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Blockchain For Dummies Non-Transactional Lawyers

Does blockchain confuse you? You're not alone -- but here's some help.

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If you come from a litigation and/or humanities background, as I do, you probably share my confusion about this whole “blockchain” thing. Sure, you understand the theory behind blockchain — it’s “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way” — but you’re unclear about how it works as a practical matter.

In the pages of Above the Law, we’ve published a number of posts about blockchain that do a nice job of explaining the technology. But if you still have questions even after reading all those stories, you’ve come to the right place.

During Legalweek, here in ATL’s home base of New York City, I headed uptown to the offices of Orrick for an event hosted by the Global Legal Blockchain Consortium (GLBC). As noted on its website, the GLBC’s mission is “to organize and align the stakeholders in the global legal industry with regard to the use of blockchain technology to enhance the security, privacy, productivity, and interoperability of the legal technology ecosystem.” The Consortium currently boasts more than 24 members, and it expects to have more than 40 within a few months.

This month is a big one for the GLBC. As noted during introductory remarks by David Fisher — interim chairman of the Consortium and CEO of Integra Ledger, a leading blockchain company in the legal space — the Consortium is organizing a Global Legal Hackathon, taking place in more than 45 cities on six continents from February 23 to 25. The GLBC hopes to have some 10,000 participants, which would make it the largest legal hackathon and one of the largest hackathons of any kind, period.

At the GLBC event I attended, three groups shared their “proofs of concept” for how blockchain could be used in different areas of the legal industry. First up: Trent Carlyle, CTO and co-founder of Lawgical, the company behind ServeManager, the most popular software for process-serving firms and their clients. (Lawgical also owns Legal Talk Network, producer of many great law-related podcasts, including Above the Law’s own Thinking Like A Lawyer.)

Showing that blockchain isn’t just for transactional attorneys, Carlyle demonstrated how blockchain can aid a task dreaded by many litigators: service of process. One of the biggest challenges associated with service is providing proof that process was served or attempted to be served. How would blockchain address this problem? As explained by Carlyle, after a process server in the field completed or attempted to complete service, she would open up the ServeManager app and enter the metadata related to that effort — information such as GPS coordinates, a timestamp, or device data. ServeManager would then, via API call, provide that metadata to Integra Ledger. Integra would in turn post this metadata to blockchain, generating a unique blockchain ID for that attempt.

This blockchain ID could then be added to the attempt information within ServeManager and to any physical affidavit relating to the service attempt. This ID could then be queried to display the untampered attempt data, allowing a client, law firm or court to confirm that the data on the affidavit or related service of process records has not been altered since entry. (For more, check out the demo on the ServeManager website.)

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One question posed to Trent Carlyle: could GPS spoofing be used to generate incorrect location information (e.g., making it appear that a process server was at a particular location when actually she wasn’t)? Carlyle acknowledged that this is an issue, which is an issue related to blockchain technology in general: the blockchain is only as good as the information provided to it. For example, a blockchain ID can verify that certain service-of-process information has not been altered since entry, but it can’t verify the correctness of the information itself.

After Carlyle’s presentation, Laura Fetter, a partner at the Fasken law firm in Toronto, explained how blockchain could be used for the Continuing Legal Education (CLE). Fasken offers CLE sessions to its clients for free, and the firm would now like to use blockchain technology to help those clients record and report their CLE credits.

Recording and verifying CLE credits is an administrative task that lends itself to automation and blockchain verification. After a client attended a CLE session, she would simply “save” that attendance in the software used for tracking CLE. This software would then provide the relevant information about the CLE session to Integra, which would in turn generate an identity ID (just like the identifier used for service of process).

The CTO of Integra, David Berger, explained that right now Integra focuses primarily on this issue of digital identity — i.e., assigning an ID number to people, institutions (like law firms), documents, and transactions (like a CLE session). Once such a digital-identity regime is more widely used, it will become very powerful and practical. As described by IBM, a major player in the blockchain world:

Digital identity is critical to many business and social transactions. It enables ways to interact with billions of users in the digital world. However, traditional identity systems are costly, disjointed, fallible, and hindering innovation and greater customer experience.

The distributed trust model is a new way of managing identities. Blockchain technology empowers consumers to control their own identity and share between trusted entities with their consent. Also, no single institution can compromise a consumer’s identity.

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Right now, Berger said, most blockchain products (including Integra) focus on recording and providing a unique identifier for digital matter that exists outside the blockchain. In other words, a given blockchain ID would refer to some external document or data — e.g., data about an attempt to serve process, or attendance of a CLE session — and confirm that the document or data hasn’t been tampered with or otherwise altered. But the blockchain doesn’t store the entire binary string representing the specific provisions of a given document. (There’s no theoretical impediment to doing so, but it would require an extremely vast amount of data and capacity.)

The final demo of the evening came from Peter Buck and Mike Sanders of NetDocuments, a leading cloud-based document and email management company. With some 7 billion documents under management, NetDocuments aims to host and deliver documents securely to its clients. To this end, it wants to move to digital-first agreements and increase trust in digital documents — which explains its keen interest in blockchain.

Buck and Sanders outlined a scenario familiar to pretty much all transactional lawyers. Imagine you have eight different versions of a document — they took a non-disclosure agreement (NDA) as their example — floating around. You have a bunch of drafts, as Word documents, and you have a final version, as a PDF file. How can the parties to the agreement make sure that they are working from the same, final document, and access that document easily in the future?

Using NetDocuments and Integra, it’s easy. First, the parties negotiate the NDA. Second, the parties submit the executed document to blockchain. Submitting the final document, the PDF file, generates a blockchain ID associated with that document.

If one of the parties ever wants to check that the document they have is the final version, they just access the NetDocuments platform, enter the blockchain ID for the final document, upload the document they’re wondering about, and click a button. NetDocuments, powered by Integra, will then tell the user whether the uploaded document is the same as the document connected with the blockchain ID. The NetDocuments platform also allows users to compare how documents held locally on a specific computer compare to documents previously sent to the blockchain, again using the blockchain IDs for verification purposes. (This is, roughly speaking, also what underlies so-called “smart contracts.”)

Still a little confused about blockchain? Don’t worry; the practical application of new technologies often takes a while for companies to implement and for consumers to understand. But as I learned from the Global Legal Blockchain Consortium’s event, the applications for blockchain in the law are myriad.

The best way to understand a technology is to use it — and if you’re a practicing lawyer, the chances are high that you’ll be using blockchain before you know it.

Global Legal Blockchain Consortium [official website]
Global Legal Blockchain Consortium Forms, Integra Ledger A Key Member [Artificial Lawyer]

DBL square headshotDavid Lat is editor at large and founding editor of Above the Law, as well as the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.

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