Blockchain technology is foundation of cryptocurrency like bitcoin and lawyers advise clients on technology contracts, ICOs, smart contracts and crypto-assets based transactions. It is crucial for technology lawyers and blockchain attorneys to understand terms associated with blockchain law practice, including, blocks of data, cryptography, list of records, nodes, decentralised technology, immutable platform, and the like.
Companies focussed on developing blockchain based products usually operate on blockchain and cryptography based tools. Blockchain development companies or individual developers focus on cost-effective technology structures and web administrations to provide a seamless UI (user interface) and UX (user experience).
Blockchain is the main innovation behind bitcoin. The distributed data store is its core foundation. Any individual who takes an interest in the blockchain network has its data store that stores the entirety of the exchanges that at any point occurred on the system (this is otherwise called the dispersed ledger). Admissions are kept inside a cryptographic chain of blocks. At each stage, the network of members must concur about the most recent block of exchanges. The agreement is made through a procedure of majority agreement, removing all the duplicate sections, two-fold spending, and so forth. This procedure and the cryptographic layering of the blocks make the concurred blockchain irreversible and changeless. The ‘historical backdrop’ of occasions inside the blockchain can’t be adjusted by any of the members without the agreement by the majority from the group.
Blockchain is considered as a Distributed ledger technology (DLT) based on a peer-to-peer (P2P) topology, wherein on one side data, is stored worldwide on numerous servers and on the other, it gives access to an individual to see everyone else’s entry on the network, in real-time.
As far as smart contracts are concerned, there is no universally established and accepted definition of Smart Contracts. In use, a smart contract includes a dynamic set of coded instructions that self-perform when data is filled in in real-time and certain criteria are met. This contract functions as a standalone commercial agreement, with a traditional contract sitting alongside it, to attend to any problems that cannot be captured in the smart contract code.
The blockchain includes two types of elements, public and private. An originator is a the person who writes the software for the system in question. The peer or operating nodes illustrate the users of the system. Miners are peers that act as the verifier of transactions for creating and confirming the blocks. Also, blockchain operators ensure that the systems are operated in a decentralized way.
Lawyers and law firms can find multiple use cases or applications of blockchain in legal sector. Few of such applications can include:
Online Payment Mechanisms
Users can avail services of payment platforms line BitPay for using Bitcoin or other tokenized forms of cryptocurrency as a part of the payment method within the Smart Contracts. Such cryptocurrency payments can ensure that an effortless online communication persists with the client.
Efficient Assets Transfer
Crypto economics allow an individual to lock their assets and subsequently use the Blockchain mechanism to seamlessly transfer assets without any threat of embezzlement.
The smart contracts developed under Blockchain automatically release funds into a shareholder’s wallet upon the completion of a previously determined set of criteria. In use, changes are recorded on the ledger, and transactions are secure, and are more affordable for the users.
In certain jurisdictions like the USA, litigation funding can be made extensively easier through Blockchain, wherein investors could sign a smart contract placing their agreed-upon investment in the law firm’s funding account, and as per the outcome of the case, a part of the settlement or reward could be circulated into their wallet.
Online Dispute Resolution
By providing an online forum for mediation or arbitration, a more affordable process can be created, thereby ensuring an alternate dispute resolution network to build on crypto-economics. In specific jurisdictions like the USA, such forums can also provide inexpensive qualified jurors and efficient dispute resolution without any unnecessary third party interference or the participation of unqualified jurors.
There are certain challenges that are associated with blockchain, specifically the smart contracts. First and foremost challenge is to determine the appropriate jurisdiction, because the blockchain users are spread throughout the world with no central administrative body, thus raising the problem of identifying the correct origin of the smart contract transaction. Subsequently, in case of any dispute, the widespread functions of a user of Blockchain may attract different rights and obligations, thus making it necessary that the latter is properly set out in the contracts between different parties. Consequently, in case of enforcement, it may get even more difficult as foreign court judgments can be highly problematic.
What must be noted here is that these challenges can be easily avoided at the drafting stage of the Smart Contract. If the contract is drafted in such a manner that clearly identifies the jurisdiction, the rights of the user and the resolution mechanism to be utilized if any dispute arises, then the contract becomes effective without obstacles. This could include appointing a qualified arbitrator or an arbitration tribunal, which can resolve the dispute online and may also possess a digital key or security to the aid enforcement whenever required.