Sunday, 22 July 2018

Why the legal sector should be investing in blockchain technology

The blockchain technology that powers and documents every Bitcoin transaction has gone fairly unnoticed. Until now.
Cryptocurrency has now been around for nearly ten years, but it has only really burst into the limelight over the past year due to Bitcoin’s extreme volatility. In December 2017, Bitcoin reached highs of $20,000 per coin, but now it is trading at just under $10,000. While it’s the currency that’s been attracting all the attention, the blockchain technology that powers and documents every Bitcoin transaction has gone fairly unnoticed. Until now.

Blockchain is a unique way that data can be recorded. The technology is often referred to as a ‘distributed ledger’, as the data that is stored is distributed across an entire computer network. The whole purpose of blockchain is to provide a digital and fixed trail of transactions so that each purchase made using the digital currency can be verified.

The technology, which began its life as a financial tool, is now beginning to attract the attention of law firms like Hogan Lovells and Fieldfisher, which are starting to recognise its benefits for making their processes and data more secure, such as through smart contracts. But, while a few law firms are exploring the technology, there hasn’t been a great deal of adoption within the legal sector as of yet.

Why should law firms be turning their attention to blockchain?

We are living in a world where technology and data dominates, and as advantageous as this is, it does leave businesses open to attacks from hackers. The recent WannaCry attack in 2017 pushed the extent of cyber attacks into the public eye and showed just how vulnerable all businesses are, as hackers held a series of high-brow companies, such as FedEx, Honda and O2, to ransom over their own data. While the attack was stopped, it wasn’t before it inflicted a cost of $8 billion in damages to businesses across the world.

Law firms, in particular, are prime targets for cyber attacks as the data they hold, both in commercial and private transactions, is extremely valuable and sensitive. As a result, over the past six months, one in five UK law firms have experienced an attempted cyber-attack on their systems.

Blockchain could have prevented the WannaCry attack, as unlike generic storage systems, the technology never stores data on just one single lone server. Instead, blockchain stores the data across an entire computer network and also on every computer that has access to that network. So, hackers wouldn’t just have to successfully attack one server, they would have to attack each individual computer on the network at the same time to breach the network and access the data, which is both time-consuming and highly complex. This aspect of blockchain makes it an extremely secure and ideal implementation for law firms that deal with and hold a lot of valuable and sensitive information.

Alongside growing cyber attacks, the General Data Protection Regulation (GDPR) is also looming, which will require every business to ensure that all their data is processed lawfully, transparently and for a specific purpose. Once that purpose has been fulfilled and the data is no longer required, the data should then be deleted Yet, despite law firms being given two years to prepare for the regulations, only 25 per cent of UK firms admitted in November 2017 that they were ready to comply with the impending laws. With only a few months to go until GDPR comes into force, those firms that have left it to the last minute will have to work extremely hard to ensure their systems are ready to comply.

Fortunately for these firms, the solution could lie in blockchain. Two of the primary focuses of GDPR is transparency and auditability. These two requirements can be successfully adhered to by the use of blockchain, as all the information captured and recorded in the ‘ledger’ can be viewed in real-time by all users on the network, including audit officers. This would enable auditors to identify every change that has been made to the data, as the blockchain permanently records it. Firms can keep a compliant, up-to-date trail of information.

Why haven’t more firms adopted blockchain yet?

The legal sector is famed for its resistance to change, especially when faced with embracing new and emerging technologies. While a few forward-thinking firms are starting to recognise the value of innovation, the rest are still sitting back, waiting until new technology has been tried and tested to minimise the overall risk of implementing it into their operations.

At the moment, those forward-thinking firms seem to be focusing their attention on artificial intelligence (AI), not blockchain. AI has been receiving a lot of attention in the legal sector for some time now, with firms looking at how the computerised intelligence can save time on case research, as well as providing greater accuracy levels by reducing human error. Now that more firms are turning to AI, the competition to implement it first to stay ahead of rivals is hotting up, but this means it could be a while before firms turn their attention to blockchain.

It is also likely that law firms will be concentrating on more pressing matters, such as the impending GDPR regulations. In the run up to May 2018, chief technology officers (CTOs), chief executive officers (CEOs) and managing partners will be making sure that their data systems are set up to comply with the data management laws. If they’re not up to scratch, further investment will be needed to bring them to the correct standards, so law firms can avoid the large fines that they will face if they aren’t compliant with the rules. This limits funding to explore new technology, such as blockchain, so it’s likely that it will be put on the back-burner.

The legal sector has been set in its ways for centuries, and technology hasn’t exactly played a huge role in helping the industry go about its business up to now. But, the combination of growing cyber threats and new data regulations is placing law firms under pressure to increase security, and they require modern solutions to do so. Blockchain is a technology that can make law firms not only more secure, but also more compliant. However, it is up to CEOs, CTOs and partners to embrace change, take control and drive forward its adoption.

source: itproportal.com 

Legal disclaimer: The insight, recommendations and analysis presented here are based on corporate filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. They are presented for the purposes of general information only, and all the information belongs to the original publishers. These may contain errors and we make no promises as to the accuracy or usefulness of the information we present. You should not make any investment decision based solely on what you read here.

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