For the last few years now, blockchain technology has continuously disrupted the way companies do business, especially in the financial industry. More than just the foundation for cryptocurrency investments, however, blockchain technology has completely innovated everyday processes and the supply chain efficiency of businesses in nearly every industry.One such industry where blockchain and the distributed ledger is starting to make an impact is in legal services. New disruptive technologies are beginning to transform the way legal departments and law firms handle their business processes, and blockchain is becoming the new standard in contract management, efficiency, and uniformity.
Blockchain Disruption in Legal Fields
Blockchain technology, introduced at the inception of digital currencies and mining protocols, enables transaction records to be kept on a digital ledger shared with everyone on a secure network. Due to the efficient and reliable manner that blockchains are processed, this new technology has opened the door for legal companies to create contracts, verify important legal documents, and record commercial transactions seamlessly. Better tools and automation introduced by blockchain technology can help lawyers reduce the time spent on redundant administrative task so they can focus on developing relationships with their clients.
Smart Contract Design
Standard legal contracts are manually generated and require physical signatures, original documentation, and notaries. Blockchain has introduced new digital processes called "smart contracts" that require less lawyer involvement and can allow contracts to managed directly through both relevant parties. Already advanced tools and templates allow lawyers and legal department professionals to generate and digitally distributed contracted documents. The blockchain then stores signatures and through a variety of predefined triggers can efficiently exchange funds, property ownership, shares, or anything else that a standard contract would allow.
Using DLT (Distributed Ledger Technology)
DLT, or Distributed Ledger Technology, is a broad term that's used to describe the methods used to distribute ledgers on networks or computers. Blockchain technology is known as a public DLT which allows anyone to interact with a system of transactions. However, DLT networks can be configured to be used in private settings that can be regulated by a developer, or in relevant cases, a legal third party. Private DLT networks allow lawyers to have transparency between ledgers stored in the blockchain and mediate any agreements or transactions that occur. The symbiotic relationship between smart contracts and DLT gives legal teams access to a number of applications that can be incorporated to streamline their practice.
Potential Implications Ahead
Much like any newer technology, however, the future isn't always clear when it comes to long-term sustainability. Smart contracts are still far from perfect and can be prone to inadequate coding and transactional errors. While the implementation of self-executing documents may be convenient, inadequacies in data management and processing can create a number of issues that cause this automation to fail. Due to the binding nature of these legal agreements, human intervention still plays a vital role in the overall efficiency of DLT and how it's used in the legal industry. Regardless, as blockchain continues to develop, it will continue to allow lawyers the ability to focus on more complex agreements while automating many administrative redundancies.
The marriage of fintech and law continues to look promising even in its early stages. As technology continues to develop, legal departments can look forward to the high efficiency and security that blockchain technology and smart contracts will provide.