We’re demystifying another piece of modern tech: blockchain. Maybe you’ve heard of blockchain technology being used to create cryptocurrencies, such as Bitcoin. Maybe you have no idea what it is.
Today is the day to get blockchain explained and to look at the modern legal practice in a blockchain world.
What is blockchain?
Blockchain technology is a way of storing and sharing records. What makes it new and fascinating? It’s that each change to any record is tied in a chain to the information that came before. We can see sequentially every change to the record, like flipping back to the earlier pages of a book. It’s also that the updating process is reliable and more tamper-proof.
Here’s a super simplified picture of how it works:
We create a record, “Record27”. This record is kept on multiple machines so that there is no single copy of the record. We don’t have to trust anyone to keep a true master copy because each machine has the full Record27.
Someone wants to make a change to Record27, adding “NewStuff.” The various machines that have Record27 talk to each other to make the change. They have to verify that NewStuff should be added. If the update is verified, NewStuff is added to Record27 as a new “block”, and this new block is chained to the first block, the old Record27.
This way, anyone looking at any copy of Record27 later can see both the NewStuff block and the first Record27 block. They will also see when NewStuff was added.
The whole time, Record27 (each of its blocks) is encrypted to keep it safe from hacking.
Examples of blockchain technology in the legal industry
So, how can this clever new recordkeeping make waves in the legal industry? Here are three examples of blockchain technology in legal practice:
- Reliable recordkeeping
Long-term agreements that are renegotiated and updated can make for messy records. With blockchain technology, a full history of changes is kept in one place. This history means contract changes can be tracked more easily. With less open questions, future negotiations and updates are simpler.
- A move to trusty chatbots
One of the main reasons we don’t use chatbots to create agreements and update client records? Trust. We’re not sure that chatbots are error-free enough to use them.Blockchain technology may be what finally puts us at ease. Blockchain records offer a better ability to track a chatbot’s activity (and errors). They also give the bot more reliable information to work with. That clear, full history of changes to a long-term contract we just mentioned—a chatbot can draw on all of that trustworthy information, letting us trust the chatbot to answer questions reliably.
- Self-executing contracts (Smart contracts)
Blockchain lets us create a self-executing contract. One way a block can store information is to put an “if-then” clause that can lead to automated transactions.An example: two parties enter an agreement that one will transfer property if the other meets certain conditions. The blockchain record can be tied to a programmatic means of transferring the property. Once the blockchain record is updated to show that the conditions are met, the transfer can be automatically triggered.With the security and reliability of blockchain records, these simpler smart contracts may become our everyday contract.
Innovation and evolution will continue to happen so it’ll be exciting to see the use cases mature and develop. Our Cloud Machinery solution helps tackle how these new use cases can help your organization.