Is it smart for lawyers to blockchain?

Hot on the heels of Gartner predicting that by 2023 “Lawbots” will handle a quarter of internal legal requests and referencing a Divorce Bot that actually (unbeknown to them) only ‘lived’ for 3 days, they have now recommended businesses move to test and adopt smart contracts and blockchain.

They have stated:-

The impact of blockchain smart contract adoption on analytical decision making is profound. It enhances transparency, speed and granularity of decision making. It also improves the quality of decision making, as its continuous verification makes the data more accurate, reliable and trustworthy.

Gartner analysts recommend Data & Analytics leaders pilot blockchain smart contracts now. Organisations should start deploying them to automate a simple business process, such as non-sensitive data distribution or a simple contract formation for contract performance or management purposes.

Then organisations should engage with their affiliates and partners to pilot blockchain smart contracts to automate multiparty contracts within a well-defined ecosystem, such as banking and finance, real estate, insurance, utilities, and entertainment.

Artificial Lawyer was of the view that it was:-

All in all, good to see that one of the world’s leading technology research companies – famous for developing their Gartner hype cycle model of emerging products – has openly got behind smart contracts.

However, that is not a view shared by many other commentators.

Coincidentally, on the back of the Gartner press release the BBC ran an article entitled ‘Blockchain: The revolution that hasn’t quite happened‘. That article contains the following statements:-

Blockchain has struggled to find a purpose, beyond powering cryptocurrencies like Bitcoin….

But a similar system could be achieved with other technologies such as cloud-based ledger databases that encrypt data and control who can access what information….

Nothing about a blockchain itself can stop some corrupt individuals trying to add fraudulent information to it. Additional checks are needed.

I highlighted the difference between the two points of view in a tweet:-

This past week in #LegalTech press: “Gartner analysts recommend Data & Analytics leaders pilot blockchain smart contracts now.” Whilst over at the BBC: “Blockchain has struggled to find a purpose, beyond powering cryptocurrencies like Bitcoin.”

This created some discussion on the drawbacks of blockchain (and a few in amongst it still in support).

Michael Veale (@mikarv) tweeted:-

A surprisingly significant part of my job as an lecturer in a law school is undoing the damage done by airheaded blockchain marketers & shockingly naive practitioners/academics to law students.

Blockchain is not a useful general purpose technology.

There has been no shortage of the world’s most renowned computer scientists and other scholars of technology screaming this for years, into the void, as the cult trundles on deliberately not exposing itself to anyone critical.

You can explain it in a few ways
– tech is complex! this is easy! just learn one thing now, sounds good
– legacy infrastructure is shit! now the Board cares? here’s our chance!
– money for snake oil? please!
– so anxious for Truth & Trust! let’s not quabble over definitions, 👍

When I say surprisingly significant I’m talking about three hours in the last three days alone.

Richard Moorhead (@RichardMoorhead):-

You have my sympathy

Michael Veale:-

I even tried to put it in my research bio to help students looking for supervision make better choices

Richard Moorhead:-

*Grits teeth and shakes with suppressed laughter*

Richard Given (@BugsieGiven):-

Personally, I’m waiting for the legal solutions using e-blockchain. They’ll be the real game changer….
#sarcasm

Craig Conte (@craigjconte):-

Can it be powered by #machinelearning and fully #digital too?

Richard Moorhead:-

Only if it is Smart 2.0

Richard Given:-

And fully holistic as well, that’s important too….

Cathy Mulligan (@API_Economics):-

Not just blockchain suffers from this; lots of tech does.  Blockchain world has been nonsensical since about 2016. All it is is a slightly different way to manage transactions not a panacea for all of world’s problems. Critical thought is useful for any student to learn however..

Michael Veale:-

Lots of tech definitely does! But at least in many cases they are theoretically (more) general purpose technologies than this highly specific hammer for highly specific nails. So foster a different kind of critical skill creation, problem structuring.

