2018 Annual Florida Bar Convention: Will Smart Contracts Outsmart Lawyers?

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Transcript

The Florida Bar Podcast

2018 Annual Florida Bar Convention: Will Smart Contracts Outsmart Lawyers?

06/14/2018

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Intro: Welcome to The Florida Bar Podcast, where we highlight the latest trends in law office and law practice management to help you run your law firm, brought to you by The Florida Bar’s Practice Resource Institute. You are listening to Legal Talk Network.

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Jonathon Israel: Hello and welcome to The Florida Bar Podcast, brought to you by The Practice Resource Institute on Legal Talk Network. This is Jonathon Israel and I am the Director of The Florida Bar’s Practice Resource Institute. I am recording today from the 2018 Annual Florida Bar Convention in Orlando, Florida. Thank you for joining us.

Joining me today I have Scott Allendevaux and Anessa Santos, who are going to talk to us about a presentation they just gave on blockchain and smart contracts and how they impact the practice of law today.

Scott, would you mind telling our audience a little bit about yourself and what it is you do.

Scott Allendevaux: Sure, happy Jonathon. So I am a Senior Partner at a risk management and regulatory compliance firm. I am also working at the firm in exploring different ways that blockchain technology can be applicable in regulatory compliance and helping to secure data in cybersecurity practices.

Jonathon Israel: Thank you. And Anessa, do you mind telling our audience a little bit about yourself.

Anessa Santos: Sure. I am a Florida lawyer, licensed and practicing here for the past 15 years. I specialize in representing corporations that are developing out intellectual property portfolios with some sort of new fandangled emerging technology. I do a lot of corporate structuring, venture capital, licensing of intellectual property. I am also expanding my reach into the area of blockchain, those that are enabled with smart contracts. I have the opportunity to work with some blockchain code developers.

Jonathon Israel: Right. Thank you both for joining us again. Scott, we will start with you, since you kind of kicked off the seminar for us today.

Scott Allendevaux: Sure, sure.

Jonathon Israel: Can you give our audience maybe a little bit of background on blockchain. I mean, everybody sees it in the press today, it’s kind of one of the hot topics, whether it’s with cryptocurrency or with smart contracts, but maybe just give a little background on the technology and how it’s affecting the world today?

Scott Allendevaux: Well, blockchain is one of those interesting concepts that people are hearing more and more about, but nine out of ten people that I meet don’t really know what blockchain is. That’s why it was great to get together today and be able from a higher level to be able to look at what blockchain is, how it might impact the practice of law.

And blockchain, people hear words like cryptocurrency or bitcoin or smart contracts, but they really don’t know how all this works together. So we were able to get together today and talk about blockchain, how that particular technology underwrites what Anessa talked about, which is smart contracts.

Blockchain is one of those technologies that — we hear about a lot of different technologies. If we look at the last hundred years there is an incredible amount of technologies that are remarkable, like mapping the human genome or going to the moon, discovering vaccinations and penicillin, but if we were able to pick out two or three or four different technologies that stand out as being so pervasive that they change how we interact with each other the world over, they change what we do in the morning, they change what we do in the evening, they change how we do our jobs or what we do for our jobs, there is only really a few things that compare with that.

During my grandparents’ era that would be media, it would be the film and radio and television completely changing the dynamic of culture and how information was propagated.

Recently, more recently it would be the Internet. The Internet is so remarkable and in the last 10 years with smartphones has changed the way we live our very lives. We touch the smartphone devices that we carry around with us 150 times a day. It’s the first thing we touch when we wake up in the morning when our alarm goes off. It’s the last thing that we touch at night when we check that social media post to see if someone reached out to me just one more time. And we couldn’t have imagined 10 years ago that technology like this would just come about suddenly, rapidly.

And I am here to say that blockchain technology is one of those technologies that’s going to be so pervasive, so global that it’s going to change what we do, from the jobs that we do, whether it’s the practice of law, whether it’s in accounting, whether it’s in government, in governing, it’s going to change the tools that we use and how we use those tools.

