Blockchain Technology: Improving Law Offices or Decreasing the Need for Lawyers

Traditional law firms are synonymous with mountains of paperwork. TV shows and movies regularly depict lawyers behind their paper-filled desk in a room that is full of file cabinets. And what can viewers assume is in the cabinets? That’s right, more paper. This is one of the few aspects of law that Hollywood accurately represents: the legal community uses a lot of paper. However, advances in blockchain technology are permeating legal atmospheres and reducing the high demand for paper. This emerging technology is continually increasing the efficiency in legal proceedings. (Frost, Bloomberg)

The decentralized nature of blockchain technology is a security feature that enables the digitization of legal material. By distributing information through a decentralized network of computers, blockchain is difficult to hack, and it prevents the sensitive information from being copied. (Skolnik, Bloomberg) Unfortunately, the same characteristic that makes blockchain more secure—decentralization—also makes it less practical for law firms. Corporations with expansive networks can benefit from blockchain because they can tap into various points of their supply chain and receive the information they need. On the other hand, law firms are typically at the end of that chain; it is less vital for a firm to be able to gather data from other points of the contracting process. (Skolnik, Bloomberg)

While law firms are typically only involved at the bookends of contracts, blockchain advances may enable firms to streamline costs and increase usability for the contracting parties. For example, blockchain can be used to develop smart contracts that integrate real-time data to create dynamic documents. After extensive research and collaboration, national law firm BakerHostetler developed automated, digital contracts for the freight transportation industry. (Scharf, Baker Law) In these contracts, blockchain serves the function of responding to changes of fuel price by automatically updating contract performance obligations at the new prices. By automating this process, the smart contract accurately calculates the cost of fuel and reduces the administrative costs that ordinarily increase as a result of fuel surcharge provisions. (Scharf, Baker Law) BakerHostetler’s smart contract is an impressive usage of blockchain within the legal context, but this niche application of the technology leaves untouched many of the potential applications for transactional lawyers and litigators alike.

Reduction of time spent on routine tasks is one future benefit that blockchain will likely provide to the legal community. In addition to automating complex documents, blockchain could help attorneys keep time, file documents, handle merger and acquisition transactions, record commercial transactions, and verify legal documents with greater efficiency. (Ye Han, Bloomberg) This is also likely to alter the practices of many transactional lawyers. For example, lawyers who use blockchain and charge by the hour will find themselves with less billable hours due to increased efficiency. Similarly, lawyers that rely on mass production of standard agreements will find themselves with less agreements to produce due to the uniformity of smart contracts. (Ye Han, Bloomberg) To this end, the legal industry is beginning to diminish in some respects as more entities embrace the technological advances provided by blockchain. In 2018, the U.K. reported that approximately 6,500 courthouse and backroom jobs were being lost due to the government’s desire for a modernized justice system that used blockchain technology to fulfill processes typically done by courthouse employees. (Bowcott, The Guardian) Although the transition to blockchain has potential downsides for them, lawyers ultimately have little say in whether or not they embrace blockchain. The technology is being used across virtually every industry, and it seems likely that this trend will continue. Originally developed as a tool for the administration of online currencies, blockchain has found its way into many processes involved in economic and financial transactions. (Mack, Above the Law) The overwhelmingly positive results that businesses have experienced from the use of blockchain almost guarantee that transactional lawyers will see more and more of their clients embrace the technology over time.

As a traditional, change-averse group, the legal community seems hesitant to embrace blockchain, and for good reason. Ultimately, blockchain is a database that serves three broad functions: providing an immutable record, digitizing physical assets, and digitizing transactional processes, which are all similar to those functions performed by transactional lawyers. (Obafemi, Legal Business World) It might seem logical for these practitioners to push back against the technology for this reason, but it would likely be more beneficial for lawyers to embrace blockchain. Blockchain should be viewed as a supplemental tool that enhances lawyers’ practices, instead of a frightening technological system that is out to steal the lawyers’ work. (Frost, Bloomberg) In court, litigators will be able to solidify their argument by using the indisputable records that blockchain can provide. In exchanges, transactional lawyers will be able to facilitate directly between contracting parties. In general, lawyers will benefit from the transformative abilities that blockchain provides as it continually infiltrates and improves the world around us.