The legal industry has developed a reputation for avoiding next-generation technologies; however, with blockchain and the metaverse, that perception is shifting
NATIONAL HARBOR, Maryland — At the opening keynote of the 2022 International Legal Technology Association Conference (ILTACON), futurist Patrick Schwerdtfeger had a warning for the attendees: “When things change, there are winners and there are losers. We need to make sure we’re some of the winners.”
However, there was one crucial detail he may have forgotten: Schwerdtfeger was speaking to a room filled with veterans of the legal industry, which of course, is built on precedent, mixed with a healthy dose of risk aversion. Indeed, an industry that has earned a reputation over the years of never even trying to explore use cases for next-generation technologies.
Recently, however, a funny thing happened: Law firms and corporate law departments alike have gotten more intelligent about both being a part of the conversation surrounding these technologies’ development, and exploring novel ways to separate themselves from their peers. In doing so, as ILTACON revealed, many within the legal industry have started to take a proactive stance on innovations like the blockchain and the metaverse, with not just technologists but leading attorneys themselves jumping on board.
Blockchain by blockchain
Blockchain has received a lot of attention for being the underlying technology behind digital assets such as cryptocurrency and non-fungible tokens (NFTs). Some innovators in legal envision blockchain being used to explore more business-oriented applications of distributed ledger technology.
Law firm Hogan Lovells, for example, sees blockchain technology as an opportunity to reform its real estate processes. The firm has developed DriveChain, a collaboration between the firm, banking company BNP Paribas, and blockchain technology provider Integra Ledger, to automate parts of the real estate process. DriveChain looks to eliminate manual data entry or multiple layers of approvals by automatically coding deal details such as parties, sale price or amount for rent, and more, into the document. That generates a unique deal ID, which is put on the blockchain. The data is then given a unique code called a hash, through which all parties are notified if any details of the deal are changed.
“What we are doing with blockchain is validat[ing] that the document they received, that the metadata within the document, is still validated,” says Bob Shaeffer, senior manager of architecture and integrations at Hogan Lovells, during a panel on the use of blockchain in professional services firms.
Shaeffer is quick to add that DriveChain is not a piece of blockchain technology itself, but rather the name for the new real estate-centric workflow. Blockchain technology simply functions as a piece of the overall puzzle, and only the hash and the unique ID for the data actually sit within the blockchain architecture. This way, the firm still holds crucial deal details inside its own walls for the protection of clients, but it still utilizes the new technology to cut time out of the process for approvals.
It’s this type of practical application that more and more firms are exploring on the blockchain, adds Joseph Raczynski, a technologist and futurist with Thomson Reuters, from “smart” contracts that are automatically executed once specifically-coded parameters are hit, to decentralized finance (DeFi) marketplaces that are increasingly becoming a hub for business transactions. Raczynski even pointed to one firm, Rose Law Group, that executed a legal wedding online, with both a pre-nuptial agreement and a marriage license coded as a legally-binding NFT.
“They moved down the road of taking documents that are unique and making them an NFT, which is what we’re going to see in the not too distant future,” Raczynski explains.
Into the metaverse
It’s not just business applications that have those in the legal industry excited about future technologies, however. For legal and professional services organizations, the metaverse is quickly becoming not the realm of first movers, but simply where clients hold their value.
Alejandro Vallellanes, knowledge services manager at law firm Baker McKenzie, says that between explosive cryptocurrency holdings, the value of social media advertising, and an increasing emphasis on digital holdings like NFTs or virtual real estate, “for some people, that asset class is more valuable than their physical assets.” Vallellanes, who spoke on a panel about the use of the metaverse in legal, adds that “when that happens across the board, we can already consider ourselves living in some sort of metaverse.”
Naturally, there is skepticism about whether the metaverse could truly become that pervasive.
Yet, almost half (48%) of consumer respondents said they would be very interested or somewhat interested in shopping within the metaverse within the next five years, according to a McKinsey & Co. survey from February 2022. More than 40% of respondents indicated they would be interested in using the metaverse to attend a telehealth appointment, attend a live learning course, or even meet with friends and family.
And where people are, money follows. Jerry Bui, a managing director at FTI Consulting who spoke on the same panel, notes that Goldman Sachs has estimated the metaverse’s ultimate market size to be somewhere between a $2 trillion to 12 trillion opportunity. Even now, Bui says, virtual gaming has become a $200 billion business, dwarfing many other forms of media and sports. “If you don’t think there’s momentum towards that end, just look at the money that’s flowing into this space,” Bui explains.
