Beyond Cryptocurrency: 5 Questions about the Future of Blockchain for Thomson Reuters Technologist Joe Raczynski

Written by Gina Scialabba and originally published by the Legal Executive Institute

Blockchain — we’ve all heard about it, and also heard that it will certainly disrupt the financial, legal and public sector worlds near you.

The real questions surrounding the future of blockchain, however, relates to the evolution of its virtual ledger technology and the ways it will change the way we do business — regionally, nationally and globally.

Financial professionals wonder how this digital ledger will impact their day-to-day activities such as regulatory compliance or combating money laundering. Legal professionals are asking how blockchain will revolutionize their practices. Public sector employees want to know how to incorporate blockchain to improve security and efficiencies.

However, the overarching question pertaining to blockchain, no matter what industry you work, is whether or not we trust the technology.

For answers, Legal Executive Institute spoke to Thomson Reuters Technologist and Futurist, Joseph Raczynski, who recently was a featured panelist at the three-city, 2018 Thomson Reuters Public-Private Partnership Forums (P3) which held its first event in New York City on March 7.

Raczynski also recently interviewed Judith Alison Lee, a partner in the Washington, D.C. office of Gibson Dunn & Crutcher and Co-Chair of the firm’s International Trade Practice Group, about the nuts and bolts of blockchain and cryptocurrencies. (You can hear Part 1 and Part 2 of that interview here.)

Legal Executive Institute: In the financial services industry, blockchain is now touted as the future infrastructure of the industry. Clearly, this could be disruptive to traditional banking operations, but also may also enhance the way anti-money laundering (AML) professionals and regulators do their job. How do you see blockchain changing the way financial institutions reduce losses from economic crimes?

Joe Raczynski: There is tremendous promise with this technology in the banking industry. Its core strength is to create permanent, immutable, redundant ledgers, which are auditable. This is the Holy Grail of an accountant or anyone who wants to see a chain of events or track money.


If you’re riveted by blockchain and want to know more, you can catch Raczynski at further P3 events on April 24 in Charlotte, N.C. and on April 26 in Washington, D.C. (You can also follow Raczynski on Twitter at @joerazz.)


There are some significant challenges. Currently, virtual currencies or cryptocurrencies like Bitcoin are unregulated, there is not a central authority that can dictate or control this, as by its very nature, it is decentralized. So, I could send $1 million in cryptocurrency to someone in Iran or North Korea in about 20 minutes, and that could pose problems for some governments. Another major issue that lies ahead are the anonymous virtual coins or tokens that are becoming more popular.

With these, any bad actor could use this to store or launder money without traceability. For the AML world this is probably its biggest challenge in the near term with blockchain technology.

Legal Executive Institute: Financial institutions spend tens of millions of dollars complying with regulations related to Know Your Customer (KYC) rules, as well as due diligence. What impact will blockchain have on KYC or other due diligence procedures?

Joe Raczynski: Fortunately blockchain has the possibility to create structured, yet decentralized data on people and businesses. These stores of information will be permanent ledgers of information. They will be another tool in the ongoing saga to identify people that investigators should be able to rely on.

Legal Executive Institute: Let’s turn to law firms for a moment. As blockchain technology matures, it seems likely we will continue to see applications impacting the legal profession. What role will blockchain play in contract form and estate planning? Should legal professionals be worried their jobs may become obsolete due to smart contracts or self-executing contracts?

Joe Raczynski: Lawyers should not be worried about their jobs becoming obsolete in the near future. However, in time, when smart contracts begin to truly take shape, it will make the drafting and execution of these documents more automated. In the majority of situations, you will have web forms that ask questions, anyone can fill out the answers, and then the document is drafted. Once the document is completed, it is stored on a blockchain. If there are contingencies — for example, sell all shares of a stock upon the death of Person A — the contract will do this. A “Smart Contract” is essentially a few pieces of code that executes or does something based on some perimeter. It is essentially an “if/then” statement.

blockchain

Thomson Reuters’ Joe Raczynski

Legal Executive Institute: Blockchain has a lot of potential to change the way government agencies work, both in the immediate future and with a long look ahead. How do you see blockchain changing the way public records are kept and maintained, such as census data or even birth and death records? Could you see these impacting day-to-day functions such as land conveyances and tile registries?

Joe Raczynski: The State of Illinois is already producing birth certificates on a blockchain. Delaware is moving all corporate records to a blockchain. This is happening now. Dubai plans on having all government records on a blockchain by 2020. In time, all public records will be on a blockchain, which should make it easier to track and interact with the files.