Giulio Coppi (@GiulioWolfe):-

Strongly agree with @API_Economics : After the Big Data and Blockchain frenzies have passed, I can already see the big wave of AI nonsense coming.

Michael Veale:-

It’s been here for years already I’d say. But insofar as statistics is useful in a general way, it’s not quite the same.

Preston Byrne (@prestonjbyrne):-

Next time I’m in London we should have a chat. Companies don’t broadcast it when they’re onto something good.

I agree though that most marketing around chains is insane. “Blockchain” = “censorship proof money” or “cryptographically verifiable state,” not marketing magic.

Nicola Rossi (@NicolaRossi):-

I once had to talk down an exec I was writing a speech for, who insisted he wanted “…to say blockchain”. It had no relevance to his story whatsoever.  I’m now writing blockchain-free fiction.

sosialist mane (@max420power):-

Out of interest, can you link to articles/papers where computer scientists says that we should be wary of blockchain?

ishufuri (@ishufuri):-

Thank you! Blockchain can be a great tech for some very specific problems, but it‘s definitely not a one-fits-all solution. As are deep learning, “big data”, the cloud, micro containers, Reactive Manifesto and NodeJS – or pretty much any hyped IT trend in the last decade.

Ross McMahon (@rossmcmahon):-

I was at a legal industry event (Ireland) three years ago where a senior member of the legal profession said if you aren’t “up to speed” with Ethereum “technology” within five years you’ll be out of business ¯\_(ツ)_/¯

Alex G Smith (@alexgsmith):-

Don’t worry had to do the deprogramming in the last job with future trainees … they didn’t seem to get the real world uses fast well permissioned databases

@MEKowalski I believe you have to run a blockchain cult deprogramming intervention on your brightest students too.

Mitch Kowalski (@mekowalski):-

The cult is strong.

Alex G Smith:-

Fanatics … koolaid

Tristan Henderson (@tnhh):-

You’re supposed to tell them to hodl on the exam! But seriously this is not just a law issue. I just had to tell a student that I could not supervise their blockchain-will-save-the-world project, and pointed them to my office door:

N.B. If you want that sticker you can order it from redbubble.com

Michael Veale:-

My new module LAWS8268 Blockchain Deprogramming 101 starts September 2020, available from all good DAOs.

Lilian Edwards (@lilianedwards):-

Queue forms outside. I think geeks can get it on prescription now?

Andres Guadamuz (@technollama):-

But, but, but, blockchain smart contracts powered by AI are stopping the coronavirus epidemic! I read it on Twitter dot com so it must be true.

Independent Comentator (@delh2010):-

Maybe not driving the change now but that does not null the concept. To advance visionaries will work it through as Tim Berners-Lee, Grace Hopper, Philip Don Estridge, Douglas Engelbart, Alan Mathison Turing, Ada Lovelace have done (or we wait to prove concept eg Bentham et al)

Thomas O’Duffy (@ThomasODuffy):-

The blockchain bubble of 2017 was one of the most psychologically intense emergent mass indoctrination events of our lifetimes. If you think you can deprogram that with logical opinion, you really ought to study hypnosis & cult deprogramming!

Maciej Kuziemski (@kuziemsky):-

Couldn’t your damage undoing work be automated somehow, or at least put on a blockchain

James Holyhead (@jholyhead):-

My preferred method is to tell people to replace the word “blockchain” with the phrase “slow and expensive database” and ask me again.

“sloooooooow and expensive database”

Lilian Edwards:-

Or “Excel spreadsheet “

Bull Run 2020 (jamocrypto):-

Very very true. But if you want an excel spreadsheet that’s not under the control of one person/company/government etc. then blockchain is the way to go. Have to incentivize the security of the database by providing payment to the systems validators via a crypto token.

James Holyhead:-

Actual use cases for such systems are incredibly limited. Databases do a better job in almost every area, the only real exception being cryptocurrencies – and they have their own problems.

