Blockchain Hogwash at Law School

I’m an LLM student at the University of Alberta studying computational law. One of my advisors recently gave me a copy of a handout that had been provided to some of his undergraduate law students by practitioners who had been invited as guest speakers.

Now, I don’t know who actually attended. What I know is that there are two names on the document. Both of them are partners in a top-10 law firm in Canada. Out of pity, that’s all I’m going to say about their identity.

The topic of the presentation was the use of blockchain in the legal industry. My advisor gave me the paper to ask my thoughts on it. I wrote him back today, and said “complete hogwash.”

Blockchain is a technology that is designed to accomplish two things: store data in such a way that a) no one can ever change it once it has been added, and b) no one can ever prevent anyone else from accessing it. Let’s call them immutability and permanence, respectively.

Blockchain achieves this by using an extremely expensive (arguably an insanely expensive) form of encryption.

I seem to remember recently someone reported that the amount of electricity expended-and paid for-to run Bitcoin’s blockchain was equivalent to the amount of electricity used by the Republic of Ireland in the same period of time.

Let that sink in for a minute.

OK, so here’s the thing. Immutability is nice. Permanence is nice. There are lots of applications for which immutability and permanence would be nice things to have. Better than not having them, all other things being equal.

But there is a difference between having a way with dealing with unwanted mutations of data, and having a way of dealing with unwanted deletions of data, and making those mutations and deletions impossible.

Consider the analogy to a house. Is it good if your house doesn’t burn down? Yes. Fireproofness is a good thing for a house to have. Are houses fireproof? No. Why? Because making a house fireproof would make it more expensive, and less functional. What do we do instead? We have smoke alarms to protect human life, extinguishers for small problems, building codes, and fire insurance. We have ways of mitigating these risks and correcting the damage they cause.

In the same way, most IT systems do not make data immutable and permanent. They just have ways of dealing with unwanted changes and unwanted deletions. The predominant method being backups. If it gets deleted or destroyed, there is a backup somewhere else. If the data gets changed it can be changed back, or if we don’t know what the data used to be, we can look at the backup and find out.

So the question of whether blockchain is the right tool for the job is not a question of whether it is better that the data not change or disappear. The question is whether it is absolutely necessary that it be impossible for the data to change or disappear. If not, blockchain is a way-too-expensive solution to your problem.

The number of problems that require absolute permanence and absolute immutability is not zero, but it is vanishingly small compared to the list of things for which permanence and immutability would be nice.

The paper presented to these law students gave a list of areas where blockchain will be employed.

In not one of those examples was both permanence and immutability critical.

Not one.

There was no discussion of what blockchain is, or how blockchain works. There was no discussion of any of blockchain’s expense, it’s problems for privacy that can’t be overcome without violating one or both of permanence and immutability.

These law students are being lied to. I am absolutely convinced that the people who told them these things believe them, and have no intention of misleading, and would be aghast and embarrassed to learn that they had misled people. I do not cast aspersions.

Nor are these particular lawyers or this particular law firm unique.

The entire legal industry is awash in bullshit about blockchain.

But we need to start doing a hell of a lot better than this in the law schools. We can’t be feeding people this nonsense in an institution of higher learning. Legal education is inept enough as it is without it actively inculcating falsehoods.

If someone tells you blockchain will be used for X, ask them why a run-of-the-mill database, operated by a trusted authority, with a good backup, would not be good enough. If they can’t or don’t answer you, they don’t know what they are talking about.

Oh, and if they do answer you, but the answer doesn’t include some reason that government control or control by some other central authority is either impossible, or unacceptable, then they probably still don’t know what they are talking about.

Oh, and by the way…

“Smart Contracts” are a completely different thing than blockchain. Smart contracts, and more generally the digitization of legal rules, really is the future of the profession of law.