It will also provide higher levels of security and transparency and should be more efficient. As people start to use tokens for all assets that they own, tracking this via a blockchain will become even more important.

Legal Executive Institute: Will blockchain or cryptocurrencies change the way government works with the private sector?

Joe Raczynski: It is possible that some of the traditional models of records keeping which were once maintained by the government will become more open and not run through those traditional central authorizations but will be exchanged through private hands. The safeguard is that these transactions would be auditable as the chain of title will be transparent on the blockchain. It is feasible that you will not have government agencies involved in the oversight of this as they have in the past, instead, a nebulous network that all parties have insight into will evolve.

Podcast: The Technology of Blockchain & Cryptocurrencies with Judith Alison Lee of Gibson Dunn (Part 2)

Originally published in the Legal Executive Institute.

By Joseph Raczynski, Gregg Wirth, and Judith Alison Lee

In the second part of our podcast on the technology behind blockchain and cryptocurrencies like Bitcoin, I speak with Judith Alison Lee, a partner in the Washington, D.C. office of Gibson Dunn & Crutcher and Co-Chair of the firm’s International Trade Practice Group.

Gibson Dunn

Judith Alison Lee of Gibson Dunn & Crutcher

Among her other areas of expertise, Ms. Lee advises clients on issues relating to virtual and digital currencies and related blockchain technologies.


Podcast: The Technology of Blockchain & Cryptocurrencies with Judith Alison Lee of Gibson Dunn (Part 1)

Originally published in the Legal Executive Institute.

By Joseph Raczynski, Gregg Wirth, and Judith Alison Lee

In the first part of our podcast on the technology behind blockchain and cryptocurrencies like Bitcoin, I speak with Judith Alison Lee, a partner in the Washington, D.C. office of Gibson Dunn & Crutcher and Co-Chair of the firm’s International Trade Practice Group.

Among her other areas of expertise, Ms. Lee advises clients on Gibson Dunn

issues relating to virtual and digital currencies and related blockchain technologies.

Judith Alison Lee of Gibson Dunn & Crutcher

 


How to Launch an ICO Token on Ethereum in 90 Minutes

By Joseph Raczynski

So you want to have your own cryptocurrency, eh?  It is surprisingly not too cumbersome to create.  If you have some very basic coding skills, general understand of a digital wallet, and the ability to follow point by point instructions, this should take about 90 minutes.  I will guide you through the process of launching your own token to fund your company, or more than likely simply test how to create an Ethereum (ERC20) token.  I am not responsible for anything that comes from your use of this code or the outlined process.  Use at your own risk.

Recently I was asked to put together a more formal booklet on how someone could technically launch an ICO (Initial Coin Offering) in order to create a blockchain enabled cryptocurrency.  I wrote up all of the various components and loads of caveats around all of the considerations.  In order to do this properly, you should have a full blown business plan, marketing master plan, have sought legal compliance, and a whole host of other services.  To that end, there is a new cottage industry surrounding taking companies through the ICO process.  ICO Box is one such company that specializes in this end to end consulting.

For the sake of this guide, I will walk you through all of the steps to create your first token for your project right here.  Some context, I based this off of my upcoming ICO for DC WiFi as the example.

Part 1: You will need the following:

  • Buy some ETH (if you are new to this, buy it from Coinbase)
  • A text editor for your code modification (Open a Text file on Windows)
  • Download a digital wallet (MetaMask)
  • Easy Compilier (via the web Solidity Remix IDE Compiler)

Part 2: Business Decisions

You shockingly need very little to get started with your token creation.  You will need four pieces of information;  1) Name of the Token, 2) Token Symbol (like a stock ticker), 3) The Token Decimal Places (making the token divisible), and 4) The total number of tokens in circulation.

In short:

  1. Number of Tokens You Will Assume (Will be all of the coins initially)
  2. Total Tokens in Circulation (ranges from 10,000 to 1,000,000,000)
  3. Name of the Token
  4. Token Decimal Places (usually 18 places)
  5. Token Symbol (use three or four letters)

My real example: (see live)

  1. Number of Tokens You Will Assume = 1,000,000,000
  2. Total Tokens in Circulation = 1,000,000,000
  3. Name of the Token = The Joerazz Crypto Token of Greatness 
  4. Token Decimal Places = 18
  5. Token Symbol = JoRa

Part 3: The Contract Coding

Now that you know the basics, copy and paste all of the code below into your your code editor, or a text document.  Simply focus on changing the five facets from above in the red section of code below. 

pragma solidity ^0.4.4;

contract Token {

    /// @return total amount of tokens
    function totalSupply() constant returns (uint256 supply) {}

