A Quick Course in Blockchain Basics 101
Raise your hand if you don’t know much about blockchain or how it can affect your practice.
Okay, hands down. Now raise your hand if you’d like to learn the basics of blockchain so that you’re not totally clueless. Great! Just keep reading.
Blockchain, which started out as a digital ledger of Bitcoin transactions, has evolved greatly.
“By definition, [blockchain] is a shared digital ledger, a distributed database that stores the information about all transactions made on its network,” writes bitcoin and tech writer Aleksandra Arsic for Legal Reader. “This database is interlinked, with each new block of data pointing to the previous one, creating a chain of information. With the way it’s all structured, it’s possible to pinpoint the exact block when an update to a document or e-wallet happened.”
Read “How Will Blockchain Technology Affect Law Firms?” in Legal Reader.
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“Working with paperwork is inevitable for every lawyer,” writes Arsic. “But with blockchain technology, instead of creating every contract from scratch, lawyers can leverage various sorts of automation, reducing the amount of time needed to prepare all the documentation for their clients. Furthermore, they can digitally sign the documents and store them on a blockchain. This would allow clients to verify the authenticity of each document and, ultimately simplify the legal system for the benefit of all parties.”
Here is a quick rundown of other highlights from Arsic’s article in Legal Reader (quotes are hers):
- Blockchain provides complete transparency. “Bitcoin’s blockchain contains information about all the transactions made with it since the cryptocurrency came into existence in 2009,” writes Arsic. “This helps verify the validity of every single transaction and prevents double-spending.”
- Blockchain is decentralized. Data isn’t stored on a single server. Rather, users retain copies of the entire blockchain or updated portions.
- Blockchain is affordable. “Once your firm makes the transition from performing manual tasks to blockchain automation, productivity will skyrocket, reducing the time required for every task and, with it, the final costs. And a client who saved some money on legal services is a happy client.”
- Blockchain is secure. “Moving confidential data onto a blockchain creates a near-impenetrable wall of defense, as hacking the data stored there is so difficult it would take thousands of years to break into just one of the blocks. At the same time, the blockchain structure guarantees the clients’ peace of mind because every change, no matter how slight, is recorded, so it’s easy to check version history and verify whether the document is valid.”
- Blockchain is ideal for financial transactions. “Crypto payments have gotten really close to becoming mainstream, with thousands of physical and local venues accepting Bitcoin and Ethereum alongside other, more traditional payment methods. An advantage cryptocurrencies have over fiat currencies is the protection against double payments. Besides, it has become more cost-effective to make a payment with crypto than use a wire transfer, as banks’ fees keep growing.”
- Blockchain provides chain of custody. “Since every entry – in this case, each instance of the evidence changing hands – is irreversible once recorded, and each subsequent entry is linked to the previous one, the very structure of the blockchain works to safeguard the evidence before the trial. It’s impossible to delete any data, so there’s no fear of losing crucial documents.”
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