Blockchain Technology and the Indian Legal Industry

The application of Blockchain technology is leading to discussions of its utilization in sectors like supply chain, pharma, finance, etc. This article attempts to explain the concept of blockchain technology, its types, its uses, and its application in the legal industry with emphasis on the Indian legal industry.

I. Concept of Blockchain

Blockchain is a method of storing data in such a way that it is difficult or impossible to alter, hack, or cheat it. A blockchain is a digital log of transactions that is duplicated and distributed across the blockchain’s complete network of computer systems. Blockchain is a system of storing data that makes it difficult or impossible to change, hack, or manipulate the data.[1]

It is a digital ledger of transactions that is duplicated and distributed across the network of computer systems that make up the blockchain. This means that if a single block in a chain is modified, it will be immediately clear that the chain has been tampered with. Hackers will have to change every block in the chain, across all distributed versions of the chain, if they intended to destroy a blockchain system. Blockchains like Bitcoin and Ethereum are constantly growing as new blocks are added to the chain, implying that they will continue to grow in the future.

II. Types of Blockchains

1. Public Blockchain

Blockchains that are open to the public are known as “public blockchains.” Users, miners, developers, and community members can all participate. On public blockchains, all transactions are entirely visible, which means that anyone may look at the transaction details.[2] These are supposed to be completely decentralized, with no single person or organization having control over which transactions are recorded in the blockchain or in what sequence they are handled.

Because anyone can join the network, regardless of location, country, or other factors, public blockchains can be particularly resistant to censorship. Authorities will have a difficult time shutting them down as a result of this.

2. Private Blockchain

A Private Blockchain, unlike a public blockchain, is a permissioned blockchain in which networks establish limits on who is allowed to participate in network activities and transactions. It permits only certain authorized entities to engage in a closed network and grants each participant particular rights and constraints.[3] To join these types of blockchains, individuals must first give their consent.

Transactions are private, and only ecosystem participants who have been granted permission to join the network have access to them. Private blockchains are useful for businesses that want to collaborate and exchange data but don’t want their sensitive data to be exposed on a public blockchain.

3. Consortium Blockchain

Private blockchains and consortium blockchains are sometimes considered independent terms. Consortium blockchains differ from single-entity blockchains in that they are administered by a group rather than a single entity. This method has all of the advantages of a private blockchain and might be classified as a sub-category of private blockchains rather than a distinct type of chain.[4]

This is one of the strongest use cases for blockchain’s benefits, bringing together a collection of “frenemies”—companies that collaborate but compete against one another. By partnering on some areas of their business, they are able to be more efficient both individually and collectively. Anyone from central banks to governments to individuals could participate in consortium blockchains.

4. Hybrid Blockchains

A hybrid blockchain combines the advantages of both private and public blockchains. It combines the benefits of both private and public blockchains, allowing for both private and public permission-based systems. Users may regulate who has access to which data is stored in the blockchain with a hybrid network like this.

Only a portion of the blockchain’s data or records can be made public, with the rest remaining secret on the private network. Users can simply join a private blockchain with numerous public blockchains because of the hybrid blockchain system’s flexibility.

III. Blockchains and Cryptocurrencies

Cryptocurrencies, such as Bitcoin, Ethereum, and Litecoin, are digital currencies (or tokens) that may be used to purchase goods and services. Crypto, like a digital version of cash, may be used to purchase everything from lunch to a new home. Unlike currency, crypto relies on blockchain to serve as both a public ledger and a stronger cryptographic security mechanism, ensuring that all online transactions are tracked and documented.

Cryptocurrencies are digital currencies that record and safeguard all transactions using blockchain technology. A cryptocurrency (for example, Bitcoin) can be used to pay for everything from ordinary things to major purchases such as cars and houses.

IV. Application of Blockchains in the Legal Industry

The use of technology in the legal profession is on the rise. When it comes to conversations about the future of technology in the legal business, blockchain is still at the top of the list. Many industries, including media and entertainment, finance, and tourism, have already been affected by blockchain. And the legal profession will not be immune to this tendency. Blockchain will change the legal services business, from executing smart contracts to introducing transparency to legal documents and streamlining most legal processes.