    /// @param _owner The address from which the balance will be retrieved
    /// @return The balance
    function balanceOf(address _owner) constant returns (uint256 balance) {}

    /// @notice send `_value` token to `_to` from `msg.sender`
    /// @param _to The address of the recipient
    /// @param _value The amount of token to be transferred
    /// @return Whether the transfer was successful or not
    function transfer(address _to, uint256 _value) returns (bool success) {}

    /// @notice send `_value` token to `_to` from `_from` on the condition it is approved by `_from`
    /// @param _from The address of the sender
    /// @param _to The address of the recipient
    /// @param _value The amount of token to be transferred
    /// @return Whether the transfer was successful or not
    function transferFrom(address _from, address _to, uint256 _value) returns (bool success) {}

    /// @notice `msg.sender` approves `_addr` to spend `_value` tokens
    /// @param _spender The address of the account able to transfer the tokens
    /// @param _value The amount of wei to be approved for transfer
    /// @return Whether the approval was successful or not
    function approve(address _spender, uint256 _value) returns (bool success) {}

    /// @param _owner The address of the account owning tokens
    /// @param _spender The address of the account able to transfer the tokens
    /// @return Amount of remaining tokens allowed to spent
    function allowance(address _owner, address _spender) constant returns (uint256 remaining) {}

    event Transfer(address indexed _from, address indexed _to, uint256 _value);
    event Approval(address indexed _owner, address indexed _spender, uint256 _value);
    
}

contract StandardToken is Token {

    function transfer(address _to, uint256 _value) returns (bool success) {
        //Default assumes totalSupply can't be over max (2^256 - 1).
        //If your token leaves out totalSupply and can issue more tokens as time goes on, you need to check if it doesn't wrap.
        //Replace the if with this one instead.
        //if (balances[msg.sender] >= _value && balances[_to] + _value > balances[_to]) {
        if (balances[msg.sender] >= _value && _value > 0) {
            balances[msg.sender] -= _value;
            balances[_to] += _value;
            Transfer(msg.sender, _to, _value);
            return true;
        } else { return false; }
    }

    function transferFrom(address _from, address _to, uint256 _value) returns (bool success) {
        //same as above. Replace this line with the following if you want to protect against wrapping uints.
        //if (balances[_from] >= _value && allowed[_from][msg.sender] >= _value && balances[_to] + _value > balances[_to]) {
        if (balances[_from] >= _value && allowed[_from][msg.sender] >= _value && _value > 0) {
            balances[_to] += _value;
            balances[_from] -= _value;
            allowed[_from][msg.sender] -= _value;
            Transfer(_from, _to, _value);
            return true;
        } else { return false; }
    }

    function balanceOf(address _owner) constant returns (uint256 balance) {
        return balances[_owner];
    }

    function approve(address _spender, uint256 _value) returns (bool success) {
        allowed[msg.sender][_spender] = _value;
        Approval(msg.sender, _spender, _value);
        return true;
    }

    function allowance(address _owner, address _spender) constant returns (uint256 remaining) {
      return allowed[_owner][_spender];
    }

    mapping (address => uint256) balances;
    mapping (address => mapping (address => uint256)) allowed;
    uint256 public totalSupply;
}


//name this contract whatever you'd like
contract ERC20Token is StandardToken {

    function () {
        //if ether is sent to this address, send it back.
        throw;
    }

    /* Public variables of the token */

    /*
    NOTE:
    The following variables are OPTIONAL vanities. One does not have to include them.
    They allow one to customise the token contract & in no way influences the core functionality.
    Some wallets/interfaces might not even bother to look at this information.
    */
    string public name;                   //fancy name: eg Simon Bucks
    uint8 public decimals;                //How many decimals to show. ie. There could 1000 base units with 3 decimals. Meaning 0.980 SBX = 980 base units. It's like comparing 1 wei to 1 ether.
    string public symbol;                 //An identifier: eg SBX
    string public version = 'H1.0';       //human 0.1 standard. Just an arbitrary versioning scheme.

