Is There a Place for Blockchain in Law Firms?

Published On March 06, 2018

Blockchain, a much talked about new technology, has risen to the forefront of popular business developments over the last two years. In fact, many pundits have described it as one of the most important technological breakthroughs since the advent of the internet. But is there a place for blockchain in law firms?

Blockchain is a cryptographically secure, worldwide, open, electronically distributed ledger for storing data that first came to the attention of the general population because it’s the underlying technology that enables bitcoin transactions. However, there are three types of blockchains: public (available to all), private (access limited to a specific entity and consortium) and a blockchain setup for the benefit of a group of organizations. Companies across the business spectrum now recognize its benefits for many other business processes, as well.

Several articles have described potential uses of blockchain technology in the legal industry, including using it as a source of relevant, discoverable evidence and creating automated, client-firm smart contracts.

As more financial transactions are created and processed via blockchain technology, it seems inevitable that its underlying technology will be questioned in court. However, explaining the technology in enough detail to satisfy the court could prove difficult and time-consuming. Also, how would a discovery request (for information that could be in the blockchain) work?

The technology was originally developed for financial transactions and contracts — so obviously, administering client-firm agreements would be a prime use for law firms. Soon, client expectations may include automated smart contracts to make their administration easier. Firms without blockchain knowledge could cause clients to consider a change.

Additional uses of blockchain in the legal industry are just beginning to be discovered. A basic tenet of the technology is its security. A key feature of blockchain is all data is immutable and therefore protected. The technology keeps data trustworthy and identifiable, utilizing a hash to store metadata verifying the authenticity of the records.

Because of this, documents — such as eDiscovery results sets — could be inserted into a public or private blockchain for safekeeping. And depending on your blockchain, this would also provide an instantaneous transfer of data sets to your external law firm or opposing counsel.

By design, blockchain records are immutable; once recorded, data on the blockchain cannot be changed retroactively. New data or changes to existing data are new, immutable records. This capability, in turn, eliminates chain of custody questions.

Additional security and privacy is provided by encrypting data in the blockchain. Encryption also enables access controls for document and data sets, allowing attorneys to specify who gets access to data. For example, specialized eDiscovery applications could connect to a blockchain, and with the correct access controls, determine the actions that specific individuals can perform on the data.

In the future, you may see eDiscovery applications with the ability to connect and work with blockchains. Specifically, consortium blockchain storage services developed for law firms will likely provide secure “cloud” storage, which includes case management and data transfer capabilities.