The Government of India’s Ministry of Electronics and Information Technology (MeitY) published a draft proposal of the National Strategy on Blockchain in January 2021, which lists 17 distinct uses of blockchain technology that are of national relevance.[5]

In the Indian Legal Sector, the blockchain can be used for some of the following-

1. Chain of custody
2. Smart contracts
3. Online dispute resolution

1. Chain of Custody and Blockchain

The gathering of evidence is possibly the most important aspect of any investigation. Furthermore, maintaining evidence accessible at all times can be a time-consuming effort that is prone to many errors. When there is a lot of evidence in a case, storing it can be difficult.

Making evidence conveniently accessible in the event of a disagreement that requires evidence to be stored for years could be a concern once again. As a result, keeping the complete chain of custody online, on an immutable, transparent, and secure platform is a far more practical alternative.[6]

When forensics collect evidence from a crime scene, it can be directly uploaded as a block to a chain and accessible by forensics as soon as possible. Finally, through the established system, evidence custodians can access forensic results and evidence analysis in real-time.

2. Smart Contracts and Blockchain

A smart contract is a computer system (series of rules) that allows two parties to digitally facilitate, verify, and enforce their agreements. It stores data on public databases and conducts transactions without the involvement of third parties via a distributed ledger system (blockchain).

The Indian government forbids its financial institutions from conducting bitcoin transactions. The fact that bitcoins indicate a peer-to-peer transactional network casts doubt on the practicality of “Smart Contracts” in India.

However, Section 10 of the Indian Contract Act, 1872 states –

“All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

Sections 5 and 10 of the Indian Information Technology Act, 2000 also recognize digital signatures and consider contracts created electronically to be lawful and enforceable.

3. Online dispute resolution and settlement

Because it is time-effective, unbiased, and has a high level of confidentiality, commercial arbitration is the favored choice of big economic entities. However, with the introduction of multiple blockchain-based ODR platforms that offer low-cost resolution services to parties in a variety of cross-border international disputes, blockchain technology is progressively infiltrating the conventional arena of dispute resolution.[7]

In the case of a blockchain-enabled litigation process, the plaintiff would first need to log into a blockchain-based litigation app and provide his personal information as well as his complaints. They might then use the app to find and contact specialized attorneys. The plaintiff’s lawyer would then file a lawsuit and notify the defendant of it through email or text message.

V. Blockchain and Indian Judiciary

It will be possible to create a secure and safe digital environment for consistent, rapid, and economically practical document exchange across various agencies by unifying and synthesizing all parties in litigation, i.e. lawyers, experts, investigative agencies, and so on, on a single blockchain platform.

There is presently no regulation in India that regulates and controls blockchain technology and its many applications. However, depending on the numerous sectoral applications, current sector-

For example, the Securities Exchange Board of India (“SEBI”) oversees the use of blockchain technology in financial markets, while the Reserve Bank of India (“RBI”) oversees cryptocurrency and the Insurance Regulatory and Development Authority of India oversees insurance-related applications (“IRDAI”). Thus, the use of technology in the legal profession has evolved over time.

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References

[1] Ibm.com. (2021). What is Blockchain Technology? – IBM Blockchain | IBM. [online] Available Here

[2] Dragonchain (2019). What Different Types of Blockchains are There? [online] Dragonchain.com. Available Here

[3] https://www.facebook.com/blockchaincouncil (2020). Private Blockchain: How it is Different From Public Blockchain? [online] Blockchain-council.org. Available Here

[4] Mazn Adnan Shkoor (2019). Everything You Need to Know About Public, Private, and Consortium Blockchain. [online] Medium. Available Here

[5] Sandip Chakraborty (2021). Blockchain: Good, bad and ugly. [online] @businessline. Available Here

[6]Digital Forensics using Blockchain. (2019). International Journal of Recent Technology and Engineering, [online] 8(2S11), pp.182–184. Available Here

[7] lexpeeps (2021). Application of Blockchain Technology in Legal Sector: Critical Analysis. [online] Lexpeeps. Available Here

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