Bull Run 2020:-

Again it comes down to decentralization. If you TRUST the spreadsheet’s owner to validate the data themselves and not “cook the books” then you don’t need it. But if you want a TRUSTLESS database then blockchain with a valuable crypto is the only way to make it happen

Michael Veale:-

usually your problem isn’t post hoc meddling but incorrect data in the first place.

Neil Brown (@neil_neilzone):-

I reviewed “Blockchain for the Legal Profession” and, as much as commentary about the concept as about the book itself, I was left underwhelmed:

sgbett (@sgbett_):-

“chapter 1 asserts that, yes, blockchain will disrupt legal practice. But it does not explain how.”

On the contrary, Legal practice will be instrumental in disrupting many Blockchains that are currently operating without regard to existing Law. #imho #ianal

Me:

And then there was, of course, the infamous e-book on blockchain for lawyers.

Simon Worthy (@simon_worthy):-

Block chain has some merits but it isn’t suitable in all fields and shoe horning isn’t the answer

Cathcart Boy (@cathcartboy):-

Too early to say. Remember Thomas Watson of IBM thought the world market for mainframe computers would be 4!

Michael Veale:-

Mainframe computers actually did something we could not do before. If you want big ‘permissionless’ cryptocurrencies then sure, blockchain. That’s not what lawtech people talk about. they just need a database.

It’s really like waiting for a blender to wash your clothes

Cathcart Boy:-

My work on this so far has been with University of Edinburgh and associated firms, and within Fintech North which works with several “powerhouse” universities in the North of England and Scotland. Thanks for your guidance. Well worth bearing in mind.

Lilian Edwards:-

Edin has swallowed the kool aid because they appointed what I was told was the most expensive professor in the history of the world who has to be amortised 😁

Michael Veale:-

When working with universities you can’t see this divorced from the neoliberalisation of academia and the need for academics to bring in funding and have ‘impact’ in order to make their jobs less precarious or overloaded with teaching. Buzzwords have power that goes unquestioned.

Ian Kirker (@ikirker):-:-

(I assume this is also why the university I work at has a “Vice-Provost for AI”.)

Michael Veale:-

(I think we are in the same boat)

Misho ILIEV (@MishoMoney):-

I’m surprised that this verdict comes from a law school

Michael Veale:-

Why?

Misho ILIEV:-

I can understand it if lawyers have views on blockchain smart contracts but shouldn’t the other possible uses be assessed by people who work in those respective areas

Jorge Fantin (@jorgefantin):-:-

Well said Michael. Blockchain is not a magic dust that you pour on things to make them look pretty and safe!
Sometimes a simple database does the job.
One tool for each problem.

Ignacio Cofone (@mikarv):-:-

Seriously. I have a blockchain jar in my office. Like a swear jar, but more useful.

Janders Dean (@jandersdean):-

We get our #Blockchains from @goop – it’s great.

#ThisSmartContractSmellsLikeMyBillableHour

Paul Higham (@pjh_grumpy):-

Whack it into a package with Big Data and Agile, and you have a winning combination.

Reuben Binns (@RDBinns):-

Just leaving this here …

Anthony Cutler (@anthonycutler):-

For non-currency applications, nobody ever explained to me who pays for proof of work.

“Null and of no effect” (@futureidentity):-

The planet.

🌏
🔥

Doc Searls (@dsearls):-

Test question: “Make a blockchain. You will find some blocks and a chain under your chair.”

J. Graeme Noseworthy (@graemeknows):-

Tim Bouma (@trbouma):-

You can always rely on lawyers to tell you what isn’t possible. Thanks!

Jon Crowcroft (@tforcworc):-

and AI hype is doing to CS.

Kevin Werbach (@kwerb):-

There oddly seems to be more blockchain excitement in law schools than business schools. We have significant student interest, but in my class they generally come in with curiosity and skepticism about the overheated marketing claims.

