Last month we wrote about cryptocurrency and its potential effect on the markets. This month we’ll discuss blockchain technology. Blockchain and bitcoin are used interchangeably but they are distinctly different. Bitcoin is a controversial currency and utilises blockchain technology, whereas blockchain technology itself is not so controversial and has a lot more potential reaching out way further than currency. Blockchain technology is on route to completely transform the way goods and services are provided to consumers in all industries.
What is Blockchain Technology?
In general terms, the blockchain is a digital ledger of recorded transactions. There is a chain of blocks and every transaction creates a new block which is attached onto the end of the chain. The chain is recorded on a decentralised system and the data is encrypted. This means blockchain is effectively a shared database which is mostly hack-proof, unamendable, instantly updating and it protects privacy.
What opportunities does this create?
Smart contracts backed by blockchain technology will improve the efficiency of services in all industries because they are self-executing and self-updating. For example, when a car is due a service the data of a client’s car history will trigger the system to order the necessary mechanical parts in advance. Mundane tasks can be completed in bulk and at speed, which creates economies of scale for businesses and is likely to produce goods to consumers at cheaper prices. This means there are potential benefits for both supply and demand sides.
Furthermore, the reliability of blockchain will encourage clients to trust suppliers and form stronger relationships which, with the help of other disruptive technologies, will lead to more personalised services. The connections between companies and consumers are tightening.
What does this mean for lawyers?
From a legal point of view these advancements are likely to lead to new regulations, particularly data laws. Lawyers will need to be prepared to advise clients on the changes. This in turn will encourage law firms to become more specialised in selective industries in order to truly understand how their clients’ businesses operate within the new environments.
From a legal industry point of view, these new efficiencies eliminate the need for intermediaries to facilitate transactions. For example, in property transactions exchange of contracts and completion takes place as soon as the system receives the purchase monies. While certain advisory lawyers would on the offset be affected negatively, these developments would also create demand for lawyers to engage in new variable tasks, such as negotiating agreements.