Are you a lawyer who is wondering how blockchain and cryptocurrencies may lead to career disruption?
Blockchain law is developing with the technology, and it has the potential spill over into many different aspects of life and therefore of law. It’s important that lawyers stay up-to-date on the topic, especially in the context of their chosen focus.
Here’s an overview of blockchain technology and how it can affect those responsible for making legal decisions.
What is Blockchain?
Blockchain is a referral to a specific type of language or ledger system that holds sets of time-stamped records. It describes the technology behind cryptocurrencies like Bitcoin. These “blocks” of information are static and as such create a permanent digital record of the movement of assets and other worldly goods.
All of these records are encrypted and connected to a network, resulting in a real-time record of every transaction that takes place. Each chunk of information is linked to another in such a way that all of the information is publicly available, and it’s this element of transparency that is part of what makes it so effective and popular.
Blockchain comes in different forms and can be public, private or hybrid. Bitcoin is the most popular but is just a single example of many types of formats. The technology is not only being used as a form of currency, however — it’s also a means of tracking track various types of assets as they move around the world.
Lawyers should be aware that they will be dealing with not only the tech sector but may likely be involved in disputes in a range of industries including music, real estate, finance, and healthcare.
What Makes Blockchain Unhackable?
Transactions completed using this type of technology, and cryptocurrency like bitcoin are highly secure and impossible to hack. This means that transaction records have a high level of integrity and can’t be altered or deleted — at least not at this point in time.
The systems that are built out of this technology (e.g., cryptocurrency) have been hacked, but the actual chain is secure. The ledger that makes up the “chain” is actually stored in different computers and is at different places at one time, where chunks of information can be added at any node.
Data is also difficult to penetrate because it is hashed (shortened) and this is what is stored in a given set or block. This set of data is encrypted and stored in the blockchain. Hashed data can’t actually be decrypted — so the underlying detailed data remains secure. This means that, even if someone tries to hack the system, what they’ll end up with is the hashed data, not the actual data. In addition, there is redundancy created due to with the network of computers.
The ledger also is basically operated by consensus rather than being a private record that can be altered (for instance, financial records in a single bank). Because it’s impossible to hack, blockchain represents an extremely private and authentic method of storing data.
Title & Authentication
When it comes to blockchain technology in particular, lawyers should be aware of specific issues that go beyond criminal law cases involving ransomware, for instance. Bitcoin can also extend into any financial manner including divorces and hacking disputes.
Some ways that it is beneficial to these cases are to do with proof of title and authenticity. Blockchain will have clear information in it to do with property, for instance, thus limiting the potential for false or misleading information to do with shared property or the transfer of property rights. But at the same time, it’s important to note that lawyers will have to understand how to document further transactions in the same way.
Blockchain can also prove that property is authentic for instance in the case of trading or dealing of antiques and art — there will be data included in the original transaction that will provide proof of originality. This is one of many examples where it can be used to prevent fraudulent transactions of property. This can be extended to chain of custody and ownership issues on pretty much any level.
Blockchain Technology Applications
Where will we start to see this technology more frequently? Here are just a few examples of how various sectors will be incorporating blockchain technology.
Energy– We’ll likely be seeing more and more incorporation of this type of technology as it applies to transactions related to energy grid exchanges.
Finance– Fintech is a key area that will sustain this emerging technology including e-commerce payment processing and other technical platforms that require a high level of security. It will also come to light in bigger trade transactions and other exchanges that involve high-level asset exchanges.
Health– In its capacity to improve security and reduce fraud, there are a number of viable applications in the healthcare field. Blockchain is an extremely viable option for managing and transferring highly confidential data such as patient records. It also will likely be applied to the sharing and security of medical research innovations.
Arts– Particularly in the music business, blockchain may take over as the leading technology protecting intellectual property rights. And in the case of art dealing and trading, it may serve to prove the authenticity of works.
Real Estate– Blockchain has the potential to reduce errors, paperwork, and outright fraud that currently weigh down matters to do with real estate in the public and private sectors. For instance, programs are already being developed with the intention of recording and transferring property deeds.
Blockchain are read-only databases so that they are confirmed by public consensus — in other words; they are firm records and facts so to this end they are basically indisputable. A part of the reason why they are so indisputable is that they are associated with crypto-contracts or smart contracts.
Smart contracts are computerized contracts that essentially track the movement of digital assets. These contracts contain rules and penalties — they are just like regular contracts except that because they are integrated into the blockchain system, they have the capacity to “enforce” certain penalties.
These can be complex and can be applied to various fields. Lawyers need to be aware that their scope of knowledge will undoubtedly need to include smart contracts and how they work.
Though smart contracts can’t prevent disputes all together, they can help to guide lawyers towards the correct and just decisions about specific transactions.
Originally published at www.datadriveninvestor.com on August 17, 2018.
An Introductory Guide for Lawyers on Blockchain Technology, Cryptocurrencies, and Smart Contracts was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.