I’ve written before about Bitcoin (with Dug Campbell, conference organiser and Bitcoin guru). Put simply, it’s a new online financial system which runs in parallel with established currencies. Merging the concepts of email and cash, it lets users transfer funds instantaneously at little or no cost to anywhere in the world. Breakthroughs in technology now enable a massive global network of computers to carry out the traditional role of financial institutions – to verify the validity and value of currency units. This network now collectively maintains one single ledger (the “block chain”) of every bitcoin transaction that has or will ever take place. This record is permanent and cannot be altered (eg by fraudsters), and because there are no third parties, transactions are cheaper and faster. Security is provided by mathematical means, and provided you keep your passwords safe, you have complete control over your finances.
Fortunately, you don't need to be a technical guru to be interested in Bitcoin - my computing skills go no further than "Hello World" but I managed to follow most of what was said at the conference. While I first got into this from the viewpoint of financial disclosure in divorce, it's clear that cryptocurrencies may have wider implications for lawyers. One emerging theme is “the drive to efficiency” by streamlining transactions. This is not just about reducing money transfer costs, but a fundamentally new way of looking at contracts and transactions that maximizes efficiency.
For example, say you’ve saved £100k in bitcoins and decide to leave this to your favourite programmer in your Will. What if your Will was registered (securely, of course) on the Internet, and then once your death registration had been confirmed electronically, the bitcoins were auto-released to Ms Programmer without further formalities? On a more mundane level, what about dog walking? Say Fido has a GPS chip in his collar which transmits a signal on completion of his walk, then the fee in bitcoins is automatically paid to the walker. No arguing about how many circuits of the park he actually completed. In fact, one company in New York (where else!?) is already on to this.
Ultimately, the technology which underpins Bitcoin may be used to generate so-called “smart contracts” which encapsulate their own dispute resolution mechanisms – so there’s no need to go to court, and parties have more control over their agreements.
What interests me in a family law context is that this approach allows no room for discretion. In fact, eliminating this is the whole point. But as the law stands, there are always grey areas in matrimonial finances. While there is a scheme of rules about division of property, they don’t prescribe a detailed outcome for every situation, and in almost every case there will be an argument that can be made to favour your client. This has downsides, not least the difficulty of predicting outcomes and risk, but while it can be a source of frustration for clients (and lawyers), it is also an opportunity. Without discretion, I wonder how we can take individual circumstances into account to achieve truly fair outcomes.
We’re still a long way away from every couple having a prenup registered on the Internet and the bitcoins being transferred the day the divorce decree is registered online. But in an environment where clients increasingly seek certainty about costs, risks, benefits and outcomes, the debates about transaction efficiency and smart contracts will be well worth following. Perhaps more so than Aberdeen Football Club, the way things are going…