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Many people in the United States already use online services that allow them to avoid the cost of hiring a lawyer to create a legal agreement and make sure it is applied. These companies have made it much easier for people, especially independent contractors and small businesses, to access legal services and get paid for what they owe.
Now the two biggest players in the market – Rocket Lawyer and LegalZoom – are experimenting with smart blockchain contracts. In theory, they could help automate true contracts and make some legal services easier and cheaper to use for everyone.
Rocket Lawyer's mission is to use technology to expand "access to justice," says Charley Moore CEO.
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Smart contracts are computer programs that can run on blockchain networks and can be used to automate payments, often the cornerstones of legal agreements. In theory, blockchains could be used to track all the rights and obligations of a given contract and automatically activate payments as the contract progresses, avoiding the cost and complexity of making and receiving payments offline.
The Rocket Lawyer service allows users to create and sign contracts, but the act of doing what is legally required by a contract is generally handled offline. For example, a company might agree to pay a freelance worker to perform a particular job or deliver a certain work product within a specified period. Using smart contracts, it should be possible to simplify this part of the agreement, known as "performance," says Moore. If it works, it could be a powerful tool for contractors, small businesses and others who sometimes struggle to get employers to submit payments on time and otherwise delay their conclusion of a relatively simple deal.
Rocket Lawyer does not yet reveal many details, but has launched a private beta phase for a program called Rocket Wallet, which describes it as a platform for "execution of legal contracts and payment on the Ethereum blockchain". he also collaborated with a blockchain startup called OpenLaw and the ConsenSys investment company focused on Ethereum. He expects to have a product available to use by the end of the year.
Meanwhile, LegalZoom, Rocket Lawyer's biggest competitor, started working on smart contract technology in collaboration with a startup called Clause. Another startup, called Monax, is testing an intelligent contract platform based on a private blockchain network aimed at entrepreneurs and creative freelancers.
The common goal of these projects could be described as creating a "legal protocol" for blockchain, says Aaron Wright, co-founder of OpenLaw. Blockchain gives us unprecedented power to move assets around the world safely and instantly, but they will not play a large role in the real world without legal agreements to govern all these new types of transactions, he says.
They may make sense in theory, but blockchain-based legal contracts still face a number of practical problems. For starters, companies often want to keep their contracts private, but blockchains are designed to be transparent. Wright states that OpenLaw circumvents this problem by storing evidence of an agreement within what is referred to as a "safe execution environment," a piece of software separate from the Ethereum public blockchain.
The parties can digitally sign that execution environment and the system can record the evidence that has been signed on the blockchain without revealing the underlying information. This system can also be used to terminate an intelligent contract, he says.
Blockchains will not be useful in any legal situation. Things that are "objectively verifiable and demonstrable on a blockchain" include account balances, evidence that you have a certain token or real-world information introduced by a third party source called an oracle, says Wright. Furthermore, smart contracts are difficult to create without introducing bugs; researchers are still developing methods to detect vulnerabilities before hackers. Finally, cryptocurrencies themselves are difficult to use for most people and are volatile in price.
But users of Rocket Lawyer's new cryptographic product will not even need to interact with the blockchain or use cryptocurrency, Moore says. Everything will happen in the background. "We do not release any type of product that would require our users to be aware of the cryptocurrency," he says. "This is not the type of user we serve."