//
// THIS IS WHAT YOU NEED TO DO - CHANGE THE BELOW TO REFLECT YOUR CHOICES FROM WHAT YOU CHOOSE ABOVE IN RED
//

//make sure this function name matches the contract name above. So if you're token is called TutorialToken, make sure the //contract name above is also TutorialToken instead of ERC20Token

    function ERC20Token(
        ) {
        balances[msg.sender] = NUMBER_OF_TOKENS_HERE;               // Give the creator all initial tokens (100000 for example)
        totalSupply = NUMBER_OF_TOKENS_HERE;                        // Update total supply (100000 for example)
        name = "NAME OF YOUR TOKEN HERE";                                   // Set the name for display purposes
        decimals = 0;                            // Amount of decimals for display purposes
        symbol = "SYM";                               // Set the symbol for display purposes
    }

    /* Approves and then calls the receiving contract */
    function approveAndCall(address _spender, uint256 _value, bytes _extraData) returns (bool success) {
        allowed[msg.sender][_spender] = _value;
        Approval(msg.sender, _spender, _value);

        //call the receiveApproval function on the contract you want to be notified. This crafts the function signature manually so one doesn't have to include a contract in here just for this.
        //receiveApproval(address _from, uint256 _value, address _tokenContract, bytes _extraData)
        //it is assumed that when does this that the call *should* succeed, otherwise one would use vanilla approve instead.
        if(!_spender.call(bytes4(bytes32(sha3("receiveApproval(address,uint256,address,bytes)"))), msg.sender, _value, this, _extraData)) { throw; }
        return true;
    }
}

This code is from the good people at Code-Factory.  You can see if they have any newer code here. The above code is displayed in three parts, combined into one section for ease here.  The code is from February of 2017, v 0.4.4.

When you are filling in the four fields, one funky aspect that you will want to pay attention to is the decimal portion.  Examples: If I wish to create 1,000,000,000 billion tokens and I want 18 decimal points, then I have to add 18 zeros onto the 1 billion number.  This number is added to two fields in your code.  So for 1 billion coins with 18 decimals point would look like 1000000000000000000000000000 and do not add commas to your code.  Another example, if you do not want any decimal points then you would not add any extra zeros.  Last example on this, if you want 8 decimal points, you would add 8 zeros to the 1,000,000,000 billion so it would look like 100000000000000000.  Most cryptocurrencies have 18 decimals.

  • Number of Tokens You Will Assume = 1000000000000000000000000000
  • Total Tokens in Circulation = 1000000000000000000000000000

Part 4: Testing via Ropsten Test Net

It is time to take your modified code – all four lines – and test it out.  You could test this in Ethereum’s live environment, but that would be a waste of money (a few dollars up to $8) for each time it doesn’t work.  So make sure you are on the TestNet of Metamask.

Download MetaMask Chrome plugin.  This is a digital wallet which can store Ethereum bmetamaskased tokens (ERC20), like the one you are going to make.  You can also deploy smart contracts via this robust little app.  MyEtherWallet, is also another option, but for this overview, I am using MetaMask for ease.

 

 

 

When you create any digital wallet, the seed (a bunch of random words) is something that you will want to take the utmost care around securing.  If you lose these words (essentially your password) you will lose complete access to your wallet on the blockchain and there is no way to recover this – none.  So keep it safe and secure – preferably offline.

The next step is to drop your doctored code into a compiler, which reviews the code for errors, identifies code that could be better defined, and then publishes that code directly to Ethereum’s blockchain.  Click on Solidity Remix IDE Compiler and copy and paste the code you modified in your text editor into the compiler.

Open your MetaMask wallet, which should be a tiny icon on the upper right corner of Chrome.  When it is open, make sure you change the network to “Ropsten TestNet” by clicking the little arrow.

testnet

Once you do this, you will need to add fake ETH to the TestNet.  Since this is a test network, you get free fake ETH from the network, but you have to request it.  If you don’t have any of the foe ETH, you will not be able to send your contract to the blockchain.

code

If you get a bunch of yellow errors in the right panel, don’t worry, these are cautionary and not fatal.  It may look like this.  Again, it should pose any problems.

errors

Next you will need to go to the actual version of the compilier and make sure you are not using a “nightly” version.  It defaults to the correct version for me, but just make sure it does not say “nightly”.  The arrow drop down is where you can change the version, if necessary.  Make sure you write down which version you choose, as you will need this later.

version

Now head back to to the “Run” tab on the same screen and click “Create”.  What is fascinating is that the compiler automatically connects to your MetaMask Wallet in your browser to create the contract.  As previously mentioned, more then likely the first time you do this you will have to request or add fake ETH to the TestNet.  Since this is a test network, you get free fake ETH from the network, but you have to request it.  If you don’t have any of the foe ETH, you will not be able to send your contract to the blockchain.  This sometimes take a bit of finagling.

So below, click “create” and the MetaMask wallet will pop up over your browser.  As mentioned, if you don’t have any fake ETH, will ask you to generate them – request 1 ETH.

run

Click “Submit” to generate the contract.

confirmcontract

Now click on the date listed below and it will take you to the live generation of the contract via Etherscan.

wallet confirm

If all went well, you will see something like the below.  A green check is great.

success

If you made it this far, now it’s time to load your tokens into your wallet.

