Blockchain, the emerging peer-to-peer distributed ledger technology, has continued to make recent headlines in the business and legal media. Blockchain underpins a new generation of disruptive transaction technologies, by promising trust for users and eliminating the need for intermediaries. Blockchain can also combine with “smart contracts”, or ways of embedding contract terms and functions in our digital or physical world.
We take a look at why these technologies are now capturing the attention of lawyers and what has been happening recently in the Australian legal market.
Why are blockchain and smart contracts getting lawyers’ attention?
Whilst still in the early stages of development, blockchain technology is an increasingly relevant innovation for lawyers. Lawyers will see development on a number of fronts:
- Clients are researching and deploying blockchain in their business operations. Lawyers need to understand the technology to continue providing relevant advice on existing laws and regulation.
- Some use cases for blockchain have the potential to transform whole areas of existing legal administration, processes or transactions. Law firms may need to re-position or adopt new strategies to prepare for this transformation.
- There will be ongoing debate and consultation on how laws and regulation may need to adapt to accommodate blockchain innovation.
Recent developments in the Australian legal market
Some Australian law firms have been amongst the first pioneers to embrace blockchain opportunities. Across the past few weeks, there have been a number of initiatives seen in the Australian legal market, for example:
- Allens has published a comprehensive report: Blockchain Reaction, looking at how blockchain is being used, with insight and views on how to navigate the regulatory and legal challenges. The authors at Allens predict that “distributed ledger technology will fundamentally reorder the mechanics of both financial and other transactions”.
- Gilbert + Tobin hosted a full-day workshop for the firm’s lawyers with Taylor Gerring, a co-founder and advisor to the Ethereum Foundation. Lawyers learnt about smart contracts, coding and the impact of decentralised platforms on their clients and the law.
- Lawyers at King Wood & Mallesons have published an open source “Digital and Analogue” (or “DnA”) smart contract architecture. This seeks to bridge a gap in smart contract development, recognising that only some contract functions (such as calculating or authorising payments) suit being reduced to digital code and automated. Other concepts (such as “good faith”) might be too complex or undesirable to code and therefore still benefit from human judgment. The proposed architecture includes a blueprint of how to make the “digital” and “analogue” work together in the context of an interest rate swap agreement.
- Hall & Wilcox recently participated in Westpac’s BlockHack 16, partnering with their client Westpac to explore commercial applications for blockchain technology.
What else has been happening?
Elsewhere in the Australian market, there have been a number of high profile announcements by companies exploring blockchain technology. For example, the ASX is building a new post-trade solution for the Australian equity market based on blockchain. Australia Post has also revealed that it is looking at how blockchain could be used in verifying identity and performing registry accreditation functions (such as verifying that a person holds a driving licence or has passed employment police checks) and has made a submission to the Victoria Electoral Commission on the use of blockchain for e-voting.
Thomson Reuters has been looking at blockchain on a number of fronts, participating in the Hyperledger project and announcing that it will be the first technology and media partner to join the R3 global banking blockchain consortium. Internationally, Thomson Reuters Labs in Cape Town has held a hackathon which explored creative blockchain solutions for land rights issues in Africa. Thomson Reuters is also partnering with the Ethereum Foundation to host a hackathon in London, focusing on the use of data in smart contracts and blockchain security.
Getting involved in blockchain
Whilst it might seem to many lawyers that the world of blockchain development is happening too quickly to keep up, this is still a very early stage technology. We finish this article with some ways for lawyers who are interested to learn more and get involved:
- There are some great online resources that explain, in simple terms, how blockchain, distributed ledgers and smart contracts work – for example, these from Thomson Reuters, IBM or the World Economic Forum.
- Lawyers can look out for blockchain professional networking events (some advertise via the Meetup or Eventbrite platforms).
- A number of forums and online communities (such as Reddit) and news sites (such as CoinDesk) are dedicated to exploring blockchain issues.
- Although currently the focus has been on financial services, blockchain innovation is relevant to other legal disciplines. For example, corporate lawyers may want to follow what happens next with the Delaware Blockchain Initiative; IP lawyers may be interested in blockchain-based efforts to reduce piracy and secure digital rights and real estate lawyers will be interested in the emerging use of blockchain in land registries, such as in Sweden.