What do we mean by blockchain lawsuits? In simple terms, the underlying technology for cryptocurrencies like Bitcoin likely will become a fixture in courtrooms and legal disputes in the years to come.
A cryptocurrency called Ethereum has devised a way for parties on a blockchain to execute agreements on the blockchain through the use of something called the “smart contract.”
A smart contract by definition is a “computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract.” It can be executed without the use of a third party. Clearly, this has the potential to revolutionize the legal industry, bringing down costs for clients while eliminating many of the disputes and disagreements that arise regarding intent.
How Blockchain Lawsuits Will Actually Work
Much of what we know about the answer to this question right now, is that there is little to actually know. The technology primarily is still in the hands of regulators with no definitive case law to determine how it could or should be handled in court.
One state — Vermont — recently became the first in the US to allow the use of smart contracts as admissible evidence of business records or transactions. The fact other states have been slow to follow suit should highlight the degree of apprehension and uncertainty remaining with blockchain in the legal realm.
Assuming Vermont becomes a model for such matters, Texas could end up admitting smart contracts into litigation. If this were to move forward, blockchain lawsuits could end up requiring expert testimony to verify the legitimacy of contracts for judges who may not be up-to-speed on their coding.
While that could add an additional cost to a legal proceeding, it would probably be a net efficiency given the savings in time and administrative costs that go with moving a case through the legal system.
Texas and Blockchain Lawsuits
Thus far, Texas has adopted a wait-and-see approach to how it handles smart contracts in blockchain lawsuits. For now, the state, through its Department of Banking, has issued one 2014 memorandum offering guidance for money transmitter licensing. But look for this to change in the next year or two as more businesses move into blockchain use to find efficiencies and forge agreements.
Dallas attorney John Teakell has years of experience with matters of financial litigation, and he has kept his fingers on the pulse of this new technology as it relates to legal matters through continuing education. He’s equipped to answer any questions you may have related to blockchain and its future impact. If you need guidance, reach out to him today.