In simple
layman terms, Block chain is a Technology which removes the middleman for any
kind of transaction and that includes financial.
The
financial world may be headed for a major change. As with any change to
society, there will be disputes, and good lawyers need to be ready.
“Everything
that can be invented has been invented” — these words are generally attributed
(perhaps erroneously) to Charles Duell, commissioner of the United
States Patent and Trademark Office from 1898 to 1901. As the story goes, Duell
said this just a few years before the invention of both the typewriter and the
telephone. The advent of either one would have been enough to prove the falsity
of his pronouncement.
When the
industrial revolution began in England and then the United States two centuries
ago, people in every walk of life in both of those countries and then the world
were angry (or, more likely, scared) at the daunting prospect of progress. As
the first caravan owners thousands of years ago learned once seafaring ships were
built, and as we’ve all learned every year since, as new industries arise, old
jobs are phased out.
Hopefully,
as Americans we can also recognize that as new industries arise there are new
opportunities. And as lawyers we can hopefully see how these new opportunities
allow us to serve our clients better. Today, a new industry has arisen known as
“block chain.” Many claim that the technology — a new type of decentralized
network — will replace the internet, offering a model in which fraud and lack
of integrity can be stamped out immediately.
Block
chain represents a major shift in information management, in a time some have
called the Information Age. In the past, to make a database, someone would
spend time crunching numbers on Microsoft Excel. Today, there’s an opportunity
to collaborate on what essentially is a secure, global spreadsheet shared by
multiple parties. One of the most promising examples of block chain technology
is Ethereum, and it contains some exceptional opportunities to disrupt the legal
industry.
Block
chains determine what is truthful by using a so-called “consensus mechanism”
effectively to compare each party’s statements immediately, alerting the
parties involved as soon as there is a discrepancy. As an example, imagine a
block chain being used for a legal case. The relevant legal texts would be fed
into this block chain so that particular laws could be cited and referenced.
The software could then identify if there is an incorrect statement by either
party in a brief or other filing. Companies are already using databases as
powerful tools for legal teams.
One such
example is Tim Hwang’s FiscalNote, where changes in legislature are
tracked in real-time and lobbyists are also alerted to changes in real-time.
The software supposedly can even predict the probability with which a certain
lawmaker might vote given past opinions from prior votes.
In law
perhaps no concept is more central to the role of the blockchain than what are
called “smart contracts.” These are agreements that are written in computer
code that automatically monitor the actions of the individuals involved, and
will immediately provide notice when a violation takes place, or when a
contractual obligation has been fulfilled. If provided adequate, accurate
information, these processes would be nearly instant, because a computer is
reviewing the actions, rather than a person.
This
would be equally beneficial for corporations and individuals. London-based law
firm Hogan Lovells has already begun to involve smart contracts in their practice.
An
example of how this could work would be a charitable donor or investor who
writes a check with a smart contract that provides, “I’d like to fund your
project and I’ll give you $10,000, but only if you have raised the $1 million
that it’s going to take to fund your entire project. Otherwise, the money
reverts back to me.” This allows people to turn contractual terms into
computer code and govern the way they are executed. In the code, the money
would automatically be returned without the need for making a claim if a
counter party did not fulfill the pre-conditions for non-reversible execution of
the wire.
Lawyers
are needed here (if not necessarily for the grunt work). A contract is only as
smart as the humans writing the code. Humans have not been made perfect here;
we will need lawyers to guide the code writers. And, of course, for trial
lawyers like us and our colleagues, there will be a role to play when
things go wrong.
Applications
of block chain technology offer great promise and potential that may give rise
to major upheaval in industries all over the world. The practice of law may be
one of the industries most primed to benefit from the immediate, anonymous,
verifiable, decentralized, and truly fair power of the block chain. And of course,
there will be disputes. As lawyers, we need to be ready.
Dubai is
planning to remove middlemen like lawyers, accountants, bankers, immigration
officers & govt. officials by year 2020 by adapting to block chain
technology. 😱
What will
governments look like 5 years from now? Today Dubai announced its plan to be
“The World’s first block chain powered government” with a plan to move 100% on
block chain by 2020:
# Arabian
Chain is moving all Dubai’s government paperwork onto the block chain, so it
doesn’t need lawyers and government departments for verification.
# ObjectTech
is providing digital passports and block chain security to Dubai International
airport to deliver seamless entry and exit from the country.
# The
Dubai Land Department has launched a block chain system to record all real
estate contracts and record all property-related transactions such as rental,
utility and telecom bills.
