The blockchain has the potential to disrupt processes in all areas, and the legal world is no exception. New York associate Steven Aquino explored the potential impacts in a recent article published by the American Bar Association (ABA), "Crypto, Part II: What’s the Use of the Blockchain? Leveraging New Technology to Disrupt the Legal World." The article is the second in a multipart series covering the basics of cryptocurrency, including its regulation.
In just over a decade, cryptocurrencies have experienced a rollercoaster of success and popularity, followed by issues and a crumbling market. But digital currencies—as large as their (ever-fluctuating) market may be—present just one use case of the technology that underlies cryptocurrency: the blockchain.
Building on the introduction to blockchain and cryptocurrencies in Part 1, Steven explains how any process utilizing records or automated transactions can benefit from the blockchain. In the article, Steven provides several examples of how smart contracts can help.
Smart contracts are programs on a blockchain that are automatically set to execute when certain predetermined conditions are met. Steven said, "A smart contract can be programmed to automatically fund the loan once the collateral is in place; immediately sweep the collateral upon a default, such as a missed balloon payment; or, upon full repayment of the loan, release the collateral back to the borrower. Funding, perfection, and enforcement can thus happen seamlessly and at a reduced cost. And because the blockchain is a digital ledger, the transactions are automatically booked, verified, and recorded."
Thanks to the blockchain’s design, any data stored on it comes with a built-in record of all of the preceding transactions that led the record to its present custodian. Because a well-secured blockchain-based network is distributed among many users, records or transactions cannot be altered without the network as a whole rejecting the change as being out of line with the consensus’s records.
Another way Steven describes the blockchain's potential impact is by providing ownership to NFTs. He said, "beyond evidencing transfers of artwork, NFTs can be used to distribute stock or other ownership interests in a business entity, demonstrate title to real and personal property, and delineate a buyer’s rights—from ownership to copyright—in a particular work."
Steven's article predicts that the blockchain’s versatility can vastly improve and transform many of the elements and tasks that have become common to the legal world—and, along with that transformation, move firms and their clients toward their ever-present goal of saving time and money.
This article originally appeared on AmericanBar.org
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