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Blockchain technology is a decentralized database that stores transaction records in chronological order and provides security and integrity of data using cryptographic methods. Blockchain helps to record information in such a way that it is difficult to change, hack or manipulate it. The basic idea behind blockchain technology is that information is spread across many computers rather than being stored on a single server. Each new block contains a cryptographic trace of the previous block, barring changes, as each edit to a block results in a change to that trace, which is immediately detected by other participants in the network. Due to its decentralized nature and cryptographic security mechanisms, blockchain is considered a trusted and transparent technology for data storage and transactions, especially in finance, digital assets, contracts, and supply chain management. The blockchain market is projected to grow from $17.19 billion in 2023 to $943.67 billion in 2032 at a compound annual growth rate of 56.1%, according to a forecast published on Statista. This growth indicates an increase in demand for this technology in various industries, the expansion of its use, improvements in the technology and interest from large companies and investors.
Benefits of blockchain technology in the legal industry
The very idea of a decentralized chain, in which each subsequent link verifies the previous one, has a number of undeniable advantages for legally significant actions of network participants.
Transparency and immutability of data excludes unauthorized changes to documents, simplifies the process of verifying the authenticity of documents and verifying signatories. The platform captures records of events and transactions that cannot be changed or deleted. This means that blockchain can serve as a source of evidence in case of disputes. Legal documentation stored on the blockchain can be used to prove the rights and obligations of parties.
The global decentralized infrastructure of blockchain technology, accessible anywhere in the world, can be used regardless of jurisdiction, making it easier to work on cross-border transactions and projects. This entails increasing the speed of the financial cycle, minimizing transaction and operational costs, and eliminating unnecessary links in contract execution.
Blockchain uses sophisticated cryptographic techniques to protect data, making it extremely secure. All data is distributed across multiple nodes in the network, making it virtually invulnerable to hacking or manipulation. In the legal industry, this is especially important when storing sensitive information.
Blockchain technology can help reduce transaction costs, speed up the closing of transactions, and ensure that documents are provable and secure, ultimately increasing trust between entities and reducing mutual risk.
Applications of blockchain technology in the legal industry
Blockchain technology has many applications in the legal industry. Let’s take a look at the most common uses of this technology:
1) Digital smart contracts. Blockchain enables the creation of digital smart contracts that are automatically executed when certain conditions are met. For example, smart contracts can be used to automatically disburse funds when contract terms are met or to register ownership. According to the Global Smart Contracts Market Research Report 2024, companies utilizing global smart contracts include major companies such as IBM, AWS, Oracle, Infosys, and Solana. This shows widespread acceptance of smart contracts as an important automation tool across industries. There are already publicly available platforms for creating and executing smart contracts, such as those based on the cryptocurrency Etherium.
2) Intellectual property rights management. Blockchain enables the creation of digital registries of intellectual property rights, such as copyrights, patents and trademarks. The technology provides transparency and reliability in the management of rights and simplifies the processes of their transfer. There are already many services for copyright registration, tokenization of intellectual property based on blockchain technology. Major players such as IBM are also actively developing their solutions in this area. The Research and Markets report suggests that blockchain technology will play a key role in intellectual property protection in the near future.
3) Document and Archive Management. Blockchain technology is used to create secure and immutable digital archives of documents, providing security, transparency and accessibility of information. Such solutions allow companies and organizations to store important documents, protect them from tampering and provide quick access to archives. Electronic digital signature services using decentralized networks, such as DocuSign, which is known to almost all lawyers, can also fall into this category.
4) Authentication and verification of documents. Blockchain can be used to create authentication and verification systems for documents that guarantee their authenticity and provenance, which helps prevent fraud. The study Online Document Verification Using Blockchain states that blockchain can be a solution to problems such as document forgery, lack of transparency and lack of security in online document verification.
5) Arbitration Process Management. Blockchain enables the creation of decentralized dispute resolution platforms where arbitrators (or even algorithms) can resolve conflicts without resorting to traditional legal processes. Decisions in such systems are transparent and the outcomes are immutable. Such platforms already exist in the legal market, for example, Kleros is a decentralized arbitration platform where participants in the system can vote on disputed issues using tokens.
6) Digital identity solutions. Blockchain can be used to create identity solutions such as digital passports or ID cards that provide security and transparency in identification and authentication processes. For example, the Civic ID service, which complies with European personal data legislation, allows the creation of a digital identity card verified by physical documents.
There are many other areas in the legal sphere where blockchain technology can optimize processes and bring transparency to them, such as corporate governance, litigation, securities issuance and others.
Blockchain technology offers significant benefits to the legal industry by making processes more transparent, secure and efficient. Nevertheless, it will take time for society to implement blockchain into everyday life, but the benefits of the technology leave no doubt that it will be widely used in the near future.
Sources:
Blockchain technology cloud market size worldwide in 2021, with a forecast for 2030, Statista, (https://www.statista.com/)
Blockchain technology and its transformative potential for the legal industry, Emory University (https://law.emory.edu/)
Global Intellectual Property Rights and Royalty Management Analysis Report 2023: A $26.8 Billion Market by 2030 – Blockchain at the Forefront of Commercialization Protection, Globe Newswire (https://www.globenewswire.com/)
Global Smart Contracts Market Research Report 2024, Reports Valuates (https://reports.valuates.com/) Online Document Verification Using Blockchain, International Journal of Creative Research Thoughts (https://ijcrt.org)
