Blockchain Will Bring Opportunities, Challenges to Legal Discovery

Companies are also implementing internal blockchain around such things as IT governance, privacy, supply chain logistics and assuring the authenticity of certain commodities, like luxury goods. Eventually, food supply companies may use blockchain to tell customers what food contains and how, when and where its ingredients were made or grown. Similarly, consumer goods and healthcare companies could use blockchains to reduce counterfeits and improve public trust.

Blockchain's Impact on Discovery

Blockchain technology is helping to build tools and infrastructure for the legal field, helping lawyers do such things as draft contracts, record transactions and verify legal documents.

So far, blockchain's impact on e-discovery is small, but it will grow. If electronically stored records were blockchain records, they would be self-authenticating and stored publicly (if part of a public or hybrid blockchain). That adds to their integrity. If managed in the blockchain environment, chain of custody is more readily known and easier to demonstrate. Because blockchains create redundant and persistent data and are distributed in nature, they're ideal for record keeping.

Eventually, more and more data will be in blockchains and attorneys will have to interact with it. Blockchain will also become part of litigation without being the central focus as systems move to blockchain implementation. Attorneys will have to take note.

Blockchain's Challenges and Opportunities

One big challenge blockchain creates for discovery is privacy. Because of the way blockchain works, every transaction that occurs on it becomes public and immutable, but the identity of the user making those transactions is completely private. That makes it harder to ferret out what has happened with particular activities. The structure of blockchain keeps confidential all activities reflected in the blocks. The very details of transactions, including the privacy of the digital assets and parties involved, are protected and hidden by design.

That design and level of privacy makes blockchain, “challenging for e-discovery,” says Antigone Peyton of Protorae Law. “Traditionally, we have records. We interrogate the system. We pull records and we do something with them. Blockchain is the antithesis of that. There is no interrogation of records. You understand limited things about the transactions, maybe timestamps, but that's about it.”

While blockchain increases privacy, it also increases transparency and, at a high level, will add integrity to current management systems. That's where the opportunity for discovery comes in. “From an integrity and reliability point of view, blockchain creates a more absolute truth,” says Erica G. Wilson of Vuono & Gray.

For instance, attorneys will have information in which they feel confident, such as who actually owns the note of a particular property, Peyton says. Chain of custody will be more solid because the blockchain will reveal whether a document has been manipulated, whether it is what it purports to be, and whether all data that is supposed to come with the document is actually there. These chain of custody capabilities makes blockchain work for things like title insurance. “It can prove who owns a real estate asset. That's the best use case I see,” Wilson says.

New Thinking Required

Blockchain can engender honesty and accountability to a wide range of legitimate and beneficial industries. But for anyone with criminal intent, it also makes it easier to hide their activities.

This means that lawyers need to invest in education and tools. Right now, there are very few people with the technical know-how to actually explore all of the publicly available data on the blockchain.

Attorneys will also need to think differently when it comes to discovery and blockchain is involved. “The traditional concepts relating to e-discovery just aren't applicable when we think about gathering data from the blockchain,” Peyton says.

True, the blockchain will be part of the corporate data set, but it will be stored in a different distributed manner throughout the organization. It creates efficiencies through centralized tracking and updating of systems that is democratizing access to records that normally take time and money to access. But when you try to get at data within blockchain itself, that's where complications come into play. It is not possible to understand individual activities; people will have to change their view of what's possible. Awareness and education will be a critical issue when talking to judges and juries.

Cryptocurrencies, like bitcoin, will also affect asset discovery and tracking. It is entirely possible to miss cryptocurrency assets in someone's portfolio if lawyers only ask for bank and credit card accounts. Someone can go to a bitcoin ATM, put in cash, get bitcoin and then store that asset somewhere not associated with traditional financial institutions. Attorneys may need to forensically search cellphones, computers and hard drives, maybe even houses for USB hard wallets where crypto can be stored. In a well-regarded white paper, Michael Doran explains one way litigators can find relevant evidence is to subpoena a hard drive image of the user's cryptocurrency wallet.

Increased regulation in the currency space may help improve asset tracking of crypto. In order for a user to obtain cryptocurrencies, they typically have to convert some form of fiat currency (USD, Euros, GBP, etc.) at an online exchange. This process of converting into and out of cryptocurrencies is pretty heavily regulated in most exchanges. Even international exchanges require thorough identity-verification processes. The records of these exchanges will probably play a bigger role in the discovery process.

Also, even though the most popular blockchains, such as bitcoin and ethereum, will keep a user's identity private, there are a few ways to reverse engineer a user's identity from their wallet addresses. This is part of what's driving the rise of “privacy coins” such as monero and zcash that have much more advanced privacy features to prevent this type of reverse engineering of a user's identity. The government can also get to identities by pulling information from the exchanges.

Start with Awareness

Overall, the rise of blockchain and cryptocurrency means attorneys will need to ask new and different questions — and awareness of that need is the first step. An understanding of the space and what blockchain means will help lawyers handle the challenges of blockchain and capitalize on the opportunities.

“It is like anything with e-discovery,” Peyton says. “If you don't ask the right question, you're probably not going to get a useful answer. Blockchain will add another layer of complexity.”

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Adam Brill is VP, Engineering at Logikcull where he focuses on scaling the team and technology to keep up with customer demand. His specialties include creating user interfaces across all screen sizes, attracting top talent, building teams, and inspiring developers.