Our Principal Lawyer, Craig Doyle, recently attended a progressive legal conference in Singapore where he learned about blockchain.
Blockchain is a self-maintaining database that is used as an operating system for technological links. The blockchain structure forms a public ledger allowing verification and accuracy and it can act as a secure way to track the existence of verified and executed documents, a task important to lawyers. A blockchain is resistant to modification of the data and once data is recorded on the blockchain it cannot be altered without changing all subsequent records. It makes the data secure by design and is usually managed by a peer-to-peer network and can record transactions between two parties in a verifiable and permanent way.
There is a risk for lawyers that the benefits of blockchain may potentially reduce the cost and complexity of legal practice. An example of a blockchain is the existence of a “smart contract” which could automatically calculate the amount payable under the Contract and when payable. Further, the system could arrange for payments to be made by connection to a bank account. It means that a Contract for Sale of Land could be verified, exchanged and administered by a computer and the Contract would have certainty because it is verified against agreed data used in the blockchain data base. Potentially, a “smart contract” could be executed and enforced without the need for human/lawyer intervention.
Like all computer systems and data, there is a risk for tampering and interference by the use of security holes, spam or computer bugs and this could compromise the blockchain network. There was an example of this in 2016 when the cryptocurrency was attacked by use of such a mechanism. Another challenge to blockchain is that the relevant data can increase rapidly and exponentially and this requires a much larger database requiring velocity which can prove to be challenging.
Because blockchain crosses jurisdictional boundaries, it may pose several complex jurisdictional issues in relation to enforcement and administration of contracts. This can be controlled by use of a governing jurisdiction clause which has been common to contracts for many years. Other issues for consideration concern retention and storage of client privacy and the ownership of intellectual property.
The blockchain concept has existing flaws and issues which need to be overcome before reliability and certainty. No doubt, it will only be a matter of time before this will occur because we are living in a rapidly changing world.
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