Blockchain Breakfast Summer Series, Part 3: Lawyers, Regulators & The Private Sector
By Lacey Shrum
Last week, I sat down with one of my dear and first friends from law school, Cole Davis. Cole is a (recovering!) attorney focused on his new startup Switchchord, a blockchain-based music licensing and copyright management platform. Here are a few takeaways from our discussion.
Status of the Current State
Cole referred numerous times to the use of blockchain as “describing the current state” for everyone to see. The immutable ledger, accessible to those who need it, is the perfect place for listing the current state, for example the ownership of bitcoin or the relationship of two parties. Because the ledger is a “trustless” place to store the status of our relationship, neither party needs to maintain their own ledger and a resulting audit is eliminated.
Hot in Here
In his practice as a corporate and entertainment attorney, Cole realized that the music rights industry and process is broken. In short, there are numerous actors and each maintains their own ledger or current state, resulting in a difficult and convoluted process for one to track ownership of a song or determine and pay those who maintain rights. Because of this, Cole started his research into trying to determine where to find and document the current state of music ownership. This led him to blockchain.
Cole and I share the opinion that traditional legal contracts will eventually morph into contracts made up of traditional legal prose and code, allowing contracts to be connected to one another and essentially talk and work in tandem. This will increase efficiency in reviewing documents for transactions and will limit the ability to breach the contract, most notably eliminating accidental breaches.
Regulator and Private Enterprise Besties
These fluid contracts lead us to endogenous, or “caused from within,” theory. The idea is that a significant amount of regulation can be drafted into code that can be used by the private sector to ensure compliance.
For example, state usury laws dictate the maximum legal interest rate of a transaction. Currently, that rate sits in the written word, unusable until someone looks it up, and it can quickly put otherwise-compliant-actors out of compliance upon a change. If this was included in a bit of code, the private sector contracts could call to the code and be updated with any subsequent legal changes, ensuring compliance.
Save the Lawyers
Cole believes code will not replace lawyers because clients seek counsel, not transactional documents. He opines that machine learning, blockchain, and artificial intelligence will have their place, and a lawyer’s responsibility is to understand these technologies and use the products that most efficiently serve their clients.
Quick Blockchain Takes
- Best Blockchain Use Case: Digital Identity
- Worst Blockchain Use Case: ICOs
- 10-Year Prediction: Individuals will realize that what they place on the internet is valuable and will want their privacy.
Don’t miss our final Blockchain Breakfast of the summer, Implementing Blockchain Solutions: How You Would & If You Should with Michael Lewellen on August 27th.