Part 5: Loading New Token in Your Wallet

contract

Grab (copy) your contract address which will be different than what you see above and go to MetaMask.  Click “Add Token”

tokenadd

You should see the following where you enter your Contract Address which you copied from Etherscan.  Also add the Token Symbol and Decimals and click “Add”.

token18

There you go!  It should be added to the list.  I have 1 billion JORA tokens now.

listoftokens

Part 6: Verify Your Code

One item, which is not essential, but shows that you are not too shady is verifying the code you used.

On the Etherscan page, where you have the contract ID, click on that link.

contract

Then on the following page look for the “Contract Code” tab and click “Verify And Publish”

proof

The next screen will look like this with the contract ID already populated.  You need to fill in the “Contract Name” with “ERC20TOKEN”, then select the correct “Compilier” – make sure it is the same version you wrote down earlier which is not the “nightly” and change “Optimization” to “No”.  Then copy and paste the whole section of code from the compilier into the big text box.  Forget all of the other parts and click “Verify” at the very bottom of the page.

verify2

Now if that all worked, you should get the following:

finalconfirm

If that all worked, you are good to go!  The next part is actually doing on the real official Ethereum blockchain.

Part 7: Launch Your Token on Prod

Now simply go through the same process by on the live Main Network site.  So go to MetaMask and hit the drop-down box and change it to “Main Network”.

mainnet

Now go through Part 4 – 8.  You will need ETH for this final stage.

Part 8: Verification:

If you want to be verified, look to do so by filling in the following information on Etherscan.  This is vetted by the organization so you do need this to be approved for this portion.

To update your ERC20 token information please provide us with the following information:

Firstly, check that your token contract source code has been verified.

1. Contract Address: 0xd5XXXXXXXXXXXXXXXXXXXXXXXXX

2. Official Site URL:

3. Link to download a 28x28png icon logo:

4. Official Contact Email Address:

5. Link to blog (optional):

6. Link to reddit (optional):

7. Link to slack (optional):

8. Link to facebook (optional):

9. Link to twitter (optional):

10. Link to bitcointalk (optional):

11. Link to github (optional):

12. Link to telegram (optional):

13. Link to whitepaper (optional):

14. CoinMarketCap Link (PriceData):

 

That is it!  Please let me know how this goes for you.

 

 

Reference @maxnachamkin

 

 

 

 

 

Exploring Blockchain Proof of Concepts in Deployments and use Cases in the Finance Industry

By Joseph Raczynski

October 2017 – Blockchain 360 IoT Conference – InterContinental New York Times Square – An esteemed panel took the stage to discuss the state of the union surrounding proof of concepts in the financial industry.  The focus of the six; to delve into what is working with blockchain, what is not, and what is ahead for the industry.

I had the good fortunate to moderate the group including Igor Telyatnikov, President & Chief Operating Officer at AlphaPoint; Ron Quaranta, Chairman, Wall Street Blockchain Alliance; Scott Matsumuto, CISO, Circle; Morgan Hill, Managing Partner, AxionV; and Yorke E. Rhodes III, Global Business Strategist, Microsoft.

The first topic lent itself to a deep dive in our current perspective within finance.  Quaranta, who comes from a background in the financial markets spoke about how blockchain has developed incredibly fast.  He has the perspective of an association where many groups of all sizes engage with the Wall Street Blockchain Alliance.  While the financial institutions have been involved with this for several years, there are other groups flocking into the space.  He said, “Now that you see the lawyers and accountants opening their eyes to it, you know it has legs”.  They need to be involved because those two groups will help “aid the industry” and create structure around the new technology as it is applied to the financial industry.  There was a bunch of head nodding on the panel in agreement.

Rhodes focused on what is preventing wider adoption of blockchain.  One of the primary areas he cites is a lack of trusted sources or oracles in the space.  These are known entities which can be a verifiable source of information.  Think of the Social Security Administration and their records of death certificates, or a known source which can verify the price of Facebook’s stock on a particular date.  While this data might be available currently it is not as well developed and built out to interact with the blockchain just yet.

Hill jumped into the fray by discussing integration and interoperability.  Right now most blockchain’s cannot interact with other blockchain’s.  They are siloed.  Rhodes said that Microsoft is looking at how to resolve this issue.

