ILTACON Panel Recap – The Promise of Blockchain
Blockchain and distributed ledgers will transform contracts and transactions in finance, banking, insurance, real estate and other industries with complex supply chains. The promise of the distributed nature of blockchain is that it eliminates many costs and risks from large-scale transactions. And it will also create new roles for lawyers capable of understanding the unique issues raised by blockchain contracts and digital ledgers.
Sarah Bruno head of Arent Fox’s Privacy, Cybersecurity & Data Protection group, and Joseph Raczynski, technologist at Thomson Reuters, discussed this in a session at ILTACON 2017 today.
Blockchain is a peer-to-peer digital funds transfer with no central authority that instead relies on cryptographic verification from the many distributed nodes across its network to guarantee authenticity and security. Emerging digital currencies, such as bitcoin and ethereum are some of the best known examples.
Bruno and Raczynski described how some law firms are now setting up blockchain practice areas and accepting bitcoins for transactions. In 2018, it is expected that leading banks, insurance companies and other financial companies will begin using blockchain in earnest for transactions such as options and trading confirmations. This will generate scores of legal issues that must be addressed, such as security, fraud, regulatory enforcement, jurisdictional questions and IP issues.
For the legal industry, the speakers said that “smart” or self-executing contracts will likely be among the first widespread uses of blockchain technology. Areas such as real estate, music licensing and estate planning may be initial use cases. But as parties become more comfortable with the technology, it will expand across more complex agreements and eventually become entrenched in the industry.
In financing, they discussed how we are already seeing the emergence of ICOs, or Initial Coin Offerings. There are somewhat akin to an Initial Public Offering, only using bitcoin or other digital currencies that are exchanged not for shares, but for “tokens” in a company.