resistance/

[2]Ben Mears “Legal Innovation: 5 Experts Predict Future Challenges and Opportunities” (2020), online: https://www.collectivecampus.io/blog/legal-innovation-5-experts-predict-future-challenges-and-opportunities

[3] Clive Rich The Future of Law: Rise of the Digital Lawyer (2021), online: https://www.law.com/international-edition/2021/05/27/the-future-of-law-rise-of-the-digital-lawyer/?slreturn=20211019231524

[4] Vivek Wadhwa, “Laws and Ethics Can’t Keep Pace with Technology” (2014), online: https://www.technologyreview.com/2014/04/15/172377/laws-and-ethics-cant-keep-pace-with-technology/

[5] Luke Conway, “Blockchain Explained” (2021) online: https://www.investopedia.com/terms/b/blockchain.asp

[6] Mirdula Shan, “Blockchain & Healthcare: How CyberSecurity Saves Lives” (2021), online: https://harvardtechnologyreview.com/2021/08/23/blockchain-healthcare-how-cybersecurity-saves-lives/

[7] “Blockchain in the Legal Industry”, online: https://consensys.net/blockchain-use-cases/law/

[8] “What are Smart Contracts on Blockchain”, online: https://www.ibm.com/topics/smart-contracts#:~:text=Smart%20contracts%20are%20simply%20programs,intermediary’s%20involvement%20or%20time%20loss.

[9] Riddle & Cole “TOKENIZATION 101: HOW TOKENIZATION OF PHYSICAL ASSETS ENABLES THE ECONOMY OF EVERYTHING”, online https://www.riddleandcode.com/tokenization-101

[10] https://www.lexisnexis.com/community/casebrief/p/casebrief-popov-v-hayashi

[11] Supra note 9.