The panel discussed how ICOs (Initial Coin Offerings) impact POCs.  Telyatnikov described this phase as a mania that is currently a bit frothy, but noted this is a “new asset class” that will be here for the foreseeable future.  The ICOs are almost POCs, but in the nascent stages, as “often these companies have concepts, which are not built out yet”.  It is hard to have a POC when a company only has an idea spelled out via a whitepaper – with no working model.

The panel answered questions from the audience, including one around regulation.  What is ahead for the law makers when it comes to blockchain and the financial industry?  The panel chucked.  Quaranta and Yorke summed it up for everyone by stating these are the early days of blockchain.  “Legislators and other agencies are in the information gathering stage.  We are beginning to get a sense from them about guidance, but much more is on the horizon.

Legal Technology/Internet 4.0 – How will Legal Technology Change the Industry?

By Joseph Raczynski

INSOL Europe 2017 Annual Congress

INSOL11

Warsaw, Poland – Sofitel Victoria. Before the full contingent of 400 attendees at the INSOL Europe Annual Congress a panel of three stepped into the future of legal technology and its impact on insolvency and the courts in Europe.  The panel consisted of Judge Erik Boerma – Court of the Nertherlands; Gunther Theis – CEO, STP Informationstechnologie, Germany; and Joseph Raczynski from Thomson Reuters, US; with Moderator – Joanna Goodman, United Kingdom.

Goodman introduced the session by discussing Internet 4.0 and AI, which is described as the fourth industrial revolution.  The concept is that we are now in a new era which will be as impactful as the machinery that was introduced to the assembly lines of the first factories. She went on to mention that each panelist offered various perspectives on technology transformation to insolvency cases in different ways. Erik Boerma as a judge is involved in digitizing courts in The Netherlands; Gunther Thies is a tech pioneer, whose software is used by 80% of German insolvency practitioners and (since 1991) to improve coordination between practitioners and the courts, and Joseph Raczynski works on emerging technology at Thomson Reuters, specializing in assisting law firms in understanding AI and Blockchain and how they can be applied to legal services.

Goodman set the stage for the first question by stating an important event within the industry, “In the past decade – since the UK’s liberalization of the legal market via the Legal Services Act – legal services delivery everywhere has changed beyond recognition.” Goodman noted that until recently the courts were lagging behind, with arcane processes and procedures, including inflexible schedules for court dates and piles of paper.  “Now at last all that is changing and many jurisdictions are involved in courts modernization projects, which include taking documentation and administrative procedures online.”

The panel first turned toward court digitization. Theis, described the current state of most courts, which are in general still struggling to deal with the pace of change and how to handle documentation and workflow.  He spoke about his organization STP Informationstechnologie which develops software and related services for insolvency administrators, insolvency courts, and corporate law firms. Judge Boerma mentioned one of his projects in The Netherlands where he cited how the obvious benefits of digitization around access to justice, legal advice and information, and some less obvious challenges around ensuring that automation does not compromise human needs.  That is, he attempts to adopt “a holistic strategy that balances economic, environment, and social access to legal advice, access to justice, and the human considerations in insolvency space. Goodman surmised that, “It’s about opening up information and not taking a blinkered view of cases that focuses only on the detail.”

The conversation then turned to what may be just ahead for Europe as they deal with insolvency.  Goodman posed the question about how the world in general is moving online and asked Raczynski, “How personal assets, which are now going digital – from tangible to virtual – will be handled with documents in the cloud, AI technologies that improve productivity and cryptocurrencies?

INSOL19Raczynski launched into an impassioned discussion around the rate of change that is happening for all of us personally and professionally.  He briefly discussed the impact of algorithms which are becoming more sophisticated and intuitive.  Saying these could help service up better information for attorneys and judges alike around bankruptcy.  He went on to state that there will be a clear push for change in the next several years for the courts, which are lagging behind.  The efficiencies, transparency and access for all will make this all but a necessity.

Goodman pushed on the digitization of assets and inquired about the Blockchain and cryptocurrencies and the impact of those on insolvency.  Raczynski first described Blockchain to level set with the attendees having asked by a show of hands who felt comfortable defining the technology – not many hands were raised.  Once that baseline was established, he dove into what he sees as the first “killer app” for Blockchain technology, cryptocurrency or tokens.  “In the not too distance future every asset with be represented by a digital token – saved to the Blockchain.”  He sees the full “tokenization of the world’s assets” including, cars, real-estate, collectibles, and these things are starting to happen now.

