You must be aware that the legal sector deals with a lot of paperwork, documentation, and details on a daily basis. The sector also functions with an attorney-client privilege where confidentiality and information security play a crucial part.
Things being so, it is imperative that the technological transformation of this sector incorporate an uncompromisable and secure solution that ensures smooth data management and safety. Blockchains are one such technology that offers immutable security, streamlined transaction processes, and safe storage of legal documents.
There are several ways that blockchains in the legal sector can transform the industry for the better. Let’s delve deeper into what these ways are.
12 Ways Blockchains In Legal Industry Are A Transformational Move
In addition to providing document security and safe storage, what could be the best blockchain use case for the legal system? There are twelve distinct ways that blockchains help the legal industry.
1. Better Efficiencies
Blockchains provide higher efficiencies to the legal system by improving the contractual processes that involve multiple parties. The access controls that blockchains bring to multipartite agreements enable better transparency for all the signatories involved.
This is because to alter a record or a document saved on a blockchain, the security protocols require the permission of all the signatories of the contract. Not only does this help bring more transparency to the entire system, but it also promotes document and information security.
Blockchains can be effectively leveraged to create secure contract environments for multipartite agreements in the legal industry.
2. Digital Signatures
Blockchains facilitate faster processing times for contracts and other legal documents by enabling secure digital signatures and automating the contract management process. Scripted contracts also help eliminate errors that a manual process could create.
Furthermore, the digital signature environment that blockchains establish for legal contracts is highly secure through randomized encryptions, making it impossible to conduct signature fraud. The authentication process can also be secured with multiple keys and layered verification to ensure that the confidentiality of information is always maintained, regardless of who tries to access the documents.
Blockchains can digitize law agreements without risking their security.
3. Smart Contracts
One of the reasons that have stalled the assimilation of modern technology in the legal sector is the need for security and confidentiality and the reliance on the written word. The industry can finally brace the technological revolution with smart contracts on the blockchain.
Smart contracts are self-executing contracts housed on blockchains that are triggered automatically when the set conditions are met. Automated creation of legal contracts with joint access and shared authorization can help set up an environment of trust among those involved, which is crucial for all operations in the legal industry.
It can also help reduce the paperwork cost and establish more autonomy in the legal system.
4. Tamper-Proof Records
One of the major challenges that process in the legal system face is the authentication of documents and determining whether they are genuine or have been tampered with. It is here that blockchains can help transform the legal process.
Since everything revolves around hard evidence, all the evidence that can be digitalized can be stored securely on blockchain vaults and networks. Blockchains create immutable, permanent records of storage, access, and alterations, leaving a clear data trail behind – which discourages suspicious activity.
This provides a secure way to store document-based or digitalized evidence for the legal industry. For example, NFTs can be brought on blockchain to track the trading activity of a company.
5. Mitigate Hacking Risks
The records on a blockchain are immutable. To alter a document stored on blockchains, the user also requires access and permission from all the other signatories. Every asset is stored over a decentralized network, making it nearly impossible to break into the blockchain system with the intent to hack data.
Every blockchain activity leaves a trail, making each action visible in the access and modification records. This helps to improve the visibility of activity and identify suspicious patterns. It is safe to say that blockchains are immutable, highly transparent, and provide good visibility of usage activity, making it difficult to hack into or breach.
6. Automation In Contract Execution
Contract automation is one of the pivotal ways in which blockchains can revolutionize the legal industry. The following key properties make the contract automation feature extremely useful for the legal industry:
Reduction in contract negotiation cycle times by automating the execution process when a set of defined conditions are met and protocol is observed.
Streamlining the ownership transfer process for physical assets that have been tokenized and stored on blockchain networks can be made significantly easier and quicker.
Blockchains can also be leveraged to create a decentralized record book for all the legal contracts and documents that exist in a firm, reducing the time required to search for specific information.
7. Elimination Of Evidence Tampering
The legal system banks on hard evidence authenticated and verified as genuine. To ensure that the evidence for a lawsuit or case isn’t tampered with before it can be brought to court, it needs to be stored securely.
Blockchains provide that functionality by enabling highly randomized encryptions for all the digital records stored in its decentralized ledgers. Only with the correct keys and access credentials can allow access even to view these digital records, and even then, they cannot be modified without notifying everyone else involved.
This makes it nearly impossible to tamper with evidence stored on blockchains.
8. Quicker Processes With Higher Accessibilities
The legal system doesn’t just involve storing evidence and paperwork. There is more paperwork that law enforcement agencies must manage. For example, land deeds, intellectual property rights, litigation statements, etc.
When used as a database, blockchains can provide an extremely efficient platform for managing all this paperwork digitally, securely, and with zero manual errors. Important documentation can be stored with controlled access authorization, while other digital documentation can remain in decentralized ledgers accessible from any blockchain-registered device.
9. Valid Property Rights, Chronological Data Preservation
Recently there has been a great buzz about tokenizing properties and real estate assets on the blockchain network. These assets can then be broken down into digital tokens worth a fixed fraction of the property. They can also be traded in the cryptocurrency market as a mode of investment.
The legal aspect of this activity revolves around establishing the rightful owner of an asset-backed token by ascertaining the chronological trade history of the token. Blockchains store all the transaction data in a chronological fashion, helping maintain the integrity of trade in the system and establish valid property rights.
10. Transparency In Legal Documentation
The longer a contractual process continues, the more the possibility for mistakes and human errors in it. The biggest use case of blockchain technology in the legal system is thus contained in digitalizing, automating, and securing the paperwork that the industry deals with on a daily basis.
Automation in documentation approvals and agreement execution helps to reduce physical back-and-forth between signatories. The secure collaboration on the blockchain network also helps to establish better transparency in the contractual process.
11. No Need For Third-Party Involvement In Transactions
The distributed ledger technology in blockchains helps to verify a user and their digital identity to help protect data and passwords stored on the decentralized network. This self-authentication process of the blockchain network eliminates the need for a third party to arbitrate when a cross-border or remote contract execution is taking place.
For example, there is no need for a witness to endorse the execution of a contract between businesses of two different countries if the agreement happens over smart contracts on the blockchain.
12. Improved Collaboration
Although it may not be a popular use case, blockchains enhance collaboration environments with improved trust, reliability, security, and authenticity:
Smart contracts are triggered automatically, eliminating the possibility of misinterpreting clauses or creating contracts that favor specific parties.
Blockchain-based documents facilitate faster communications between involved parties, reducing the turnaround times for the processes significantly.
Any changes made to an asset are reflected immediately everywhere, with every participant in the contract helping to bring everyone up to speed immediately.
Blockchain in the legal sector presents the best possibilities with the use of smart contracts and for the storage of legal documents on blockchain databases. These two use cases present the most revolutionizing solutions for the industry, given that it is heavy on paperwork and requires highly secure, no-breach storage.
Additionally, blockchain-based solutions are also useful for the peripheral activities that revolve around the law and its enforcement, such as the transfer of property rights or securing assets.
The trick lies in partnering with the right blockchain technology partner who understands what your legal firm needs and provides custom-fit solutions to address those challenges. To that end, Spydra Technologies provide Decentralization-as-a-Service to help you seamlessly assimilate blockchains into your system.
If you are wondering what does a blockchain lawyer do and wish to explore how the potential of your legal firm can improve with a blockchain law course, visit Spydra.
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