Edwin Rice, chief operating officer of CTG Blockchain Malaysia and chief executive of GemVault, spoke to Patrick Dransfield.
What is blockchain?
The blockchain is one of the most revolutionary tools of our time — and that is by no means an exaggeration. Simply, it’s a ledger. It keeps track of information of all sorts in an unalterable record. This may not sound exciting until you start to understand and consider the applications of such a system.
Another key feature of the system that adds power and usefulness is the concept of decentralisation. Traditionally, records are kept and stored by a centralised entity. This allows for those records to be potentially altered by such an entity and also provides a single point of failure. This has import in financial systems, voting systems, real estate records, medical records and much more. With the blockchain, the records are stored, shared and verified by everyone on the network and eliminate the need for trust or reliance on a single entity. This dispels the previous two problems of centralised systems that I just mentioned. When any one node or member of the network attempts to alter the data, the other participants can reference each other’s records and mutually verify the inaccuracy of the fraudulent actions or transactions.
In addition to that, transactions are more secure due to cryptography, cheaper than traditional systems and faster. The myriad of advantages afforded by blockchain make it a superior, and natural, choice for data storage going forward. It’s far too much to explain every aspect and benefit in such a short space or time, so I’ll have to leave it here for now. But suffice it to say, it wouldn’t have attracted the attention of the world’s best and brightest individuals, largest corporations and most powerful governments if there wasn’t something there.
How does blockchain enable smart contracts?
Smart contracts are essentially self-executing code. Since all records are stored and distributed across the blockchain, there is universal agreement as to what has happened and when. With that knowledge, the system can respond to actions taking place on the network without the need for human intervention. This creates the potential for an infinitude of ‘if-then’ scenarios that can be used to code automatic actions of everything from sports betting and stock purchases and sales, to automatic royalty payments for publishing and smart city management.
The simplest example comes from a comparison of standard or ‘traditional’ contracts to smart contracts. Let’s say that you and I make a bet. ‘If’ it rains tomorrow, ‘then’ I will give you $5. Tomorrow comes and it rains, but I decide that I don’t want to pay. With a traditional contract, you would have to track me down, take me to court, or go through whatever other means it would take to get me to honour our agreement. This could be costly in terms of both time and money. On the other hand, with a smart contract, having our agreement connected to a simple weather API would ensure that if it indeed did rain in the area where our bet took place, the $5 would be deducted from my account immediately, automatically, and without need for either of our attention or my approval. The possibilities for this type of automatically executing ‘if-then’ statements based on distributed and verifiable data is limited only by our imagination, and ability to code.
What legal applications do you envisage for smart contracts?
Law, legal agreements and the enforcement of such lends itself quite well for the introduction and application of smart contracts. Commercial transactions, insurance, licensing agreements, rights and property transfer, tax payments or collections, registration of title (or anything else), and any kind of documentation process are just some of the areas in which smart contracts will be applied to the industry.
This will be due to the potential benefits smart contracts will provide such a increased trust (as documents are encrypted on a shared ledger), autonomy (which means no need to rely on middlemen), duplication (because there are multiple copies available/accessible on the blockchain), safety (due to cryptography), speed (since software automates many routine/manual tasks), cost savings (considering there are no/less middlemen), and accuracy (thanks to computer-generated content not susceptible to human error). At the end of it all, we are talking about increased efficiency. And in any industry, it is those that can intelligently leverage the greatest efficiencies that pull ahead of their peers and offer greater products and/or services to their clients. With happier and greater numbers of clients, success follows. This is generally true, and it is also specifically true in the case of the legal profession.
Why should lawyers care about smart contracts?
Because, as with the advent of the internet, the game is changing. It would seem ridiculous and even unbelievable to hear of an in-house legal department or private practice lawyer to say that he or she doesn’t use the internet, doesn’t have an internet connection, has no need for a computer or doesn’t communicate by email or chat application. The efficiencies that these tools provide are indisputable. Similarly, and especially as the technology develops, the same will be said about the blockchain and smart contracts. There is a real opportunity to get in front of this and bring yourself and/or your firm/legal department into the future right now. One could be forgiven for missing the import of the first internet. But having seen such a revolution once before and how it has and continues to massively impact the world, we would be nothing short of remiss not for not knowing about this coming revolution but for doing nothing to prepare for it once you we have been made aware or it has been brought to our attention.
Edwin Rice will be speaking at the first KL Blockchain Week in September.