Blockchain has turned into somewhat of a buzzword, with the term being thrown around often. Within every corner of the internet, you’ll undoubtedly run into terms like “cryptocurrency” or “NFTs”. But what do these terms really mean and how will they ultimately affect the legal industry? Let’s go back to the basics — what is blockchain, and all things interrelated?
Blockchain refers to a system that is able to securely store and record information and transactions in a database, which is then able to be replicated and circulated widely. It is otherwise known as “distributed ledger technology.” Such technology can be made either public or private, depending on the needs and requirements of the ledger and those utilising it. It also records all possible transactions across a peer-to-peer network and acts as the overarching technology that enables the functioning of mechanisms like cryptocurrency.
By utilising the blockchain network, transactions are confirmed and recorded without the need for an overriding central clearing authority. The secure, digital storage of information means that a wide range of industries can leverage and make use of this innovation. The utilisation of blockchain varies and includes (among other things) allowing individuals to transfer funds internationally, settling trades, supply chain logistics, voting and more.
We see the growing global adoption of blockchain across a wide range of industries, with societies all over the world taking active steps to increase their knowledge and understanding of this powerful innovative technology. Blockchain truly will change the world, and influential institutions like governments and banks are already noticing this. Regulations in various jurisdictions, including Australia, are gradually being developed around the implementation of blockchain and its consequential impacts. As a community, we should see reasonable regulation as a positive step towards eventual expansion and adoption of blockchain within our society.
Cryptocurrency, or “crypto” is another major disruptor to the digital payment’s world. Cryptocurrency is a form of digital or virtual currency that is essentially secured by way of cryptography. This makes it nearly impossible to duplicate or counterfeit, as it is based on a decentralized blockchain network. It is a digital asset relying on a decentralized structure, in turn allowing for independent existence away from central authorities or entities like governments, who often seek to control and regulate currency.
Cryptocurrency has a reputation as a disruptor, with Bitcoin (BTC) long being known as the first of its kind. There are various pros and cons to the usage of cryptocurrencies, some of which include the following:
Non-fungible tokens, or NFTs, are units of digital data stored on the blockchain. However, NFTs are quite different to cryptocurrencies, which are transposable and fungible. NFTs are unique in this respect, as they are not interchangeable.
NFTs essentially “live” on the blockchain, whereby it provides verifiable proof of ownership, given that the blockchain tracks and records every movement. NFTs have grown in popularity with large, supportive communities backing them. Connection is fundamental to success in this niche and the NFT community has done quite well in bringing the hype, creating for some pretty ludicrous sale prices, like when Beeple sold ‘HUMAN ONE’ for $28.9 million.
NFT pros reject all claims that the growth of this sector is simply a gimmick or will eventually die a slow death. Corporates on the other hand are struggling to understand the real-life connection and the impact NFTs can have. As the industry develops, it will surely be made clear that NFTs are in fact here to stay, with global institutions simply forced to catch up.
Blockchain technology has the capability to disrupt many industries, including the legal industry. It is already expected that this technology is set to become as revolutionary as the internet. For centuries, the legal industry has been resistant to change, rather embracing archaic practices and quickly dismissing any sign of transformation.
As more and more businesses implement blockchain into their system, the greater the need for lawyers to understand the workings around it and the issues that may arise. Blockchain technology is expected to change how law firms typically serve clients, as well as how they are run overall.
The utilisation of blockchain carries with it many benefits, including immutably storing legal agreements, smart contracts, automated contract management and reducing the overall time spent preparing. The transparent nature of blockchain also creates a seamless, predictable environment for all parties involved in a transaction, allowing for all to better understand the deal they’re entering in to.
At present, blockchain is being leveraged by changemakers in the legal industry in various ways, including the following:
Blockchain technology is making headlines, with those leveraging the technology quickly becoming leaders in their field. The global market moves quickly and with blockchain, the developments are endless.
Christine Bulos is a solicitor at Allied Legal.
