Blockchain technology is a revolutionary development, yet the law is, once again, stuck in the time of the dinosaur. As we lawyers chisel stone, the world around us is advancing at lightspeed. It’s time to pull our heads out of West’s Digest in print and embrace the new digital world around us.
You don’t know it yet but everything has changed with the invention of the blockchain and the smart contract. Eventually smart contracts will be the method by which the transfer of all assets occur, whether the transfer is a result of a business agreement or some type of estate planning. Additionally, the blockchain will be the place where all assets exist, whether digital or physical.
The smart contract is a function of the blockchain. The blockchain is where crypto currency lives. However, the functionality of the blockchain is not limited to currency. The emergence of the non fungible token or NFT has demonstrated that the blockchain is a platform that has quite a bit of potential. Namely, we now know that the blockchain will house more than just currency.
The smart contract aspect of certain blockchain platforms allows for “if/then” logic to be built into a transaction. For example, let’s say that we agreed to have me change your car’s oil, upon completion of the oil change, you could keep your wallet in your pocket because the funds would automatically transfer. Although, the transfer would only occur upon completion of the negotiated task.
Despite the abundant potential, there will likely be slow adoption. The smart contract will, in many ways, take work away from attorneys. Simple, and in the future, complex agreements will be programmed into a transaction with all terms and caveats contemplated in the programming logic.
We should embrace rather than reject this technology. It has the potential to clear up a significant amount of litigation. It will also hasten the speed of transactions, bringing business squarely into the twenty-first century as contemplated by science fiction.
Transfers of Assets other than Currency/NFTs
Let’s say you want to transfer your home to your child. To do so, you would need to have an attorney draft a deed, which includes the legal description of your property and the amount of interest you intend to convey (in this case, 100%). You would then need to sign that deed in front of a notary public (and possibly witnesses, depending on your state). Lastly, the deed would need to be recorded in the register of deeds in the county where the property is located.
In other words, we have much the same process of transferring real property as did jolly ol’ England from whom we inherited our common law. The only update we’ve made is that we now have a digital registry of deeds to accompany the physical one (truly futuristic).
What if real property transfers could happen instantaneously will all the same (and more) safeguards that we currently have in place? Imagine, instead of a register of paper deeds, we have every property “minted” on the blockchain, property description and all. Once on the blockchain, real property transfers would happen via smart contract rather than through the antiquated deed transfer we still deal with today.
Assets on the blockchain are currently held in a “wallet.” This wallet is not much different than a bank/brokerage account and the “wallet ID” is not much different than an account number. Wallets are set up to not only hold assets but to also allow for the seamless (and almost instantaneous) transfer or swapping of assets. These wallets are allso incredibly secure, since they exist on the blockchain and have a unique and encrypted identity. Currently, the only assets that can be held in a wallet are those assets that exist on the blockchain. However, there’s nothing saying we can’t put other assets in our wallets.
It would not be difficult to assign an asset, such as real property or a vehicle, a digital identification that exists on the blockchain. If so, physical assets with a digital identification could exist in our digital wallets. The ownership of such assets would be evidenced through their association with whatever wallet they exist in. Further, transfer of such assets could occur instantaneously, whether for purposes of gift, sale, or testamentary devise.
The future is here. Attorneys around the world have a duty to embrace the new technology to make asset ownership, transfer, and protection easier and more effective for our clients. A push for adoption of blockchain technology is needed. The future is a place where attorneys and digital blockchain engineers work together to bring the law into the twenty-first century.
SCHEDULE YOUR FREE CONSULTATION
Brenton S. Begley
Estate Planning & Elder Law Attorney