Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m M A Y 2 0 1 8 29 As Toronto lawyer and blockchain expert Amy ter Haar puts it, "For the first time, mere mortals have used clev- er code to manufacture trust . . . With blockchain, the trust train is moving to a new place." Aaron Grinhaus runs Grinhaus Law, a full-service mid-town Toronto boutique business law firm that provides daily tax and securities advice on blockchain-relat- ed initial crypto-currency coin and token offers (referred to as ICOs and ITOs). He also helps clients structure crypto-min- ing operations, advises crypto-investment companies and helps structure asset hold- ings of high-net-worth crypto investors and traders. Grinhaus believes lawyers "should be scared" by blockchain. It will "hit the pro- fession hard," he predicts, rendering many legal services — including secured and commercial transaction, real estate regis- tration and dispute resolution — "obso- lete." "I got into this a few years back, when I saw I needed to get ahead of blockchain before it got ahead of me and put me out of a job," jokes Grinhaus. Omar Soliman, a Toronto corporate lawyer with Stikeman Elliott LLP, agrees about the risks to the profession from blockchain. Soliman, who has been advis- ing blockchain startups since 2015, says the technology means that, "suddenly, the people whom we currently pay to facilitate trust in commercial transactions — the clearing agencies, custodians and depositories, all of the existing infra- structure [that] is used to settle securities — are beginning to look a bit ancient and costly." Given the likely disruption and challen- ges on the horizon, maybe the profession's best bet is to simply hide under a desk and hope the current hype around blockchain turns out to be just another Y2K? Or, like Grinhaus and Soliman — and an already sizeable and seemingly fast-growing group of Canadian com- mercial lawyers — legal service provid- ers could instead start making money out of blockchain's significant poten- tial for increasing legal ambiguity and uncertainty. Take, for example, blockchain-enabled smart contracts that self execute without the involvement of contracting parties. Do traditional contract concepts apply or is a re-examination of Canadian contract law required? Then there's the seemingly fast-burgeoning raft of legal issues around blockchain and Canadian and inter- national intellectual property, securities and data privacy law. (Immutable personal records, anyone?) Jennifer Farrell, an assistant law pro- fessor at Ontario's Western University, says that, for regulators at least, block- chain is a double-edged sword. "On the one hand, blockchain could enhance many regulatory and legal pro- cedures — for example, fighting fraud, ID theft [and] human trafficking or I n 2015, The Economist dubbed blockchain the "trust machine," saying it "lets people who have no particular confidence in each other collaborate without having to go through a neutral central authority." In a blockchain, no single entity or party controls data or information. Instead, all participants collectively keep the ledger up to date. Similarly, each party to a transaction can individually access the entire database including the complete history of a transaction and can also verify the records of its transac- tion partners — without going through an intermediary such as a lawyer. Addi- tionally, there is no loss of records in case of a crash, as the ledger is distributed among different participants and computers on the network. This is called dis- tributed ledger technology — or blockchain. As soon as a transaction is entered into, the blockchain and the accounts are updated. A record cannot be altered because it is linked to every transaction record that came before it. The records are irreversible through the deployment of complex computational algorithms that ensure that records are permanent, chronologically ordered and available to all others on the network. If a party wishes to alter the record, it must pass a new entry that will be added to the old block, and this will be evident to all participants. This ensures the transaction is immutable. All communication in a blockchain occurs directly between peers instead of through a central node. Each node stores and forwards information to all other nodes (peer-to-peer transmission). The digital nature of the ledger means that blockchain transac- tions can be tied to computational logic and programmed. Hence, users can set up algorithms and rules that automatically trigger transactions between nodes. (This enables smart contracts.) Finally, every transaction and its associated value is visible to anyone with access to the system. Cue the "trust economy." WHAT IS BLOCKCHAIN ANYWAY? SUDDENLY, THE PEOPLE WHOM WE CURRENTLY PAY TO FACILITATE TRUST IN COMMERCIAL TRANSACTIONS … ARE BEGINNING TO LOOK A BIT ANCIENT AND COSTLY. OMAR SOLIMAN, Stikeman Elliott LLP

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