Since lawyers are naturally cautious and resistant to change and are well aware of the potential legal and financial repercussions associated with it, the introduction and usage of blockchain technology in the legal industry runs the risk of being a slow process.

For lawyers working for companies interested in NFTs, the metaverse, the digitization of securities, debt instruments, mutual funds, real estate, etc., blockchain technology is generating a significant amount of legal work. Additionally, the technology is being used to hold, share, and save data and create smart contracts, all of which promise to automate but not necessarily replace lawyers. E-signature, document storage, and virtual data rooms are the three significant areas of development. According to PwC, 60% of the top 100 law firms in the UK have been boosting their financial commitment to technology. 

Why Blockchain technology in the legal industry is a good investment

Improved utilization of technology is the top priority for business support for law firms. According to PwC research, “Tech needs now cost the partners nearly as much as what a firm’s premises cost. This merely demonstrates how crucial technology is today to the operation of law businesses. ConsenSys, a blockchain software developer, also holds that “lawyers can use blockchain technology to speed and simplify their transactional work, digitally sign and immutably store legal agreements.”

In 2017, the 26th PwC annual Law Firms’ Survey found that 31% of surveyed law firms would provide high-value legal services, 70% of surveyed law firms would use smart contracts for transactional legal services, 41% would use blockchain for transactional legal services, and 21% would provide legal support.

Blockchain technology’s advantages in the legal industry

By utilizing blockchain technology, attorneys may automate and simplify their transactional labor and digitally sign and archive legal contracts. The amount of work required to create, customize, and maintain typical legal documents is decreased through intelligent contracts, scripting texts, and automated contract management. Both the legal sector and the clients benefit from the cost savings.

Transparency: Because compliance is built into blockchain-based contracts, there is no room for doubt. Blockchains, which use distributed ledger technology, produce a shared ledger available to all interested parties.

Automation: According to CLIO’s 2018 Legal Tends Report, administrative work takes up around 48% of a lawyer’s time. By automating non-billable administrative and transactional activity, pre-designed intelligent contracts will improve the effectiveness of legal procedures.

Cost savings: When manual procedures are automated, drafting and modifying legal papers takes much less time. Introducing smart contracts will decrease transaction costs for both parties because clients pay the documentation price.

Efficiency: Blockchain can automate and streamline several legal business procedures without compromising any of the judicial authority. Additionally, cost and friction can be decreased by optimizing administrative and crucial duties.

Data integrity: Important information in legal documents is susceptible to theft, erasure, or manipulation by malicious hackers. However, data can be kept in decentralized locations to protect data integrity. It will be apparent that a modification has occurred if the evidence’s corresponding hash value is altered. Blockchain-powered platforms offer better cyber security and perhaps better disaster recovery capabilities because data is stored on a blockchain cryptographically and on numerous servers.

Different types of Blockchain Technology  in the legal industry applications

DMS (document management system) is specialized software for managing, storing, and accessing files. This initial step toward digital recordkeeping was developed to streamline and expedite office procedures. It provides excellent security features, including customizable access privileges, data backup, and regulatory compliance maintenance through simplified data classification. Although DMS has many benefits for Blockchain technology in the legal industry, some disadvantages have made a more effective technology—namely, blockchain—necessary. Due to its inability to manage changes and susceptibility to document duplication, DMS is a methodology that is inadequate for handling legal documentation. Since blockchain technology in the legal industry operates on the tenets of integrity, security, and confidentiality, blockchain, a distributed ledger with characteristics like immutability, accuracy, transparency, and security, can sustain the legal sector’s ideals. One example of a blockchain-powered document management system (DMS) platform for lawyers to enhance their ability to track documentation, be more reliable, and speed up the entire document management process is DocFlow.

The current legal contracts are written down with physical signatures; smart contracts are not. The manual process is very time-consuming. And is prone to mistakes made by humans. Blockchain technology can resolve this problem, making legal documents transparent and available. Creating a contract that can automatically execute depending on pre-specified criteria lowers the expense and hassle of producing and securing legal agreements.

The USPTO (US Patent and Trademark Office) informed of 440,000 new intellectual property applications (IP) applications in 2017. The following year’s annual report states: that one patent registration procedure takes the USPTO roughly 16.3 months to complete. It is tough to determine who originally invented an intellectual property because the approval procedure takes so long. By building ledgers for IP owners that can be intelligent contracts that define terms and conditions and different sorts of compensation, blockchain offers solutions to this problem. Since information may be made available virtually instantly, copyright matters should be able to be processed more swiftly. As a result, leading to speedier, theoretically, dispute resolution.

Document notarization: Companies like Stampd, Blocksign, and Stampery have created blockchain technology to offer notary services to confirm a document’s existence at a specific time that can be independently validated. Blockchain technology can make proof of existence easier by hashing the paper and putting the value in the blockchain. It creates ownership evidence possible by hashing the record obtained by the transaction ID. This facilitates the secure storage of papers and deeds and open transactions for the data network.

Property rights: Blockchain technology makes it possible for real estate transactions to require fewer intermediaries, making it possible to sell and buy property in a transparent and unchangeable manner. Blockchain-based ledgers offer a novel method of managing property rights by being able to both time and date stamp and record when the intellectual property (IP) has been lodged/sent to a third party. A solid example of a blockchain network where IP owners can register their IP and a history of how, when, and with whom it was shared is Fileprotected, based in California.

Chain of custody: collecting evidence is the foundation of any investigation; confirming the conclusions and maintaining accurate records is crucial, especially when a case lasts for several years. During a claim, evidence acquired early on might be essential later on. The chain of custody will be accurately and consistently documented (on paper or electronically), making it more straightforward for the legal authorities to locate the crucial data whenever necessary. Paper-based documentation is inconvenient, but because electronic evidence is kept in a centralized database, security concerns have also been raised about it. Blockchain makes the system more auditable and traceable by allowing time-stamped cryptographic data.

Also, read – Banks with most investments in cryptocurrency and blockchain companies

Blockchain technology’s difficulties in the legal domain

Blockchain technology in the legal industry is complex; because evidence and paperwork are essential, hard copies may take precedence over digital versions, which could provide a hurdle to further use of blockchain.

Technical apathy — historically, the legal sector has not made significant technological investments. Despite the increased use of technology in various industries, according to the LawTech report from the law society published in 2019, interest in the field remained low. Legal stakeholders are also hesitant to make any changes due to what appears to be their concern over the prolonged legal processes. Even if they are unwilling to let this go, their opinions seem to shift (as highlighted by the PwC 2021 survey mentioned above).

Legal concerns: Although blockchain technology is widely used in many nations, some still find it difficult to believe. In some jurisdictions, the decentralized approach’s legal aspects and absence of centralized governance pose problems.

Scalability has been identified as a barrier to the adoption of blockchain technology in the legal industry, albeit this is less of a problem as blockchain technology advances. Blockchain technology thus presents both benefits and risks to the legal industry. Counseling businesses now utilizing blockchain technology is undoubtedly a significant amount of work for attorneys, who frequently require a solid understanding of the law and the technology to do so.