The legal industry is transforming before our eyes. New technologies and workplace models are reshaping small law firms’ operations. In this five-part series, we’ll analyze the top 5 trends affecting the legal industry in 2022. This week: the blockchain.
This series has so far focused on popular trends that have already permeated the sector: legal workflow automation, data security and hybrid working. But the benefits of blockchain, which is most commonly associated with cryptocurrency, may not be readily apparent in the legal profession.
How does the blockchain work — and how could it specifically reshape the legal industry?
What is the blockchain?
A blockchain is a shared, transparent and unchangeable ledger that records transactions and tracks assets.
Think of it as a decentralized database of blocks within a network. Each individual block contains cryptographic information about the timing, order and content of transactions that have taken place on the network. The blocks all connect in a chain (leading to the term “blockchain”), fitting together like a jigsaw puzzle, providing a foolproof, tamper-proof transaction record.
How the blockchain benefits the legal industry
The blockchain boasts three primary benefits to law firms: trustworthiness, decentralization and transparency.
Altering the information on a blockchain is impossible, so it’s completely trustworthy. Your firm can trust the information you (or your clients) store on the blockchain has not been modified in any way, shape or form.
The decentralized nature of blockchain allows firms to sidestep the typical vulnerabilities of a single, centralized system. There’s no single central entity for would-be hackers to attack, increasing your data security.
And because any member of the network can see which transactions other members have made, transparency is instantly boosted. For example, the blockchain provides a far easier route to establishing property rights, clearly showing exactly who purchased which land titles and when.
Specific use cases
Blockchain is poised to make a splash in the legal community, but it’s a long way from popularization. While 70% of law firms surveyed in a 2017 PwC say they would use blockchain-supported smart contracts for transactional legal services, 41% for transactional legal services and 31% for providing high-value legal services, none of the firms currently employed the technology.
Let’s break down a few specific ways blockchain could provide firms value.
Contracts are a crucial — and time-consuming — part of running a firm; some attorneys manually review up to 700 documents per day manually. This is clearly unsustainable.
Smart contracts offer a future-proof approach to contracting that relies on automation, not manual effort. “Contracts” are written in code and can be automatically executed between parties using “if-then conditions,” without human intervention.
Smart contracts allow firms to easily create and automatically enact contracts on their clients’ behalf. Best of all, these contracts can’t be tampered with. Once both parties sign off, smart contracts are baked into an automated protocol.
Intellectual Property (IP)
Blockchains provide a public, 100% trustworthy record of copyright/IP ownership. IP owners can even use smart contracts to earn royalties whenever someone uses their creations/inventions.
Imagine an artist sells a digital asset, such as a non-fungible token (NFT). Not only does the blockchain provide irrefutable proof they were the original creator, but smart contracts also can be applied to resale royalties whenever the NFT exchanges hands in the future.
Blockchain-based IP protection can even help prevent piracy. According to DAI, “When the IP work is registered and verified using blockchain-based platforms, authors can search across a whole host of different sources simultaneously to ascertain who is using their work. This enables IP owners to identify and stop infringements and makes it easier to license their IP works.”
Chain of Custody
Firms go to great lengths to produce paper trails that prove the chain of custody for evidence. Courts won’t accept evidence without such proof — there is reasonable doubt it could have been tampered with at some stage.
But blockchain provides watertight proof over the custody of critical documents. Evidence is stored in secure environments where it can’t be modified or lost, and only the right parties can access it at any time.
One for the future
There’s still a long way before the blockchain transforms the legal sector. However, it’s certainly a trend that’s worth keeping an eye on throughout 2022 and beyond. Get ahead of the competition today by familiarizing yourself with tomorrow’s technology.
In the final installment of this five-part legal industry trends series, we’ll analyze employee retention.