How are Blockchain and the Law Related?

by | Sep 2, 2022 | Blockchain, Blog

When thinking of blockchain and the law, most people would probably think about blockchain regulation. After all, the regulation of blockchain is a widely discussed topic among enthusiasts of cryptocurrencies and non-fungible tokens.

The possible benefits of crypto regulation and blockchain implementation are no secret to anyone. Properly assessed blockchain law can make markets more transparent and trustworthy, and this includes the market for products like law-abiding crypto and digital non-fungible tokens. 

Through the recognition and inclusion of blockchain in law, the technology could reach its full potential, allowing for more efficient financial systems and creating new alternative financial services.

The contributions of blockchain, however, can go far beyond financial systems and institutions. The legal industry as a whole could see incredible improvements if blockchain is massively implemented, potentially serving as a tool to make all manner of legal proceedings faster and more transparent.

With the creation of smart contracts as a fundamental part of blockchain technologies, a world of possibilities opens up, as these contracts have the potential to be created under legally binding conditions, which could make many judicial processes be exercised automatically.

Smart contracts are blockchain-based digital contracts that contain built-in programming to automate certain transactions when specific conditions are met. 

In the field of regulations, this concept can be used in a variety of ways. Many regulations are based on charging or exempting taxes based on company activities or the ownership of assets. Smart contracts can process these types of conditions to allow organizations to make sure they always stick to regulatory frameworks.

These are some of the ways in which blockchain and law can be combined into technological disruptions that can improve the legal industry upon their mass adoption, regardless of the jurisdiction in which they’re applied.

Use Cases for Blockchain in the Legal Industry

To understand how beneficial blockchain can be when employed as a tool for law abidance, it is useful to see concrete cases where it can be used or is currently being used. These are some of the ways in which blockchain can be applied to revolutionize the legal system as we know it.

Regulatory Compliance

When companies get to the point where they can begin expanding and raising capital, many of them are not prepared to face new regulatory frameworks which can go from something as simple as falling into a new tax bracket to abiding by industry-specific laws. 

This situation often demands hiring entire teams of lawyers just to keep in check with current regulations, which adds to the financial burden that the regulations themselves can carry.

Blockchain can represent a solution to this problem as it allows for the development of technologies that streamline and automate the process of abiding by regulations through smart contracts. 

This is possible because smart contracts can be programmed to act as assets that automate the payments required in regulatory frameworks. For instance, if a company buys stock from an energy firm for which the government demands a tax increase due to environmental regulations, this payment can be automated through a smart contract.

Furthermore, using blockchain technologies, companies can hold real-time access to secure and reliable information about regulatory compliance, which is recorded decentrally in the blockchain’s ledger.

Upon mass adoption, these types of technologies could save companies in almost any industry millions of dollars in bureaucracy while making the legal system far more efficient and transparent.

Intellectual Property Laws

The uses of blockchain in intellectual property are extensive. NFTs and fungible tokens can be programmed through smart contracts to represent the intellectual property of a particular asset, from an invention to a piece of art, a book, or a song.

This allows creators and their supporters to benefit in many ways, and create entirely new ways to understand and trade digital property, paving the road for innovative forms of monetization that can result in incredible incentives for creativity.

However, there’s still a way to go until blockchain technologies are made a common part of the legal exercise, making smart contracts over digital property fully legally binding. 

When this happens, the legal industry will have a whole new field to work on that combines the technological and financial aspects of blockchain with the nuance of intellectual property laws in different jurisdictions, and creators will truly have de-facto incentives to share and trade their intellectual property in new ways.

Tax Administration

Blockchain technology can help companies and individuals to make their tax-paying and reporting processes far more efficient. As a result, it’s possible that company owners could reduce the number of lawyers and bureaucracy they require to comply with tax laws. 

Blockchain can automate tax paying taking into account variables such as diverse forms of income and registered property, making the tax paying process easier for the payers while reducing bureaucracy at the public level and preventing tax evasion.

Thus, blockchain technologies can be an effective way to increase tributary justice and, at a certain point, could become a central part of tax laws, which lawyers in this field would need to learn about and constantly apply.

When blockchain technologies develop to the point where they can be massively employed by governments and a majority of organizations, having a smart contract or a blockchain platform takes care of our taxes for us.

Real Estate and Property Laws

Many real estate firms are already taking a great interest in blockchain technologies. Not only can these technologies give real estate holders new ways to define and exercise their property over their assets, but they can streamline contracts between landlords and tenants.

When it comes to the landlord-tenant relationship, blockchain can be used to create smart contracts that automatize payment processes, taking into account variables such as market prices in real-time, tax variations, and regulatory framework.

Blockchains can also be used for purposes like keeping track of both landlords’ and tenants’ credit lives and trustability in their experiences on previous agreements, allowing new agreements to be made with better information.

When it comes to property deeds and land registries, blockchain can provide the necessary tools to create digital documentation in a fast, transparent, and efficient manner, which can reduce bureaucratic processes and make full property registry over land possible in developing countries where it has not been achieved.

Litigation and Dispute Resolution

Litigations and disputes over money often take years to come to a resolution, and even after years of investigation, judges can still be prone to different types of biases and third parties involved in the processes can sometimes cross jurisdictional boundaries.

Smart contracts can make for new forms of arbitration where a large part of the dispute process is handled based on the conditions of the smart contract and the information recorded by the blockchain ledger.

The mass adoption of blockchain judicial systems could result in fully globalized digital jurisdictions, where disputes can more easily and efficiently be carried across borders, with less need for third-party arbitration.

Organizational Structures

Decentralized autonomous organizations or DAOs are already revolutionizing the ways in which different types of institutions are managed. These organizations are established through digital blockchain systems to require no central leadership.

DAOs utilize systems of bottom-up decision-making and can employ automated incentive systems to promote productivity and reach their organizational goals, essentially redefining the way in which organizations and the hierarchical structures within them are thought of.

The phenomenon of DAOs can lead to a new field within laws as technology is integrated into organizational structuring, leading to the necessity to make the decision-making processes of DAOs legally binding.

DAOs may also be incorporated into the structures of judicial systems themselves, making them more efficient as a whole, creating incentive structures and horizontal decision-making mechanisms to make the work of judges and juries easier and more transparent.

The New World of Blockchain and the Law

Blockchain technologies can be implemented to improve the various branches of the legal system, from making the job of lawyers easier in fields like real estate and property laws to helping judges solve legal disputes in a faster and less biased manner.

However, the most important changes that blockchain technologies could bring to the world are not just in the specific local fields of law abidance. When these technologies are massively adopted, the very way in which we understand legal procedures could fundamentally change.

We’re already beginning to see the evolutional processes that come with the adoption of blockchain technology in the legal industry, as it is demonstrated by the emergence of many new blockchain law firms across the world. 

The best blockchain technology law firms are not just advising potential and existing investors in the new crypto and blockchain fields, but also assessing ways in which blockchain technologies can be implemented to create innovative solutions within the law industry. 

Blockchain adoption could lead to the full integration of a global legal system based on smart contracts, in which the fundamental globally shared elements of law abidance are implemented in a way in which the conditions of contracts are automated.

As contracts and regulations are automated, the necessity for a central entity such as a government and a local judicial system can be reduced, allowing more businesses to be carried on a global scale based fully on a combination of technology and mutual trust among parties.

If you wish to learn more about the ins and outs of blockchain and how it will change the future forever, join us at Expoverse, where the biggest and most creative minds in the blockchain space gather along with enthusiasts and newcomers to discuss the future and mass adoption of blockchain technologies.

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