Will Next Gen Blockchain, “Hashgraph” Create Problems For Ethereum Legal Alliance

We learnt back in August  that ten Amlaw 200 firms and four legal institutions that specialize in blockchain technology joined the Ethereum blockchain group.

Members include, amongst others: Cooley, Debevoise & Plimpton, Hogan Lovells, Holland & Knight, Jones Day, Morrison Foerster, Perkins Coie, Shearman & Sterling and Cardozo Law School’s Blockchain Project.

Since then more have joined the fold.

But, have they have jumped in too early?

This past week we learnt about a new development Hashgraph . The next level  in distributed ledger technology invented by Professor of Computer Science, Leemon Baird.

Baird has over 20 years of technology and startup experience and has held positions as a Professor of Computer Science at the Air Force Academy and as a senior scientist. He has been the co-founder of several startups, including two identity-related starts ups, which were subsequently acquired. He received his PhD in Computer Science from Carnegie Mellon University, and has multiple patents and publications in peer-reviewed journals and conferences in computer security, machine learning, and mathematics.

 

So …What is Hashgraph and Why is it Better?

Hashgraph is a superior distributed ledger technology system that eliminates the need for massive computation and unsustainable energy consumption like those of Bitcoin and Ethereum.

This morning we learnt from the BBC that in order to generate one new bitcoin the energy consumption required is almost the same as the electricity consumption pattern of an ordinary home in one week.

Hashgraph see the following as their advantages over the older blockchain tech.

It is, we are told, able to reach a consensus.

  • It is estimated to be 50,000 times faster than the blockchain and is limited only by bandwidth?—?250,000+ Transactions Per Second (Pre-Sharding)
  • Currently Bitcoin is limited to 7 transactions per second.
  • Fairer system? mathematically proven fairness (via consensus time stamping) means no individual can manipulate the order of the transactions.

In the blockchain world, a miner can choose the order for which transactions occur in a block, can delay orders by placing them in future blocks, even stop them entirely from entering the system.

Consensus time stamping within Hashgraph  prevents an individual from affecting the consensus order of transactions.

Once an event occurs, everyone else in the network knows about it within a couple of minutes.

Only the effects of the transaction are necessary in storing, everything else can be discarded. This shrinks the amount of storage currently needed (Bitcoin: 60GB) to a fraction of 1GB, allowing a smart phone to now act as a node.

  • Improved Security: Asynchronous Byzantine Fault Tolerant: No member can prevent the community from reaching a consensus, nor can they change the consensus once it has been reached.

With Byzantine, a consensus can be reached, whereas in the blockchain world, it is only a probability that increases over time.

If no consensus is ever reached, conflicts will always occur. This is why hard forks that result in alt coins, such as Bitcoin Cash and Bitcoin Gold are occurring.

  • 100% Efficient: No mined block ever becomes stale.

In the blockchain, transactions are put into containers (blocks) that form a single, long chain. If two miners create two blocks at the same time, the community will eventually choose one and discard the other.

In hashgraph, every container is used and none are discarded.

To find more detail on the nuts and bolts of Hashgraph here are a couple of documents that you can download and peruse at your own pleasure.

 

 

Hashgraph & The Law

Last week we spoke on the phone to the Hashgraph office in London.

Although intrigue, here at Cognate Blog, we weren’t sure what the technology could do for law firms until marketing manager, Alex Godwin, said the following,unprompted.

Think of Hashgraph as Ethereum taken to it’s logical conclusion.

Immediately our ears pricked up. 90% of law firms engaged with blockchain have placed their bets with Ethereum. Should they have waited a little longer?

Above The Law recently published an article entitled. The Advent Of ‘Blockchain’ And What It May Mean For LawyersBlockchain will bring disputes — and good lawyers need to be ready.

We highlight part of the article below illustrating the importance of “Smart Contracts” for the legal sector.

The takeaway here is that the Hashgraph has already proved itself against the original blockchain in the world of  “Smart Contracts”.

 

Perhaps no concept is more central to the role of the blockchain in the legal space than  ‘smart contracts’. These are agreements that are written in computer code that automatically monitor the actions of the individuals involved, and will immediately provide notice when a violation takes place, or when a contractual obligation has been fulfilled. Examples of the application of these ‘smart contracts’ would include: discovery, audits, and dispute resolution. These processes would be nearly instant, because a computer is reviewing the actions, rather than a person. This would be equally beneficial for corporations and individuals. London-based law firm Hogan Lovells has already begun to involve smart contracts in their practice: (https://blogs.wsj.com/cio/2017/02/01/law-firm-hogan-lovells-learns-to-grapple-with-blockchain-contracts). The implementation of these smart contracts means that law firms themselves can write contracts that will exponentially speed up the legal process by having everything from arbitration to building a case happen in a moment because the contracts themselves will be computer code that reference all the agreed upon terms that went into the agreement.

‘Smart contacts’ can be used for other purposes too. A charitable donor or investor can write a check that says, ‘I’d like to fund your project and I’ll give you $10,000, but only if you have raised the $1 million that it’s going to take to fund your entire project. Otherwise, the money reverts back to me.”  This allows people to turn contractual terms into computer code and govern the way they are executed. In the code, the money would automatically be returned without the need for making a claim if a counterparty did not fulfill the pre-conditions for non-reversible execution of the wire.

Applications of blockchain technology offer great promise and potential that may give rise to major upheaval in industries all over the world. The law is perhaps most primed to benefit from the immediate, anonymous, verifiable, decentralized, and truly fair power of the blockchain. While one early iteration of this technology might simply be a smart contract, could we one day imagine a blockchain system so sophisticated that it could pass the state bar examination? By holding a ‘virtual blockchain attorney’ to the same standards as a human one, the jury is still out whether such a system could outsmart the status quo – but for how long?

The Advent Of ‘Blockchain’ And What It May Mean For Lawyers

Does all of this mean that law firms may want to investigate this new world before investing in the established technology.

A few years back we would have said that once a law firm has made a tech decision they tend not to go back for improvements or upgrades for at least 5 years.

But, if the Hashgraph promises are true and indisputable we’d suggest that the Cardozo Law School’s Blockchain Project and associated law firms start talking to Hashgraph sooner rather than later to ensure they are going down the path that ensures speed and security in legal transactions.

It’s also worth remembering that the Hashgraph isn’t a pie in the sky offering. It is already deployed with the USA Credit Union system.

We’ll be very surprised if we don’t find ourself reporting regularly on Hashgraph in 2018.