INSOL13

Clearly this struck a chord with the audience as this will be a monumental shift in how they handle insolvency cases with their clients and within the courts.  He went on to discuss the positives of the Blockchain showing a history of ownership which could assist with rights to property and creditors.  However, he noted, “there are challenges ahead as some of these tokens or digital coins are specifically developed to hide assets.”  He summed it up by stating this is going to be a wild ride into digitization which will certainly impact the insolvency landscape.

Closing out the session, Goodman asked for final thoughts from each of the panelists.  The takeaway was that everyone in every role needs to think about how technology will impact the legal industry.  There are a myriad of opportunities to be had, but Judge Boerma emphasized it has to be done in a way that humans are still at the center of the equation – we have to develop systems that are reflective of our humanity and enable access to justice for all.

 

Some quotes and notes above from Joanna Goodman who has written Robots in Law: How Artificial Intelligence is Transforming Legal Services is now available from ARK Group https://www.ark-group.com/product/robots-law-how-artificial-intelligence-transforming-legal-services-0

2017 Emerging Legal Technology Forum: Examining the Blockchain Business Revolution

Originally published in the Legal Executive Institute.

By Joseph Raczynski

TORONTO — With a nearly palpable pre-session buzz, the blockchain panel at the Thomson Reuters 2017 Emerging Legal Technology Forum finally took stage in the afternoon, titillating attendees with an in-depth overview surrounding the technology’s pending impact on the legal landscape.

The primary focus of the panel discussion was on how blockchain technology is poised to transform the contemporary business scene. As it progresses across a wide swath of different business sectors, the technology will force both in-house and outside counsel to cultivate a thorough understanding of this nascent technology in order to better service clients, the panel discussed. I was honored to mediate the panel that included Bob Craig, Chief Information Officer at Baker & Hostetler; Steve Kirby, Senior Counsel at IBM Canada; Casey Kuhlman, CEO of Monax.io; Ted Mlynar, Partner & Chair of the Blockchain-Smart Contracts IPMT Working Group at Hogan Lovells US; and Houman Shadab, Co-Founder of Clause.io and Professor of Law at New York Law School.

Craig addressed the new Global Legal Blockchain Consortium, a group of 10 law firms and several universities that have banded together to create standards with the emphasis on addressing security and common terminology. On a personal note, Craig mentioned that blockchain technology is ripe for explosive growth but will have some setbacks along the way.

“There will be huge public failures with blockchain but much positive growth lies ahead — thus allowing for huge opportunities specifically for law firms to lead, not follow,” he said.  Following on that thought, Ted Mlynar pushed further by saying that there is little doubt that blockchain is growing. “Lawyers need to adopt and adapt now,” he added, citing the need for attorneys to learn quickly as a myriad of legal issues have to be sorted out, including the right to privacy, data security and many others.

The conversation turned toward the power of the applicability of smart contracts within blockchain. Kuhlman described it as the ability for technology to be trusted, where agreements are automatically acted upon when specific conditions are met. In a business where trust in documents is invaluable, this advancement would be a boon. A key to the success of the smart contract is developing oracles — or trusted sources of information — that would offer data, such as the price of a stock on a given day or a death record.

blockchain

Also, you could see the audience lean in when the topic of cryptocurrencies sprung up — another innovation tethered tightly to blockchain technology. The proliferation of companies now raising money by launching an ICO (Initial Coin Offering) and the millionaires it has produced seemed to leave mouths agape for the final portion of the panel discussion. A graphic showed that the $150 billion market cap for all of virtual currencies dwarfed some bricks & mortar businesses and underscored the power of this burgeoning industry.

There was a clear line drawn between a currency, e.g. Bitcoin, and the tokens e.g. Ethereum, that populate this arena. The latter is what is beginning to proliferate, especially as the legal industry turns to smart contracts. Tokens help pay for the saving or recording of contracts to the blockchain, i.e. database. Shadab clarified this by saying, “Tokens are not money; in fact, in the future law firms may issue tokens to give access to attorneys’ work product, i.e. advice.”

Based on this panel conversation, there is little question that the first true killer app for blockchain technology is the ICO. Though there will be huge volatility in the market as governments around the world begin to sort this incarnation out.

Alas, the panel seemed to agree that the genie is out of the bottle and the age of the token economy and blockchain has begun. Craig closed the session by saying, “Once you understand what the layers of blockchain entail, the more you see that it will change things permanently.”

ILTACON 2016: When Will Blockchain and Smart Contracts Be Important in Legal?

By Joseph Raczynski

“Blockchain is Hot: More than $1.5 Billion has Been Invested in Blockchain in the Last 18 Months”

  • Tori Adams, Booz Allen Hamilton

 

NATIONAL HARBOR, Md. — If someone had told you in 1993 that the Web would be integral to your life today, would you have believed them? Well, the discussion around blockchain technology at ILTACON 2016 harkened back to that same scenario of the early ‘90s. This is a reboot, where another new technology will revolutionize the world.

