Working a legal case from origination to conclusion generally requires a ton of information flowing between multiple parties. Even the most basic cases are laden with information that has to somehow be managed. It is for this reason that nearly every law firm in America utilizes computer software to some degree. The only question is how useful a firm’s legal software package actually is.
In recent years, the legal industry has seen the emergence of cloud-based applications that are taking all of the best features of legacy systems and combining them into one-stop solutions for complete practice management. The best among those packages are being developed with an eye on blockchain and smart contracts.
The best and brightest in the legaltech industry have discovered that smart contracts can increase automation exponentially. Increased automation makes law firms more efficient and productive. It also frees up attorneys to get back to serving their clients. By automating as many business tasks as possible, smart contracts are putting the practice of law back in the hands of attorneys.
Smart Contract Basics
The smart contract of the IT world is far different from the kinds of contracts attorneys are most familiar with. A smart contract is not a piece of paper filled with legal terms and signatures. Rather, it is a computer protocol designed to facilitate performance within a computer system. The best way to understand smart contracts is to look at where they came from, and that’s blockchain development.
Blockchain is the main technology that makes cryptocurrencies possible. Smart contracts are what make it possible for blockchain technology to do what it does. Let us look at the Ethereum blockchain as an example of how it all works.
When people transact business using the Ether (ETH) coin, the information from that transaction is immediately broadcast over the entire Ethereum network. Computer nodes on that network receive the information, process it, verify it, and then create a permanent record of the transaction on the blockchain’s ledger. This is all done automatically without any human intervention. Smart contracts make it happen.
An initial smart contract is triggered when the sender pushes coin from his wallet to the recipient’s wallet. Execution of the contract sends data across the network, subsequently triggering smart contracts at each of the nodes. As the nodes process the information, they trigger the next round of smart contracts that eventually result in the transaction being finalized.
Smart Contracts in Law
Once you understand how smart contracts work to facilitate cryptocurrency transactions, it becomes easier to see how they can also be used to create automation within case management software. It is all about the exchange of information among multiple parties in a given case, explains the makers of the NuLaw legal software.
For example, a system of smart contracts can be used to automate billing and accounting. Attorneys enter the time spent on a given case while support staff enter any additional costs associated with the attorneys’ work. Court costs are automatically entered by the system as well. A series of smart contracts combines all of that data to automatically generate invoices. When payment is submitted, additional smart contracts integrate payment information with billing and accounting – all without the need for human intervention.
As you can see, smart contracts and automation can remove much of the manual labor involved in invoicing, billing, and accounting. That frees up staff to devote their time to other things. That is pretty amazing itself, but smart contracts are capable of so much more. Suffice it to say they are making legal software a lot better.