ITProPortal reports… “The blockchain technology that powers and documents every Bitcoin transaction has gone fairly unnoticed. Until now.”
Of course, anybody who reads our blog or has been looking at the legal sector and blockchain will already know all of this.
What interests us, here at Cognate, is that articles like this were not to be seen late last year; but as we approach the end of the first quarter of 2018 we aren’t surprised to see an iteration of a piece like this every 2nd or 3rd day.
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.