On Sunday, November 5th, LegalRnD had the honor of hosting Pamela Morgan, Founder, and CEO of Third Key Solutions. The theme of the morning workshop was educating future attorneys on what they need to know about Bitcoin, Blockchain, and Smart Contracts. “Bitcoin, blockchains, and smart contracts are coming to disrupt the legal practice. These technologies provide new ways of delivering services that are faster, more secure, and often eliminate the need for “trusted” third parties. They’ll impact the way lawyers, and their clients, do business.”

The workshop provided law students with a practical understanding of what’s happening now (and what’s just hype); what students, as future attorneys, and potential clients need to know about the technology and the laws that govern them; and how to further develop your practice in this niche area.

What is Blockchain

“A blockchain is a decentralized distributed public ledger, accessible to all nodes connected to the blockchain (Nodes are individual computers that contribute computing power to the blockchain). Each transaction is stored on several computers connected to a common network, which individually validates whether each transaction should occur. For information to be included on the blockchain, the network (comprised of all the nodes) must reach a consensus, usually at least a majority. The transactions are then aggregated (“batches”) into blocks for organization. Then each block is connected to the previous block, hence the name blockchain. Each block is accessible to each node on the blockchain. The block becomes an immutable record and ultimately secure.” – based on research from Danielle Chirdon and Justin Evans

Workshop Take-Aways

Students learned that when advising future clients about blockchain applications and platforms, they should consider some key questions:

Is the blockchain public or private (DLT)?
Blockchains should be established as a Peer-to-peer network. Blockchain systems are stronger when connected to other computers and consistently being validated. If the blockchain is closed and secure behind a corporation’s firewall, it is subject to attack.

2. Who can change the future/past?
When analyzing the closed blockchain platform being proposed, we must identify those who have the ability to change transactions on the blockchain? Under the traditional system, the content on the blockchain remains an unchangeable transaction and requires the introduction of a new block to update terms amongst the parties.

3. At what cost?
Can a member of the blockchain easily alter the material incorporated on the closed blockchain platform? Under the traditional system, the ability to change material on the traditional blockchain requires a large computational feat. Because the traditional blockchain requires a large computational feat, the material added to the blockchain is considered largely immutable (secure/unhackable). Clients need secure blockchain platforms, securing their data and transactions.

5. Who will know and how?
If the material on the blockchain platform is altered, who will know and how will they be notified that the material is changed? Clients need the security of knowing that their material is secured and not easily altered by the members of the closed blockchain platform.

ICO Crowdsourcing

Students learned that many startups are using Initial Coin Offerings (ICO), rather than the capital-raising process required by venture capitalists or banks, to fund their companies. For example, Martin Köppelmann, 31, Stefan George, 29, and Matt Liston, 25 sought to use the ICO platform to raise 12.5 million for their startup, and did so in 11.5 minutes!This works by the startup offering its coin, in which investors can purchase, giving the early investor a stake in the company. To help assist in crowdfunding for ICOs, the DAO, which stands for digital, decentralized autonomous organization, was created to act as a form of investor-directed venture capital fund. Recently, governing bodies such as the SEC have come out and ruled the offering of coins for a stake in the company as securities. As ICO crowdfunding continues, 21st-century lawyers are needed to help startups adhere to potential laws that may govern them.