Dan Sereduick (@dansereduick):-

Blockchain sounds like a great way to manage contracts until you, um, actually start managing contracts.  Decentralized authentication is like 1 millionth on the list of things that need to be fixed about contracts.

Dr. Deborah Apthorp (@deborahapthorp):-

Relevant:

güneş tavmoş‏ (@tavmos):-

I have recently listened a presentation from someone at Turing Institute about the civic opportunities in blockchain technology. 👀that was in 2019!

Lauren Bridges (@Laurenebridges):-

@ZaneGTCooper is working to shed some light on this!
Also I’m pretty convinced that Gartner is the mitochondria of techno-solutionist marketing myths and bad tech metaphors

Defying Dutchman (@DefyingDutchman):-

“Just spin off a blockchain” were the words once uttered to me at a conference when I explained a particular persistent problem in financial services.

That was 6 years ago and I’m still waiting for someone to “spin off a blockchain”

Thomas O’Duffy (@ThomasODuffy):-

Alternatively, you can scope the promise vs the present reality. Other than siloed applications, the dream of ubiqutious smart contracts that reorganise economic sectors requires throughputs & price/power compute efficiency far beyond what we have today (> 100m TPS @ <0.1c / TX)

cheri kiesecker (@cherkies):-

They are also selling
#BlockchainSnakeOil in education, see this. @Philly852

Dallas And Tulsa: A Tale of Two Blockchains

Zac Yap (@ZacYapJQ):-

Maybe @ljxie and her a16z Summit talk can help to change your mind: Beyond Cryptocurrencies
Indeed a distributed database with tamper-evident features, but it is exactly because of these 2 characteristics which attracts interesting use cases. Challenge is to cut through the hype.

jon crowcroft (@tforcworc):-

they belong in the Cryptozoic era

Eerke Boiten (@EerkeBoiten):-

I foolishly bought a book “Blockchain and the law” (pre-presentation panic). It was written by lawyers with serious errors (e.g. a message was being sent encrypted twice, using public keys of sender and receiver).

Nic Wistreich (@netribution):-

We already had decentralised databses via linked/semantic data formats; we had distributed versioning/hashing/merkle-trees with Git. Beyond making it easy to fundraise via ICOs, Blockchain’s innovation seems to be decentralised versioning, plus micro-payments for processing time.

Tyler Watt (@TylerWatt_TROK):-

With respect Mr Veale, if you believe that, then you have a shockingly poor of understanding of the mechanism of the creation of money. (But you not alone!)

Alex G Smith:-

JP Morgan silently dropping their blockchain “initiatives” … its almost as if a big fast well permissioned database would do a better job.

Richard Moorhead:-

I know, but imagine. Although… If you start talking about embedding pivot tables into SQE relevant training I will do a Liam Neeson*

* trying not to get myself banned from twitter

Alex G Smith commenting on the BBC comment that a similar system could be achieved with other technologies such as cloud-based ledger databases that encrypt data and control who can access what information:-

Sorry – I said that 2 years ago but got shot down.

Rupert Collins-White (@RupertWhite):-

Gartner analysts would, in their defence, recommend you go to sea in a sieve, if there were Jumbly dollars in it for them …

Bootdisk (@bootdisk):-

Well for a start, your right to be totally forgotten ranges from incredibly difficult to impossible with blockchain

AK Martin (@empo11on):-

Please write this up as a short publication. Not only will it be cited until the cows come home (REF!), you’ll also be arming loving colleagues with a potent tool with which to dissuade LLM students from writing their theses on blockchain. It makes me want to pull my hair out.

Professionalize your rage with a DOI!

Michael Veale:-

Just Doi It.

AK Martin:-

Blockheads Unchained.

And now I have written it up for AK Martin so it can be cited until the cows come home 🙂

Hopefully, it will do more good to those that read it than the Gartner press release that started the debate.

After that Gartner press release was republished at Artificial Lawyer a p.s. was added:-

the Deconstructing Smart Legal Contracts event at Cardozo Law School last night in New York was a great success. There were plenty of insights from the panels and also lots of incisive questions from the audience.

