The True Transformation Begins? Smart Contracts, Digital Signing and Law
The area that blockchain, cryptography and digital signing technology will benefit citizens most will probably be in the legal industry. I often outline that, in the 21st Century, I cannot understand why this is anything more than a scrawl on the piece of paper:
By the way, this isn’t my signature. I took it from the Tuscaloosa web site [here]:
I really don’t quite know what my signature is anymore, but I still get asked for it to sign the back of a document related to a spin-out company, in a loan application, and in the sale of a house. These days the chance of someone copying my wet signature is almost 100% (I often receive wet signatures from other people as JPEG images). The chance of them knowing my private encryption key is:
1 in 1,150,000,000,000,000,000,000,000,000,000, 000,000,000,000,000,000,000,000,000,000, 000,000,000,000,000,000,000,000,000,000, 000,000,000,000,000,000,000,000,000,000, 000,000,000,000,000,000,000,000,000,000, 000,000,000,000,000,000,000,000,000,000, 000,000,000,000,000,000,000,000,000,000, 000,000,000
And in fact, you’ll see my signature on tweets:
In a digital signing world, we generate a public key and a private key. The private key encrypts something — such as a hash of a message — and then the public key will decrypt this, and we can thus check that the private key was the one that was actually used to sign the hash. This does two things — it proves the identity of the person (as only they will have the required private key — and it proves the integrity of the message, as the hash of the message can be checked.
So, in a single digital signing ,we prove that we are signing for the whole of the document. If someone changes even one bit of the document, the hash will not match, and the signature will be invalid. In a printed legal document someone could undo a staple, and put a new page in its place (and then recreate a scroll with the same pen).
Here is a simple explanation of the signing process:
A changing legal world
I regularly receive documents and emails with someone’s scanned signature, but still we continue to trust scanned signatures. But now there is a change on the way, as The U.K. Law Commission are undertaking a research project which aims to bring legal clarity to the integration of smart contracts.
“It is important to ensure that English courts and law remain a competitive choice for business. Therefore, there is a compelling case for a Law Commission scoping study to review the current English legal framework as it applies to smart contracts.”
While it’s unlikely to go the whole way to accept smart contract and crypto signing, it is at least a start in understanding how the legal industry could be changed into one which had a core level of trust. This builds on a document which defined 14 reform areas which the Law Commission would investigate [link]:
- A Modern Framework for Disposing of the Dead.
- Administrative Review.
- Automated Vehicles.
- Electronic Signatures.
- Employment Law Hearing Structures.
- Intermediated Securities.
- Modernising Trust Law for a Global Britain.
- Museum Collections.
- Registered Land and Chancel Repair Liability.
- Residential Leasehold.
- Simplifying the Immigration Rules.
- Smart Contracts.
- Unfair Terms in Residential Leasehold
For the technology focused ones, the aim is to:
Boost Global Britain and help enhance the UK’s competitiveness as we leave the EU — smart contracts, electronic signatures; automated vehicles; intermediated securities; and modernising trust law.
As a Cypto Professor you will expect me to say that we should go for smart contracts and digital signing, but we are starting from an almost zero level, and there is very little in the way of the common platform for digital signing. The UK has no real credible and trusted digital ID system, so we are a long way of getting anything that would even be acceptable. For me there needs to be a strong understanding of identity, and how we can create trusted identity sources, and this will be the core of any legal system. Then we need to define the methods which will prove someones identity, and this will vary in the levels associated with the risk involved.
Imagine a world where a smart contract is created on the sale of a new home. The true identity of the buyer, the seller, and the selling agents, are defined with cryptography, and each transaction is signed by the entities. The contact might involve planners, estate agents, councils and all the other roles being part of the sale, and how these all interact. New smart contract can now be created which will hold back payment until all the conditions are met. All the associated fees can be defined within the contract, and paid when the requirements are met. No more paper. No more confusing contracts. A public blockchain can then record the things that require to be public, and where the core data can be stored securely with hashed signatures used to confirmation of the data.
There’s risks, of course, and the complex nature of law would require that we could only implement fairly simply parts of a house sale at the current time, such as basically just creating an audit trail. But at least this would be a step forward. Anyone who has interacted with the planning permission system in the UK will know that it is a mess, and that plans are often lost, and there’s little in the way of proper tracking of documents.
We are now moving into serious applications of blockchain, and these will change our society forever. We are now building a proper digital asset infrastructure, and recording our footprints. At one time it was libraries and great state buildings which held these, but in the future our footprints will be held on a blockchain, for our future generations to use.
I find it strange that the objective of the investigation relates to the UK’s competitiveness in the world, as the change is something which will bring benefits to our society. For me, cryptography is not just fixing the security problems we have created with the Internet, it will build a new (and better) society:
If the UK and Scotland does not transform its core infrastructure, it will lose out in the long term. Blockchain and cryptography will be at the core of the digital rebuilding, and this time it will not be centralised on those with the power, but will be handed back to our citizens. When it comes down to it, we are just codifying our world, and creating the start of a ledger that will properly record the world we live in.
But while we need proper digital trust, the true test will be human trust, so we need to make sure that we all work together to make sure that we build something which can be trusted for all involved. We are truly building the most amazing machine ever created, but if we build it incorrectly, it will risk our futures. Up to this point in time, the technology — including the required cryptography — was not in-place. As of now, it is ready to be built.
Just like with the Doomsday Book — the great survey that was undertaken in 1086 by King William the Conqueror for England — we are now properly recording our assets and how we interact with them, and this time it will place them in a way which will allow them to exist in our digital world. Our houses, our design plans, our house sales, our planning permission, our deeds are all part of this, and need to be properly recorded (and protected) in a digital form. It’s an exciting time!
You may agree or disagree with everything I have just said, but be part of the debate, as this is a new world we are creating and will involve defining new ways of doing things in virtually every area of our lives, so be part of it.