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We are at the very beginning really of all of this, so it’s still early in the lifecycle. We talk about the technology adoption lifecycle. We are early in the technology adoption lifecycle; there are six different phases to that lifecycle and that lifecycle begins with the research phase and moves to the innovation phase. We are in the innovation phase. We are just starting to move to early adoption. I don’t know that we are really quite there yet, because so many of us, nine out of ten of us don’t really understand how this technology is going to touch what we do each day, but we know it’s going to be big and we know it’s going to improve so many things, if that’s a helpful of introduction.

Jonathon Israel: Sure. That’s a great introduction, kind of a good overview for our audience. And it’s kind of sad to admit it, but I think 150 times a day of touching my smartphone may be an understatement.

Scott Allendevaux: Yeah, me too; my kids even more.

Jonathon Israel: And Anessa, you talked in your presentation a little bit about smart contracts and how blockchain is the underlying technology or platform for these smart contracts, but maybe you can provide a little bit of overview of what a smart contract is and how attorneys may be starting to see these come into their practices today.

Anessa Santos: Sure, absolutely. As Scott just alluded to, the inclusion of blockchain into the world’s industries at large is going to be so incredibly disruptive, it can be likened to, well, the invention of electricity. As he stated during his early morning presentation, smart contracts is that, it’s that disruptive.

And so it’s really interesting Jonathon that when we were in the Committee meetings, because I sit on the Computer Law & Technology Committee of the Florida Bar and we were sort of tossing around some ideas like what are some emerging technologies that we need to share with our colleagues so that we can get out in front of it so that we are not left behind.

We kicked the can and of course everybody wants to know about blockchain and digital currencies and I raised my hand and I said well, what about smart contracts, right, because that is a blockchain based technology.

And so they said yeah, yeah, why don’t you develop that out. And Jonathon, I had no idea what I had agreed to when I said I was going to do this. I literally had to dedicate 100 hours of time in order to put this presentation together, because what I learned in the process is that, oh my gosh, smart contracts, they automate, they are self-executing automation of the contracting process.

And so there are like these huge global applications that are solving big world problems that businesses, consumers, our clients, we in our practices are encountering on an everyday basis.

For example, there is a company in Silicon Valley called Proppy and they are the first company in the United States to have successfully registered the conveyance of a piece of real estate in Chittenden County, Vermont on a blockchain. And so what’s really interesting about this is that in order to be able to accomplish this goal, they came to an agreement where the legislature of the State of Vermont actually approved distributed ledger technology, which is whatever is being registered on the blockchain as being self-evidencing in court, so that you don’t need to have an actual individual custodian come in and evidence the chain of custody. So any blockchain record is self-authenticating in a court of law under the Rules of Evidence in the State of Vermont.

This is important because when you register the deed to a piece of property that’s being transferred, then what that means is that for every future conveyance of that property as long as you continue to register future conveyances on the blockchain, you won’t really ever need to run a title report ever again, because the entirety of the title report attached to that a piece of property has been recorded on the blockchain, it’s self-authenticating. This substantially reduces the business that title companies are going to see and it also negates the need for title insurance.

And so we see applications of this to the real estate industry, to embedding smart contracts and smart properties, so that if you fail to pay the loan on your automobile that the contract will take notice of that, will shut down your automobile, and if your automobile can actually autonomously drive itself, it can actually return itself back to the bank.

We see instances of this being used to streamline the international shipping process. This is recording farm to shelf for food, food safety, transportation, resulting in millions of savings to Walmart that has to pull their food off the shelf every time there is an E. coli scare because they will be able to trace their food in seconds rather than weeks to know which of the food has been contaminated and not to be removed.

And so we are seeing just now where it’s nascent, baby steps and bit by bit this is going to grow as we learn how to convert contract prose into programming language that can authenticate increasingly complicated levels of contract clauses on a blockchain.

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Jonathon Israel: Great. Thank you. And Scott, you kind of mentioned the six stages for technology and said that we are just now kind of approaching the adoption level, yet you see cryptocurrencies all over the news and people getting more popular with cryptocurrencies and now we have smart contracts starting to come in line and take shape. Where do you see this going next? What should attorneys be looking out for? What should they be learning about?

Scott Allendevaux: Well, I see that like cryptocurrencies are in the early adoption phase and so we have gone from research, to innovation, to early adoption. What can I actually buy with my cryptocurrency? I can actually buy a number of things, much more than I could have three or four years ago. I can actually go to overstock.com and I can buy product.