Other than tweets promoting the event I struggled to find any with those insights or incisive questions. Other than the p.s. above, Artificial Lawyer does not appear to have written about the event.

I came across a tweet that might perhaps suggest that only men have an interest in blockchain and smart contracts:-

But then I discovered that it was not just diversity of gender that was a problem at the Deconstructing Smart Legal Contracts manel in NYC but also diversity of thought on the topic. I discovered this from a blog post by VQ Virtual Intelligence from Sweden. They state that the manel:-

Started off though to give smart contracts a context without all the jargon and described what it really is about, i.e. a program (a computer protocol) to digitally transfer assets and enforce the negotiation or performance of a contract by self-executive code. Thus, smart contracts allow the performance of credible transactions without third parties and aim to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting.

None of the drawbacks appear to have been mentioned. They go on:-

The creation of smart contracts can involve a wide range of natural language and code, and, as could be expected, raised the question from the audience as to whether lawyers need to learn how to code or not. The panelists had somewhat different opinions on this topic, but the final consensus could be summarized as “if a lawyer has an interest in it why not, it’s always good to understand the logic behind coding, but from a value-perspective it’s probably more worth spending time on traditional work and collaborate with coding experts instead”.

So back to that old chestnut about lawyers coding. I have, of course, covered that fully on this blog before: Lawyers and coding and again at Document Automation is not a good use case for Lawyers Learning to Code.

The VQ blog post goes on:-

As for the technology behind smart contracts, it was agreed in the panel that even though smart contracts do not require blockchain per se, it will definitely be the dominant technology for it. They did not want to make any predictions weather it would be public blockchain or private blockchain though, but all agreed that at some point one of the versions would prevail. All panelists saw an enormous potential in blockchain and smart contracts, and the way they will provide access to justice and transform the role of lawyers and legal services, even saying that “blockchain will take over the world and all assets will be digitalized” and that with smart contracts “we are building a new intranet”.

Oh dear! Did they really say “blockchain will take over the world and all assets will be digitalized” and that with smart contracts “we are building a new intranet”?! Some of the comments on Twitter about lawyers and blockchain did after all reference a cult!

And then:-

There are of course many challenges left to solve, like jurisdiction, security risks, responsibility issues if something goes wrong or if a party opposes the outcome etc, but the panel was confident that these challenges would be handled, pointing out that “blockchain has been around for ten years but has so far never been hacked”.

“Never been hacked”. Really?! That’s not what I’ve read. A year ago (almost to the day) the MIT Technology Review ran an article entitled ‘Once hailed as unhackable, blockchains are now getting hacked‘. They pointed out that:-

More and more security holes are appearing in cryptocurrency and smart contract platforms, and some are fundamental to the way they were built.

This article gives a number of examples of successful blockchain hacks and enlightens us that:-

In total, hackers have stolen nearly $2 billion worth of cryptocurrency since the beginning of 2017, mostly from exchanges, and that’s just what has been revealed publicly. These are not just opportunistic lone attackers, either. Sophisticated cybercrime organizations are now doing it too: analytics firm Chainalysis recently said that just two groups, both of which are apparently still active, may have stolen a combined $1 billion from exchanges.

We also learn of smart contract bugs:-

A bug in a live smart contract can create a unique sort of emergency. In traditional software, a bug can be fixed with a patch. In the blockchain world, it’s not so simple. Because transactions on a blockchain cannot be undone, deploying a smart contract is a bit like launching a rocket, says Petar Tsankov, a research scientist at ETH Zurich and cofounder of a smart-contract security startup called ChainSecurity. “The software cannot make a mistake.”

These bugs can be exploited:-

A fund, called the Decentralized Autonomous Organization (DAO), was set up in 2016 using the blockchain system called Ethereum. Shortly thereafter, an attacker stole more than $60 million worth of cryptocurrency by exploiting an unforeseen flaw in a smart contract that governed the DAO. In essence, the flaw allowed the hacker to keep requesting money from accounts without the system registering that the money had already been withdrawn.

