Unpacking the Tech Lingo
17 November 2022 13:00 by Nicolene Schoeman-Louw
Ever-evolving technology is not just a trend, and businesses need to stay informed as they evolve and adapt to remain relevant. So too must legal professionals as they ensure that the layperson develops an understanding of the fibre of laws and regulations which regulate such interactions for the collective good.
Written by Nicolene Schoeman-Louw, Managing Director SchoemanLaw Inc, for LexisNexis South Africa.
Unpacking the Tech Lingo – if you are - why you cannot ignore it anymore
Daily we are having conversations around a new world and cryptocurrency, the metaverse, NFTs and Blockchain (to name a few). To many of us, this may seem like fiction or perhaps a trend that will fade. Therefore, many of us do not pay too much attention to it. However, ever-evolving technology is not just a trend, and it is something to stay informed of as our businesses would need to evolve and adapt to remain relevant.
Let's start where it all began – the internet
There are two generations of the existing word-wide-web: Web 1.0 (the 1990s) and Web 2.0 (2000s). The key points are that web 1.0 was the foundation for web 2.0. However, it consisted of static websites mostly. Web 2.0 made interaction with other users and online content possible and took the user experience from a spectator to a collaborator. Unfortunately, this also meant that the less constructive human behaviours started to exhibit themselves online such as defamatory social media posts, fake news and an unprecedented era of data collection and invasion of privacy.
Let's move to blockchain
Cryptocurrency is essentially a token on the blockchain, and the value is driven by perception or linked to an underlying asset. It, therefore, is not the blockchain but an application thereof.
Non-Fungible Tokens, on the other hand, are unique and noninterchangeable and non-divisible assets recorded on a blockchain. NFTs are commonly used to track the ownership of an associated asset.
Fungible tokens or assets are divisible and non-unique, for example, some cryptocurrencies and legal tender.
Decentralized Autonomous Organizations (DAOs) are groups whose rules are encoded and transactions executed using a blockchain without intermediaries. They are self-regulatory. According to Bloomberg Law, “In the absence of remedial legislation, DAOs have been viewed as partnerships in terms of joint and several legal liability. Wyoming and Tennessee enacted remedial statutes in 2021 and 2022 to address this concern.
… Of all the tools available to address the world's deteriorating conditions, DAOs appear to be among the most efficient, cost effective, and “trustless” organizational structures available at this time. DAOs are “trustless:” Like other blockchain applications, they do not rely on a centralized oracle to conduct business on behalf of the members and associates. Decentralized DAOs become “trustless” due to the autonomous consensus-based decision making unavailable in centralized systems.”
So, what is Web3.0 or the metaverse?
While Web 1.0 and 2.0 use the client-server model. Web3 would use a blockchain-based "peer-to-peer'' and data would be hosted across participating nodes in a distributed network rather than servers operated by a company providing such services (as in Web 2.0). No intermediaries and more control over the user itself. However, this significant shift would entail paramount awareness of the technical components for users to protect themselves in this self-regulating environment effectively.
What could the legal world look like?
According to Bloomberg law: “The practical benefits of meeting the needs of lawyers, clients, and courts through DAOs created for the specific purposes unique to each, could include:
- Charitable support for global associations of immigration lawyers serving the world's displaced populations
- Virtual courts operating remotely with high levels of cryptographic security for conducting hearings, trials and document filing
- An automated real estate practice by which documents are produced, shared, executed, and filed securely, virtually, and remotely
- Swiss verein structured legal groups with automated client conflict checking, creating digitally secure Chinese walls to ensure client confidentiality
- Legal reform associations for local, national, and multi-jurisdictional interdisciplinary facilitation of proposed legislation
- Specialized global practice groups collaboratively serving unique legal industry needs such as Web3, NFTs, DAOs, and other blockchain applications
- Dispute resolution groups which provide DAO experienced mediators, arbitrators, and automated mechanisms by which conflicts can be promptly addressed and resolved at low cost and little disruption to the DAO”
We are already in a situation where our legal frameworks grapple with staying up with technological advancement. As such, the more we move into a user-directed and controlled environment – democratically self-regulated, the better we need to be equipped to make informed decisions about the exposure of our personal information and commercial risk.
As we start to embrace these technological advances as the business community, we must ensure that we communicate our offer adequately, as well as the terms and conditions of our interactions. This is specifically from not only a contractual point of view but also from a data protection point of view.
In addition, that as consumers, we ensure that we educate and inform ourselves of the risks or nature of the assets we are seeking to acquire, the terms of the contract in this environment, what the tokens we have to entitle us to do and to consider and understand the regulatory frameworks as we interact. Knowing that we are soon to be positioned to be the makers of our fate, there are no intermediaries that would offer some level of protection or share the responsibility of safeguarding risk as we interact and contract.
Our role as legal professionals is therefore likely about to shift, where we ensure that the layperson develops an understanding of the fibre of laws and regulations and how it is meant to regulate interactions for the collective good. So, that the not so far off self-regulation is hopefully transitioned with and as healthy progress and not ultimate destruction.
In closing, according to Bloomberg Law: “Lawyers and other professionals can lead the challenging work to be done on many fronts.”
Managing Director SchoemanLaw Inc