Attorneys should increase their familiarity with Bitcoin and blockchain technology.
Assisting in securely transferring assets constitutes a substantial percentage of the work performed by many attorneys. This form of asset management includes mortgage closings, sales of businesses, divorce cases and securities transactions. Attorneys have a professional and ethical duty to oversee that such transactions occur successfully. Because blockchain promises to provide such facility at volume, attorneys should become more knowledgeable about Bitcoin and the blockchain technology that makes it possible.
Some may argue that the odds are against Bitcoin gaining universal acceptance as an alternative currency. Bitcoin was embroiled in controversy in its early years with the Silk Road, and more recently, Alphabay, both dark markets that ended up being disbanded. However, it has become clearer over time that the technology is not to blame. Criminals tend to be among the first adopters of any successful technology. The internet is a great example. However, when the drama and mystique are pushed aside, what is Bitcoin really?
Bitcoin is based on the blockchain technology that allows a transparent and efficient transfer of an asset between two parties in a decentralized and cryptographically secure ledger. Blockchain is best thought of as a very innovative ledger that is distributed in a very secure manner that allows it to be “trustless.”
The blockchain technology records ownership of a particular asset such as a Bitcoin, and this information is transmitted across the entire ledger from the registered owner of the asset to the collection of parties in a network using an anonymous key. If there is any change in ownership of an asset by any member of the anonymous network it is recorded and broadcast across the entire network yet again, including the anonymous authorization key that is used to verify the legitimacy of the transfer. The risk of fraud and simple bookkeeping errors are drastically reduced because the entire record of the transactions is recorded by numerous parties across the network. Blockchain technology thus can be used to record medical records, educational records and business records in a decentralized way that blows wide open the accessibility, malleability and applicability of such information. This is especially true since because the information is no longer centralized, there is no single point of failure, that once struck, could bring the whole system down. One power outage, or hack, has disabled many a large hospital or company in the past.
Blockchain technology is thus a very relevant technology for attorneys due to the fact that, if it does become widely adopted, not only for its use with digital currencies like Bitcoin, but for its use with digital assets or digital asset protocols, it will reduce the need for many transactions that are currently very complex, and that take a lot of time, such as escrow accounts and title checks.
The fact is that many Fortune 500 companies are currently investigating as to how they will be able to utilize the blockchain technology in their operations. These companies include many large banks and utility companies. Banks for example are investigating how to do away with currency exchange fees that are incurred by exchanging one currency into a digital asset by utilizing a system called Ripple that automatically converts the house currency with the target currency in a matter of seconds saving banks potentially hundreds of millions of dollars a year.
Other cryptocurrencies such as Ethereum have already been developed and are currently being fine tuned to utilize them in corporate finance and other industries using “smart contracts.”
These newer cryptocurrencies are not intended for widespread use by consumers. Instead they were developed and were intended to be used by businesses to utilize to ensure that the recording of the ownership of an asset, or any transfers of ownership can proceed faster and at a lower cost. Some have called blockchain the future, as it is conceivable that as everything is moved on to blockchain, that such blockchains will act as the backbone for the Internet of Everything (IoE) as well as applications for artificial intelligence.
Attorneys that work in specialized areas of the law including securities law and litigation finance are likely to be among the first to become aware of blockchain technology in their practices. In fact, blockchain technology has just recently begun to be utilized to speed the process for clearing securities. Another potential use for blockchain technology would be in litigation finance where the companies could use it to create smart contracts that would allow them to become more efficient.
As we head toward the end of 2017, attorneys who haven’t already, should become more familiar with both Bitcoin and blockchain technology so that they will understand what a potential client is referring to. Clients have already begun contacting attorneys asking for more information on using a smart contract based on blockchain technology. Because blockchain is now moving from the innovation phase into the early adoption phase, those attorneys who understand blockchain now will be in the best position to be able to provide the clients much more complete legal services. As more services move on to the blockchain, including court and county records, knowledge acquisition on blockchain will likely become mandatory to maintain competence as a legal professional in various practice areas.
See you on the blockchain!
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