Law firms across the globe are becoming victims of ever-more sophisticated cybercrimes. In May 2019, two American law firms lost over £92,300 ($117,000), following a malware attack by an overseas cybercrime network. And in the UK, the SRA issued 217 scam alerts on their website last year, warning practices and the public about the cleverness of cybercriminals duplicating reputable and genuine law firm websites and spoofing email addresses in a bid to steal client money.
In the endless fight against hackers and cybercrime networks, blockchain is proving a powerful weapon. In April 2019, the Land Registry announced it had successfully tested a prototype blockchain property transaction as part of its Digital Street project. In the United States, blockchain technology is widely used in real estate transactions. However, many law firms have a limited understanding of what blockchain actually is and how it can be used to protect the business and its clients.
What is Blockchain?
In the article A Very Brief History Of Blockchain Technology Everyone Should Read, Bernard Marr quotes FT technology reporter Sally Davies, who states:
“Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.”
Blockchain is a time-stamped series of immutable record of data stored across a number of computers (nodes). Each of these blocks of data (i.e. block) are secured and bound to each other using cryptographic principles (i.e. chain).
The data contained in a blockchain is cryptographically stored, decentralised, traceable and tamper proof. Transactions are recorded across millions of computers, and each data block is linked to the block which came before it. One area blockchain is being heavily used is in contract law, through ‘smart contracts’.
What is a smart contract?
A smart contract is a self-executing agreement where the terms are written into lines of code. The agreement and the code exist across a blockchain network.
The parties to a smart contract can be anonymous and there is no need for a centralised system. Their key advantage is they render transactions traceable, transparent, and irreversible.
In America, smart contracts are tentatively being used for real estate, insurance, healthcare, and supply chain management.
The Global Legal Blockchain Consortium
When it comes to cyber security, blockchain dispenses with centralised systems, making it impossible for cyber criminals to locate and target the date they are looking for. The legal industry has recognised the advantage such a system provides. Founded in 2017, the Global Legal Blockchain Consortium now has over 225 members and, according to its website, is focused on the following goals:
- Data integrity and authenticity for contracts, documents, and similar data.
- Data privacy and security for contracts, documents, and communications.
- Interoperability between large corporate legal departments and law firms.
- Productivity improvements and cost savings in the operation of legal departments and law firms.
- Use of blockchain to fortify and augment existing legal technology investments adding important functionality to legacy systems to extend their useful life.
Dispelling the myth that solicitors traditionally shy away from new technology, Artificial Lawyer states that the consortium is adding around 10 new members per month.
From conveyancing to intellectual property law, blockchain provides an ability to protect highly sensitive data held by law firms. The technology is set to revolutionise not only the legal sector, but almost every other industry. Solicitors will need to work with the technology as the increase in smart contracts is not all good news for solicitors; as they, by design, eliminate the need for a middle person to negotiate and execute the agreement. But rather than focus on what will be lost, practices must now examine what can be gained from blockchain; both for their firm and their clients.
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