Pablo Viedma, Tech & Privacy manager at
We have heard countless times about what blockchain technology is, what it can do and the uses we can put it to, but have we ever wondered in which fields of legal business this technology could be most interesting?
Approach and introduction to Blockchain.
First of all, let's define blockchain in a simple way, it is a technology that consists in its less developed or complex state, in a sort of digital ledger, decentralized and immutable ledger in which facts and transactions can be noted and recorded, ordered in blocks chained to each other by means of algorithmic and cryptographic techniques based on mathematical problems.
Blockchain technology must be conceived as a base on which infinite applications for countless sectors can be built. Thus, we should not think of blockchain as the definitive technology, but as the base and channeling technology for many other solutions such as, for example, traceability applications, purchase and sale of currency tokens (cryptocurrencies), decentralized networks for the consumption of works protected by copyright, and a long etcetera.
Blockchain and legaltech.
Blockchain technology, as far as the legal and legaltech sector is concerned, can bring many benefits and constitute a good basis for the creation of very interesting applications, of which we have already seen more than one example, especially in the line of confidentiality protection and certification of the authorship or invention of a certain work or development.
In this sense, and taking into account the main elements and characteristics of this technology: decentralization, immutability, consensus, protocols, P2P communication, and what can be considered one of its most relevant characteristics, versatility, we can imagine (and see) for example networks for the distribution of audiovisual content -like the old Ares, eMule, and similar, but without the purpose of pirating- in which authors are remunerated according to their exploitation rights and equitable remuneration for each use -regardless of the purpose- of the content created by them.
Also very interesting for companies and their in-house lawyers is the possibility of automating the execution of contracts and also being able to monitor their evolution and compliance through smart contracts, which are not in themselves contracts -although one may have certain reservations- but rather tools for the execution of agreements between parties. Imagine, in the field of contract law, a platform for traceability and monitoring of contracts that allows us to monitor, for example, the status and modifications of a given agreement between parties.
Now, let's talk about tokenization and NFTs.
Lately they could not be more in fashion, and it is almost impossible not to talk about them, especially, if we talk about Blockchain technology. Tokens, have become the #TT to talk about due to the hype around non-fungible tokens or NFTs.
But before talking about NFTs, let's define what a token is from a cryptoeconomics point of view. Tokens are digital representations of goods and rights, digital or not, easily exchangeable between third parties, without the need to trust a third party outside the relationship, and whose evolution can be easily tracked.
Through tokenization we can represent in any Blockchain network (that allows it and is programmed for it) practically any asset, digital or not; so much so that in metaverses unique digital assets can be represented by tokens that can be acquired through cryptocurrencies or other types of tokens used for the exchange of value.
Now, an NFT, as the term itself says -non-fungible token- refers to non-fungible tokens, that is, those that cannot be spent, nor can they be substituted by others of the same nature because they have unique qualities and characteristics. The utility that can most easily be attributed to this type of token is the representation of goods, digital or physical, that are unique.
In short, this type of tokens are perfect for collecting any type of unique good, such as works of art if we are talking about physical objects, or unique items in digital environments, such as online games.
In reference to this last point, one of the first and most popular uses of NFTs has been the representation of unique and collectible items for online games such as weapons in GTA V, and the representation of unique digital goods in metaverses such as Decentraland -as we pointed out before-.
Currently, and as mentioned before, the NFT sector is very fashionable, especially since one of the co-founders of Twitter, Jack Dorsey, tokenized and put up for auction his first tweet and the first tweet in history - dating back to 2006 - whose price has reached over 2.5M euros.
Blockchain and tokenization in the legaltech industry
Having done the introduction to the technology and having talked a little about tokenization, now it is time to present some possible applications of these technologies in the legaltech sector. In this sense, we can find applications of blockchain technology such as those mentioned above, on the one hand we can talk about blockchain designed for the traceability of contracts, both through smart contacts with the intention of controlling the evolution and execution of an agreement, and to be able to determine the origin and evolution of the different operations associated with an agreement without the need to execute the contract through a smart contract.
On the other hand, we can find applications of blockchain technology for compliance, thus, in the form of recording events and/or operations, we can record as events the different phases of a compliance program from the creation and first version of each policy to the different versions or replacements of the same; thus compliance tasks in entities such as insurance companies will be easier to demonstrate and to monitor by regulators.
Also, we can think of blockchain technology, and on this idea different projects have arisen, especially endorsed by law firms, which apply blockchain technology to create as a registrable event "the creation" of elements or works protectable by intellectual and industrial property rights to prove the authorship of the same.
Last but not least, and on the tokenization side, we can find very interesting projects, especially applicable in the field of industrial and intellectual property. With tokenization we cannot only represent the works as such, but also, together with smart contracts, we can automate the licensing agreements or assignment of exploitation rights, total or partial, mainly those that are non-exclusive. In this way we can represent the work and its rights through tokens and automate the remuneration of equitable remuneration rights, and eliminating intermediaries, one of the main reasons why blockchain technology came to light through the launch in 2007 of Bitcoin, to get authors to regain their ability to control their remuneration.
With the same configuration, the creation of networks for the distribution of exploitation or commercial rights over elements protectable by industrial property, such as formulas, protected raw materials, or similar, can be achieved.
Finally, we cannot fail to mention that also by combining smart contract technology and tokenization, applying the theories of self sovereign identity, we can ensure that users and therefore companies comply with and enjoy the right to privacy in a more transparent and user-centered way as the true owner of their data.
In conclusion, as we can see, Blockchain technology not only has a place in the financial, banking, insurance or currency-related sectors, but goes much further and thanks to its incredible versatility it can be adapted to practically any environment and be useful in almost any project -not to say that this technology is a panacea for all the problems and deficiencies that we can find-.