Moderated by the esteemed Ron Friedmann, Partner at Fireman & Company, we were led down the path of what to expect with blockchain. Rohit Talwar, CEO of Fast Future Research, started us off with his futuristic vision on what we can expect over the next five years. Joe Dewey, Partner at Holland & Knight, who specializes in blockchain, discussed the law and smart contracts. Lastly, Tori Adams, a data scientist at Booz Allen Hamilton, illustrated her predictions on the reality of this technology in the near term.

Current Landscape

All major industries are looking toward blockchain — most pointedly, the financial sector. Talwar focused on one platform that is pushing this new space forward quickly — Ethereum — a pseudo-Bitcoin 2.0 that allows users to code on top of the blockchain. This can create huge advances in how the blockchain can interact with the world; utlizing smart contracts and digital identities, an even executing stock trades. In fact, Talwar stated that Goldman Sachs estimated a legal savings of $11 billion to $12 billion per year from streamlining clearing and settlement of cash and securities through such technology.

Near Future

The next significant phase developing now is the DAO (Decentralized Autonomous Organizations) which means that processes and companies are completely autonomous. This technology has the ability to disrupt a disrupter, e.g. Airbnb. Let’s say you visit a DAO-enabled travel site. The condo owner places an ad on the site to rent their place weekly. You choose their place in Miami, agree to the terms (date of check-in and -out, etc.) and agree to the fee and deposit (paid automatically). When you arrive at the condo to check-in, simply enter the password at the door through an Internet of Things (IoT) tech-enabled doorknob (check out Slock.it) and you gain access. That lock at the front door knows who you are and how much you paid, and it can also see your contract for the rental of the condo and knows when you are to be out. The DAO can do all of this with one employee running the entire operation.

Law Firms Start to Embrace Blockchain

Several law firms are starting to make a foray into this space. Recently Steptoe & Johnson began a multi-disciplinarian practice to help manage the blockchain for clients. They will also be accepting Bitcoin as payment. Most importantly, they co-founded the Blockchain Alliance6, a coalition of 25 blockchain companies and 25 regulatory and law enforcement agencies — including Interpol, Europol, the Securities and Exchange Commission (SEC) and the FBI — to educate enforcement agencies about digital currencies and blockchain technology. Other law firms including Holland & Knight see exponential growth of attorneys laboring in this discipline.

Smart Contracts

Holland & Knight’s Dewey said he believes the definition around smart contracts can be varied. For the purposes of this conversation, it is snippets of code that can change the ledger or a legal contract that is implemented on the blockchain. Of course, he outlined several benefits and challenges to this new innovation in the area of smart contracts:

Benefits:

  • Smart contracts are coded so there is less ambiguity than prose;
  • Verification can be achieved even within a trustless environment;
  • Self-executing; so once released, it is difficult to impede execution; and
  • Integrates well with IoT, artificial intelligence (AI) and machine learning.

Challenges:

  • Must balance transparency with privacy concerns;
  • Infrastructure needs to be updated;
  • Lack of experience with blockchain technology in IT departments;
  • Lack of education and understanding of the technology in other departments, including compliance;
  • Development of uniform standards and protocols; and (of course)
  • Need to overcoming custom and tradition (e., change is hard.)

So a real world example of how a smart contract was implemented can be seen in how Barclays did it with an interest rate swap prototype. Essentially, the investment bank set up an incubator of coders who worked with their legal department to understand how these swaps (trades) worked legally. They distilled three lines in the process that could be coded — (x) the amount of cash; (y) the interest rate; and (z) the currency. Once this information was garnered, the transaction could be solidified and then stored on a blockchain.

One of the most surprising revelations of the session came from Dewey when he stated: “Big news for attorneys, existing law — passed well before blockchain technology was contemplated —not only validates transactions, including the trading of credit interests accomplished through the use of the technology we are discussing, but as a matter of policy, strongly supports it.”

There is little question that this is an industry that will be growing rapidly over the next few years. Many firms are moving forward with practice areas and educating their attorneys on the technology to better position themselves for the coming wave.

Lastly, Dewey added some additional encouraging words surrounding the future of blockchain. In May, the State of Delaware — which is home to almost two-thirds of the Fortune 500 companies — announced a Blockchain Initiative so that corporate filings can be added to the ledger. “This is a clear sign that blockchain technology will have a significant impact on business,” he said.