In Blockchain we trust

adult-bitcoin-blockchain-1037914 (1)The first thing we do, let’s disintermediate all the lawyers.

 

Imagine a virtuous world where someone says they would do something and then actually did it. Blockchain promises to revolutionize the economy since the need for virtue simply disappears. Advocates claim that Blockchain immensely raises the level of trust in the system. Alternatively, one could argue that it removes the need for trust.

 

Presently, we are more of a trust but verify type of society. If you want to buy a car, you search for comparable vehicles, haggle for the best price and sign pages of legal documents. Banks have you sign reams of paperwork and generally place a security interest on the car. The Bank also confirms the car is free of any liens. You then generally pay on time for the next four years. If you miss a couple of payments, then the bank may have to launch some proceedings for collection.

 

Undoubtedly you have heard of Bitcoin somehow in conjunction with Blockchain. Let’s ignore the Bitcoin frenzy for now and focus on what drives it.

 

Blockchain comprises a continuously growing list of records called blocks. These blocks link together using cryptography that are resistant to data modification. So instead of a single ledger of transactions held by one organization, it creates an open distributed ledger that can record transactions between parties in a verifiable way. One earlier block cannot be altered without the consensus of later blocks.

 

Blockchains can be public or private. MasterCard’s Blockchain can’t be viewed and may not have any purpose outside of marketing since all of its transactions run through the existing infrastructure. This harkens back to the time when companies advertised they were Y2K compliant.

 

You clamber down the rabbit hole and you encounter smart contracts. The name again seems a bit of a misnomer since the contracts operate a simple logic of if this happens then that happens next.

 

Smart contracts use computer protocols intended to enforce the performance of a contract. They can be fully or partially self-executing. Once various conditions are fulfilled, assets are transferred and funds are released. This transaction appears visible to all users but all parties remain anonymous.

 

We can look to Ethereum as having one of the better systems for establishing these smart contracts. Ethereum uses its own cryptocurrency called Ether. In our car example the history of the car and the dealer’s transactions reside on the Blockchain which is public. You contact your bank which has instant access to your credit history. The bank can transfer funds immediately and the dealer can arrange for the vehicle transfer by the time you get back from your test drive.

 

So long as you continue to authorize payments to the bank, all remains well. If you decide to stop payments, then the car’s systems could be disabled the next time you try to start it. Welcome to the internet of things.

 

The Blockchain concept does have the potential to extend to all types of commercial transactions. House purchases could be reduced down to days from the existing weeks it presently takes. This would require a public ledger of real estate titles, planning permissions and certificates of title. Sweden’s land-ownership authority conducts Blockchain property transactions in various staged pilot projects. A three to six month transaction could take hours instead. All that extra efficiency must come out of some intermediary’s pocket.

 

The removal of intermediaries impacts large swathes of job categories.  Any sort of job category that involves creating trust in a transaction may no longer be required. The Association of Certified Fraud Examiners strongly claims that Blockchain is no mere hype train. This strong endorsement may have the effect of reducing the need for Certified Fraud Examiners by using Blockchain instead.

 

One paper suggested that insurance payouts could applied to Blockchain. They suggested that an automated system could indicate if an insured fell within an area that was recently flooded. Insurance payments would then be automatically issued.

 

Ultimately, Blockchain can be seen as a foundational change. Immense barriers remain for its adoption for businesses, government and individuals. The incorporation of Blockchain may take years.

 

However, a major function of lawyers includes the trust but verify aspect. As real estate transactions become more blockchainish, then the role of the lawyer would be substantially reduced.  This may finally drive the concept of hourly billing into a strict transactional fee type of relationship with clients.

 

Harvard Business Review goes so far as to say intermediaries such as lawyers, brokers and bankers may no longer be necessary. Not so much a ‘the first thing we do, let’s kill all the lawyers’ as ‘let’s disintermediate all the lawyers.’ This may not have the same emotive content, but the result would be same, lawyer wise.

 

From Lawyers Daily

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