We hear that:-

Hundreds of valuable Ethereum smart contracts were already vulnerable to this so-called reentrancy bug, according to Victor Fang, cofounder and CEO of blockchain security firm AnChain.ai. Tens of thousands of contracts may contain some other kind of vulnerability, according to research conducted last year. And the very nature of public blockchains means that if a smart-contract bug exists, hackers will find it, since the source code is often visible on the blockchain. “This is very different than traditional cybersecurity,” says Fang, who previously worked for the cybersecurity firm FireEye.

Buggy contracts, especially those holding thousands or millions of dollars, have attracted hackers just as advanced as the kind who attack banks or governments. In August, AnChain identified five Ethereum addresses behind an extremely sophisticated attack that exploited a contract flaw in a popular gambling game to steal $4 million.

Surprisingly none of this appears to have been mentioned as part of the “insights” by the manel or “incisive questions” from the audience in NYC the other week. Instead the manel appears to have misled the audience with the clearly false statement that “blockchain has been around for ten years but has so far never been hacked”! Was this therefore a straw manel? Daniel Munro has provided a definition of that for us:-

Straw Manel (n): panel of men talking nonsense.

The Deconstructing Smart Legal Contracts event in NYC was organised by Aaron Wright, co-founder of OpenLaw. This is “an open source protocol that aims to arrange the world’s commercial relationships”. OpenLaw claim that they are “building the first decentralized peer-to-peer protocol for creating legal agreements. Just like how Bitcoin ushered in an era of peer-to-peer payments, OpenLaw is ushering in the future of peer-to-peer legal agreements.”

So probably unlikely that the organiser was going to bring in speakers with a counter view to what OpenLaw are trying to create. Instead it appears that it was the evangelists no doubt preaching to the converted.

In a week where there has been criticism of a lack of customers in the room at legal technology conferences I think we should also be questioning legal technology conferences where only one viewpoint is expressed and the other is suppressed. That would never happen in a proper court of law and lawyers shouldn’t expect it to happen at the conferences they attend.

To resolve the diversity of thought issue do call in David Gerard to keynote at your next blockchain/smart contract conference. As David Gerard puts it in ‘Attack of the 50 foot Blockchain‘ smart contracts are “a bad idea in every way”. He explains:-

Computer code maps very badly to real-world legal agreements, where the hard part is not normally operations, but what to do when things go wrong; immutability means you can’t fix problems, programmers need to write perfect bug-free programs first time every time, and if the contract can’t be updated if circumstances or laws change; if the contract acts on real world data, that data will often need human interpretation. And imagine your money working as reliably as your PC.”

After giving a comparison with Dr. Strangelove (the best-known story of an unstoppable smart contract – involving nuclear bombs – going wrong), David Gerard adds:-

Fortunately, most of the worst real-world smart contract proposals are infeasible; what they’re actually used for is “honest Ponzis” and ICO tokens.

David Gerard also points out that:-

Smart contracts work on the wrong level: they run on facts and not on human intent – but legal contracts are a codification of human intent. Human intent is inexact, but contracts assume they will be running on human minds in the context of human institutions, for human purposes.

A conventional contract, even one specified as precisely as possible, will have disputes and changes in circumstances, and resolving these will often involve ascertaining what people were thinking at the time and what the world outside the contract was doing. The purpose of law is not to achieve philosophical or mathematical truth, but to take a messy reality and achieve workable results that society can live with.

So hopefully we will not see, anytime soon, the straw manel’s vision of blockchain taking over the world and all assets being digitalized.

——

For previous posts on this blog on lawyers and blockchain see:-

Hack the Law to Reinvent the Wheel?

What does it say when a Legal Blockchain eBook is promoted by FAKE views?

Blockchain is just hype? Allen & Overy won’t worry