Now, while we are constantly converting it to a fiat currency and I have to keep looking to see what a bitcoin is worth; last week it was $7,500, this week at $6,500, that kind of defeats the purpose of a bitcoin.

When a car is a Bitcoin one week and then it’s still a bitcoin next month and it’s still a bitcoin next month, that’s going to be a lot better as opposed to when I have to keep looking it up.

So we are in the early adoption of the adoption lifecycle model and the protocols that exist, we see things still in the news where there was a hack or there was an attempt to hack. Again, most people look at cryptocurrency and they think, is it really mature yet, is it really safe yet to get involved. And that’s because the early protocols are still being contoured to do and to be exactly what we need them to be. And while technologists are doing those types of things, we need the help of the legal community to work with our regulators, because a lot of development has to happen in that space too.

Just as the technology has gone from the research phase to the innovation phase, maybe early adoption, arguably, so the practice of law, so regulation really kind of mirrors that. There is so much work to do.

Our regulators actually want help. It’s difficult for our regulators to keep up with all that’s happening in cryptocurrency, all that’s happening in blockchain, all that’s happening with ICOs. They are wanting to ensure that consumers are protected. They are wanting to ensure that nefarious activity isn’t happening. But it’s hard for them to know how to think through this.

And so I think it’s actually a great time for those in the practice of law that also are in regulatory compliance to really be able to come and line up with different regulatory bodies and actually participate in this conversation and help as we are trying to ensure that regulations catch up with technology.

Jonathon Israel: Right. Anessa, back to the smart contracts topic for a minute, so if I am an attorney and a client is coming in asking me for assistance with a smart contract, what is it that I need to know about smart contracts, what should I be reading up on? Do I need to know how to code in order to discern what a smart contract is and assist the client walking in the door?

Anessa Santos: Yeah, that’s an absolute great question and the best way that I can sort of associate it with something that I think all of our listeners can understand is it’s literally how do I translate my contract into a foreign language?

So I happen to be fluent in Spanish, but I am actually only conversational sadly in Brazilian Portuguese, that’s still a work in progress, and so while I can read a great deal of my contracts that are presented to me in Portuguese, I definitely can’t read them like I can in Spanish. And while I can write contracts in English amazingly, I don’t quite have the experience or the vocabulary of legal and technical words in Spanish, so I don’t really converse in that in a regular basis.

So there are these translation issues that I come into contact with, but that certainly doesn’t mean that I can’t represent my client who is bringing me a contract in a foreign language. I can just employ interpreters.

And so it’s the same process that we utilize our interpreters and our translators on an everyday basis, whether we are representing clients from Czechoslovakia or South Africa or Brazil, it’s the same process. These smart contracts are actually written in a programming language. Right now the most familiar open source and available programming language that’s most widely used for smart contract development is called Solidity. It operates on the Ethereum Network. But IBM has actually developed its own programming language for their private blockchain that’s accessible only to member businesses and that’s called Golang.

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So what I foresee in the future is that we are going to have a wide range of blockchains with a variety of turing Complete programming languages that will enable the universe of possibilities of contract language to eventually step-by-step-by-step be converted into programming code. And so we just need to make sure that we have got a good bundle of fluent programmers that we can communicate with to help us interpret and translate going from one direction to the other.

Jonathon Israel: I feel like we are just kind of scratching the surface here, but unfortunately we have reached the end of our program today.

I want to thank Scott Allendevaux and Anessa Santos for joining us today and speaking about blockchain and smart contracts. Before we close out, Scott, if our listeners have any questions and want to reach out to you for more information, how would they get in touch with you?

Scott Allendevaux: The best way to get in touch with me would just be to go to my website. It’s a simple website,  HYPERLINK “http://www.allendevaux.com” allendevaux.com. Thank you.

Jonathon Israel: Thank you. And Anessa.

Anessa Santos: Absolutely. Likewise, my contact information, my mobile phone number, my email address, my LinkedIn account, all of that good stuff is also available on my website and that is  HYPERLINK “http://www.panamigration.com” panamigration.com.

Jonathon Israel: Great. Well, thank you both again. This has been another edition of The Florida Bar Podcast, brought to you by The Practice Resource Institute on Legal Talk Network.

We want to thank our guests for joining us. If you liked what you heard today, please find and rate us in iTunes. Until next time, thank you for listening.

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