Applying cryptocurrency's peer-to-peer system to legal contracts and dispute resolution could decentralize trust.
Remember hearing that bitcoin is the new internet? Well, while finance was the technology's first battleground, it is slowly bleeding into other sectors—everything from airplanes to democratic voting, and possibly, the law itself. The bitcoin protocol, that strange decentralized creature, could make legal services more accessible, potentially revolutionizing the current justice system.
"Smart contracts" are a big piece of this. These digital agreements are "smart" because they replace paper contracts with sleek code. In a sense, they replace judges with code—more on that later. There are a variety of types of smart contracts, but the basic idea is that the cryptographic code, once unlocked, carries out whatever conditions are written in the agreement.
We sign contracts all the time: apartment leases, parking lots, business agreements, wills. Rarely do we understand what is in them; that's the lawyer's job. In today's legal climate, the client might spit out a few main points they want addressed. "That magically turns into a 20-page document" Pamela Morgan, an attorney and social justice defender, explained. By the end, nobody really knows what the contract says. If something goes wrong, it is up to the judge to interpret the document's "incantations."
Smart contracts are unambiguous. They are enforced by cryptographic algorithms. The rules of the game are determined before the contract executes, rather than at the foot of a judge's podium.
Cryptocurrency's peer-to-peer nature puts control back in the client's hands. With the blockchain system, if Alice wants to send Bob bitcoins, she doesn't need to channel that transaction through an intermediary. This system makes smart contracts customizable: The sender can stipulate that the transaction go from A to B only if certain conditions are met.
The vending machine is a simple example. The machine holds onto the snack until it receives payment. But once a user slips in some money and selects from an array of snacks, the selection pops out. The code executes when a payment is made. The deal is between you and the machine.
This concept could decentralize trust when it comes to legal contracts and dispute resolution. A cryptographic contract will execute exactly as it is written, and if the attorney or contract writer doesn't properly explain the terms, they could be sued or risk a sullied reputation. While the current court system relies on trusting the opinions of sometimes imperfect judges enforcing potentially discriminatory laws, smart contracts are unambiguous. They are enforced by cryptographic algorithms. The rules of the game are determined before the contract executes, rather than at the foot of a judge's podium.
By giving users more control, this process could have social justice implications, Morgan believes. "I would really love to create a system where I can explain to my clients what their agreement really is," she told me.
Ethereum is perhaps the best-known company working to create the platform for these fancy contracts. The digital "ether" could function as a cryptocurrency operating system on which programmers can build apps, smart contracts, and altcoins. According to the company website, users will be able to "codify, decentralize, secure and trade just about anything."
For example: alternative dispute resolution (ADR), which carves out a clearer avenue for settlement outside of court. Battling a case in court is generally not a cheap process, and the emotional costs shouldn't be underestimated. ADR lifts the strain put on traditional courts that are already brimming with lawsuits, and offers a flexibility courts currently lack, explained Morgan. Smart contracts give this amiable form of resolution a cryptographic boost.
Jumping ahead, the bitcoin protocol could potentially crowdsource justice on a much grander scale. In an unreleased paper, Morgan describes a system of Judicial Choice paired with the cryptocurrency "justice coin." Judicial Choice would provide a flexible, "customizable" jury system—giving parties the option of dipping into a pool of willing decision-makers to hear a dispute.
The idea is that the disputing parties decide how many jurors to pick, whether they want the jurors to have specialized knowledge, and so forth. The jurors are then selected randomly from a pool. Participants need some sort of an incentive for resolving disputes, which is where judicial coins come into play. Afterward, participants can use the currency for their own dispute resolution services, trade them, or whatever they want.
"This protocol has the potential to revolutionize systems in ways that we can't even imagine," Morgan said. "I love that." Morgan believes these emerging bitcoin 2.0 tools could be used to empower people without legal recourse: minorities, populations under the foot of corrupt regimes, people who simply do not have the means to fight for their position in court. Women face discriminatory legal conditions all over the world. In many courts they are not considered equal and "justice just isn't a consideration," Morgan said. In some countries, women aren't allowed to own property.
This technology is so powerful because it doesn't recognize borders or people in power. It just recognizes transactions. It recognizes math.
Here's where bitcoin's cryptoanarchy bent comes into play. Peer-to-peer contracts and smart dispute resolution could provide opportunities for oppressed populations, by allowing people to draw up contracts outside of the established system—maybe an agreement to transfer bitcoin or a write a more favorable marriage contract.
With enough people using the system, people could even draw from a global pool of jurors to settle a dispute, rather than rely on potentially discriminatory court systems. "This technology is so powerful because it doesn't recognize borders or people in power. It just recognizes transactions. It recognizes math," Morgan said. "It's such a new perspective. It's a new way of looking at things."
As enticing as these possibilities are, a series of "ifs" precede the proliferation of smart contracts. Most glaringly, bitcoin itself needs to cut through a thick of obstacles to achieve wider acceptance. Smart contracts also face a slew of technological and legal hurdles before they'll attract widespread use: Once Ethereum gets off the ground, customizable templates need to be drawn up to make smart contracts easier to use. The legality of the system is still a bit hazy, and there are significant concerns about anonymity.
With all this to consider, visions of decentralized dispute reconstruction sound premature. But these tools are advancing. Bitcoin enables the sorts of contracts Nick Szabo—the computer engineer who coined the term smart contracts and a Satoshi Nakamoto candidate—outlined in an influential paper nearly 20 years ago. With the technology out there in the open for anyone to explore and improve, it could very well stare today's traditional legal process in the face.
"It's not necessarily about getting rid of [current] systems," Morgan said. "It's about critically thinking about them and evaluating them. And now knowing that we have the power to do something about it. That's the part that's been missing."