Blockchain is being touted as the next big emerging technology. Some hope that it might revolutionize how we transact, in the same way that the Internet revolutionized digital innovation.
As with any new technology there is often a lot of hype, confusion, and misinformation. Terms like "bitcoin," "cryptocurrency," and "blockchain" have escaped from their geeky roots, and are now starting to penetrate mainstream media. So, what exactly is blockchain and how will it affect the legal industry in 2018 and beyond?
What is blockchain?
The blockchain technology, at its core, is simply a database, which offers a method to store transactions performed on the network onto a trust-less digital ledger. It's useful for all sorts of transactions that can be further programmed to keep track of financial transactions, as well as, anything that holds a value.
There are two common applications of the technology that are worth understanding: smart contracts and cryptocurrencies.
Smart Contracts: A smart contract is a digital agreement that is self-executing and self-enforcing. They can run programs that allow the contract to execute when certain conditions are met.
Like the blockchain technology itself, smart contracts are at an early stage of development. They can theoretically be used to automate business logic, or fully encode complex commercial contracts. The latter is the more challenging, and the one likely the furthest away from real world implementation.
Cryptocurrencies: A cryptocurrency is a digital currency stored in the blockchain, which uses encryption techniques to generate units and verify transfer, operating independently of a central bank.
You have undoubtedly heard of Bitcoin, the currency that was the genesis of blockchain technology. Since then hundreds of other cryptocurrencies have emerged.
The technology was initially designed to power the digital currency, Bitcoin; however, it has since grown to offer a number of additional benefits. Blockchain has the potential to make processes more secure, transparent, efficient, and democratic - disrupting multiple industries in its wake.
How will blockchain affect the legal industry?
The legal technology industry is still in its infancy of exploring viable solutions that utilize the blockchain technology. Though it isn't widely accepted, there are some proof-of-concepts being explored by lawyers and law firms alike.
Smart contracts could become a useful tool for the smart lawyer. With it, firms can offer a more efficient service at a reduced cost. The future might see the lawyer's role shift from drafting mindlessly, to becoming a strategic adviser to clients. The question is whether attorneys will want to exercise creative freedom.
For legal professionals, the important point is to be aware of some of these possibilities and the impact they might have. Although your firm may not be implementing this technology (yet!), your clients are likely to be seeking guidance and support on how this technology might affect their businesses and policies.
What can you expect to see from blockchain technology in 2018?
This year could be the year where the technology's potential value might start being tested. Businesses might start looking at the advantages of the blockchain platform compared with other more conventional business models.
Blockchain will head towards a mission rather than just a process of exploration. Expect a number of applications introduced in blockchain technology, perhaps some that graduate from being just proofs of concept.