Blockchain And the Legal System


“These technologies can change the meaning of law, how it is created and enforced. Lawyers should be part of the innovation so that the innovation still upholds society’s core values and the rule of law.” –Krzysztof Wojdylo, Head of New Technologies, Wardynski & Partners.


Legal systems are usually cautious about adopting new technologies, because of financial and legal risks. The legal industry, one of the world’s oldest, still depends on paper workflows and manual methods. This presents many opportunities and practical utility for blockchain technology. 


Our societies are evolving with digitalization. Technology has improved the quality of living, with mind-blowing innovations in every industry. Corporate and individual interactions, the transmission of information, and the speed of transactions are at an all-time high. 


It also means that traditional dispute methods may no longer be sustainable in conflict resolutions. Laws, policies, and legal bindings and execution also have to be at par with this rapid technological growth. 


Because “innovation precedes regulation”, it puts pressure on the legal systems to be more precise and efficient in their administration. This presents new opportunities for blockchain use in law.  


Benefits of the blockchain in the legal industry

The blockchain has unique properties that can solve many complex and recurring problems in legal systems. A survey by PwC shows that 70% of law firms will incorporate blockchain in their legal services, and for business support given the chance. 


Here are some benefits of the blockchain for the legal industry:

  1. Transparency

Blockchain uses distributed ledger technology, which allows parties to access a shared ledger. The International Finance Corporation calls it a “tamper-evident and tamper-resistant digital ledger in a distributed form.” Distributed ledgers share and update transactions in real-time using independent computers, called nodes. 


From any location, a node can record, propose, and validate a transaction. The details of the transaction are synchronized across the network and can be seen on a shared ledger by all parties involved. It does not require any centralization, it eliminates ambiguity and enforces compliance. 


  1. Accessibility

Blockchain is a decentralized technology and can be used to store legal documents. One of the properties of blockchain is immutability, and documents can be stored and retrieved without alteration. 


Legal documents can be stored long-term, and retrieved; smart contracts and scripted texts can also help in reducing the cost of personalizing, processing, and maintaining legal documents.


  1. Automation

Administrative functions make up a bulk of legal tasks. The Legal Trends Report by Clio shows that it sums up to about 48%. With blockchain technology, lawyers can employ repositories and smart contracts for legal agreements, and automate administrative tasks—especially non-billable tasks. Automation in legal processes speeds up legal proceedings and improves trust between clients and legal officers. 


  1. Efficiency

Because many legal processes are manual and paper-based, it is prone to error, and accuracy may be questionable. Because of how sensitive and highly regulated law as a field is, legal errors are usually very costly, to individuals, businesses, and even law firms. Blockchain can optimize legal processes, and streamline complex processes – all without affecting judicial authority.


  1. Data Integrity

Legal documents, like court evidence, are targets of hackers and manipulators, due to the information they carry. Blockchain allows for the decentralized storage of data. If documents or evidence are altered, their hatch value will not tally, exposing such manipulations. Blockchain offers better security for data and better retrieval in cases of disaster. 


Applying blockchain technology in legal systems

Several companies and countries have started exploring several real-life uses of blockchain. Georgia, for example, has started experimenting with blockchain for land title registration and as proof of ownership. 


Other ways the blockchain may be applied in legal practice include


  1. Smart Contracts for Electronic Signatures

Most legal contracts are still signed with physical signatures. Blockchain-based electronic signatures can save time on signature verification, reduce human error, improve efficiency, and reduce the cost of legal services. 


Although e-signature platforms already exist online, blockchain offers comparative advantages. It is cheaper to sign a smart contract with blockchain, e-signatures stored on the blockchain can be stored independent of the object to be signed, and it allows parallel signing. 


It is also easier to access on the blockchain versus regular e-signature platforms. Smart contract signing binds the parties involved to the terms of the agreement and is an immutable proof of agreement. 


  1. Intellectual Property Rights

Registering a trademark is a long process, which involves many stages and complex legal procedures. The United States Patent and Trademark Offfice (USPTO) takes 12 to 18 months to register one patent. The processes are rigorous, and a recurring problem is to prove the first person to come up with a patent. 


The blockchain fixes this and can make patenting and IP rights faster and more seamless. NFTs can be used to represent unique items on the blockchain; blockchain ledgers can also be used for intellectual property owners. 


With blockchain, an inventor or creator can upload and register their work on the blockchain, and retrieve timestamps if necessary. Data is easily accessible and available on the blockchain, and dispute resolution takes a shorter settlement time. Another blockchain innovation in IP rights is that creators can see how their properties are being used, and by whom: all in real time.


  1. Evidence Management

A court ruling is influenced by the presence or absence of adequate evidence to (dis)prove a case. Many people have been wrongly sentenced due to evidence manipulation or poor handling of evidence materials. 


About 20,000 people are falsely accused every year in the US, according to the Innocence Project. It ranges from mistaken identity to forensic inaccuracies, evidence mismanagement, and false accusations. Blockchain can make a significant impact on the proper administration of justice. It is already in application in the supply chain industry in tracking and recording goods across the supply chain. It’s an application here can be modeled in evidence management systems to prevent theft, tampering, manipulation, and loss of evidence. 


  1. Litigation and Settlements

Litigation involves all the processes required for taking legal action. It can be agreed upon between the parties involved or may be decided in court. 


Litigation covers issues from contract settlements, regulations, mergers and acquisitions, fraud cases, and banking transactions. It is a time-consuming process with lots of paperwork and documentation. Litigation done on the blockchain can save time, and ease the process. It ensures transparency and improves efficiency. 


These are just some of the opportunities for blockchain use in the legal system. Just like every other industry, the true proof of how the blockchain can be will arise from actual use, lessons learned, and further innovation. In any case, the future of the blockchain and the legal industry is bright. With more adoption and innovation, smart contracts and blockchain-based title deeds may become as common as paper. 

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