Jason: I’m talking to Stephen Diehl who is the Chief Technical Officer of Adjoint. He and his company are looking at how to implement law on the blockchain and how that’s potentially going to completely shake up the legal profession. Stephen, thank you to talking to me! Do you maybe want to kick-off by talking a little bit about your project and what you’re working on?
Stephen: Yeah – thanks for having me here today! I run a company called Adjoint Inc., we’re particularly interested in building technology around asking questions of smart contracts in much the same way you would ask questions of a legal contract. My company is largely a technology company, we build tooling and infrastructure around creating settlement networks for the capital market space in which smart contracts can be deployed which faithfully model real world contracts. Smart contracts themselves are kind of a misnomer, because they’re neither smart, nor contracts.
Jason: Do you want to talk maybe about what smart contracts are, what your definition of those is?
Stephen: Indeed. A smart contract is a digital representation of the time frame, rights and obligations between counterparties that’s synchronised on a distributed database. A smart contract is actually a description about the touch points between different counterparties and how they have to agree or disagree about some fact at some point in time in a way that can’t be refuted. A large portion of traditional contracts actually involve the synchronisation of certain facts or certain assertions about ownership or value flow or membership over time based on people agreeing about some fact. What’s interesting about smart contracts is that we can use the blockchain as this single source of global truth to synchronise counterparty agreements in a way that can model traditional contracts, and we can take a traditional contract, distil out the touch points between the counterparties, and then encode that in logic which is then run on the blockchain.
Jason: And that’s also without the need for a third party.
Stephen: Exactly, so this all runs on this global distributed network which doesn’t require third parties to intermediate between people.
Jason: Which clearly is tremendously revolutionary and could disrupt basically every business on the planet potentially.
Stephen: Indeed, there’s a lot of venues for improving traditional workflows, yeah.
Jason: So right now we have smart contracts, which is the code that gets run on the blockchain, which defines these agreements. But then we have the actual law and actual contracts that are legally enforceable through traditional space, and right now those two things are being bridged. Do you have to talk a little bit about how those two things interlock, interplay, how those two things are being knitted together?
Stephen: Yeah. At the heart of what we aim to do with smart contracts and what we’ve traditionally done with legal contracts is describe some workflow between counterparties. The way these processes are being bridged at the moment is that we’re interested in taking traditional agreements about workflows and distilling them down into a process that can be automated. The question we need to ask about an implementation of a traditional contract in terms of a smart contract is does it preserve the same structure as the traditional contract?
What my company is effectively focused on building is to set up analysis tools for business users to basically ask questions of the contracts themselves so that they can interrogate whether a digital implementation of a traditional contract actually has the properties that they desire. We do this through a process known as formal methods, which distils a digital representation of a contract in terms of the time frame, rights and obligations of the counterparties down into a mathematical formalism in which we can interrogate specific properties about events over time – whether events will happen, whether they won’t happen, if an event happens, will something else happen – in a description language which can be phrased as asking business questions of a smart contract, in much the same way you would ask business questions to a barrister or lawyer.
Jason: We’ve talked about the very high level technical stuff. How do you think this stuff is going to change the legal profession on the ground?
Stephen: As these technologies become more prevalent, I think a lot of lawyers are going to have to become a bit more versed in technology. What is a digital signature? What is nonrepudiation? What does it mean to exist on a global network? What does that mean with regards to jurisdiction? What is identity is a big question. How is identity tied to say cryptographic credentials on a blockchain? These are questions that really we don’t have good answers for as technologists, and I think the traditional law profession doesn’t have good answers, or they haven’t historically, so I think these are questions that we need to hammer out together with each other, and I think they’re questions that are going to be extremely important for building the next generation of smart contracts.
Jason: Do you think that technologies like this are going to replace lawyers?
Stephen: No, of course not. I mean, most contracts are bespoke, so I think there’s always going to be the need for people to interact with other people, to reconcile different systems to come to agreements. However, there are a large portion of contracts that are not bespoke, which are largely the ones that are traded as instruments in the financial industry or venture agreements or notary services, which are very automatable and they are currently done via very traditional methods: you go to a notary, take a piece of wax and stamp it with some stamp by a trusted person… These kind of services are probably replaceable. But am I going to replace my general counsel when I come to him and ask him about questions about compliance and immigration law? These things are still obviously not automatable, so obviously smart contracts are not going to replace most of the law profession.
Jason: Okay. What other industries do you think are really going to be shaken up in this way, by not just smart contracts but blockchain in general? Clearly the legal profession is one of the biggest ones, but what other ones do you think are going to be turned over by this?
Stephen: Well, I’ve always thought of blockchain as basically just being the next generation of database solutions, they’re just database solutions that have nice properties about distribution and identity baked into them. If you ask yourself what industries can be revolutionised by the blockchain, I think what industries have been revolutionised by the advent of IT and database solutions, and that’s nearly everything, nearly everything. I think the big idea around the blockchain is that we can construct globally consistent data stores in which we can record facts about human activities, which is a very general assertion, and I think it’s going to be wildly applicable to a lot of things that none of us can even foresee.
Jason: Do you have a sense of a timescale in which maybe different waves of change are going to happen?
Stephen: I think what you’re seeing right now with a lot of the hype and a lot of the interest we’re seeing from a lot of different sectors is just the industry coming to grasp with what it means to have this global data store and what we can do with these things. It’s not all that dissimilar from what we saw in the early 90s, where we had the dot-com bubble and we saw a lot of frenzy and interest in the technology, that mostly went nowhere and caused a lot of harm, did some good things but left some damage behind, but ultimately it left us with what we take for the Internet today, and we’re all now connected to this everywhere, with our phones and… What you’re seeing right now is the early stage of something that’s going to be quite big in a way that I don’t think a lot of us can foresee.
Jason: Right. In the short term, do you think we’re in a speculator bubble with crypto and ICO and things like that, as people run into the early hype phase?
Stephen: Almost certainly, almost certainly – I think anybody who looks at this space would obviously come to that conclusion.
Jason: Alright. Stephen, thank you very much for talking to me and good luck with your efforts!
Stephen: Thank you!