Using the blockchain, smart contracts pave the way for online dispute resolution

In the digital age, commerce happens at lightning speeds. We’re constantly making deals and agreeing to contracts, whether consciously or not (e.g. “I have read the terms and conditions”). With this exchange comes certain risks, namely disagreements over the nature of the deal. The purpose of contracts is to avoid these pitfalls, but they can sometimes be difficult to interpret.

In the past, we’ve turned to lawyers to wade through the jargon and settle these disputes. Unfortunately, that’s an expensive route to take. A single meeting can cost hundreds of dollars, and in the event it’s taken to court, that cost, as well as the time commitment, really begins to add up.

That’s where online dispute resolution comes in. Utilizing technologies like smart contracts, the future of arbitration is likely going to be done through video chat. What it really comes down to is decentralization, as we eliminate the need for a central authority.

Why Decentralize?

It’s easy to see why anyone would choose the less expensive route, but the rise of this phenomenon means so much more. It means justice is now more accessible. It means those that can’t afford litigation can’t be taken advantage of. In the digital marketplace, small businesses are able to prosper.

Unfortunately, their prosperity is dependent on the other party following through. Thanks to online dispute resolution, they won’t have to pay high legal fees just to collect what they are owed.

Here’s a scenario: A freelance graphic designer is hired to design several logos for the company. In the contract, the two parties agreed on submitting payment after the completion of each logo. The company then fails to pay after the first, saying they’ll pay when all are completed.

The designer has bills that need to be paid, so they can’t wait weeks or months to receive payment. Unfortunately, they also can’t afford to higher litigation to enforce the contract. Through online dispute resolution, the designer can take their case to a licensed arbitrator to settle the dispute without leaving the comfort of their office (or going bankrupt).

In some ways, it’s similar to practices in the law, especially for personal injury, that make legal assistance more accessible. Contingency fees and non-recourse plaintiff legal funding can at least postpone to financial burden until the case is settled. Like online dispute resolution, this helps those who would otherwise be taken advantage of get the justice they deserve.

Smart Contracts and Blockchain

Blockchain has been a common buzzword recently, but it can be a little hard to understand. Essentially, a blockchain is a list of records. Each of those records is referred to as a “block,” and each block has a permanent timestamp allowing decentralized record keeping. Out of context, of course, that means absolutely nothing.

The most common (and original) use is Bitcoin. Each block is a record of a peer-to-peer exchange. Since that record is permanent, no central authority, like a bank, is needed to regulate the system.

While Bitcoin’s use as legitimate currency is still impractical, decentralized currency would, in theory, make the free market exchange more democratic.

While cryptocurrency might make blockchain seem technical and confusing, it will have the opposite effect on contract law. Smart contracts utilize this exact same technology to help two parties map out their agreement.

If all goes according to plan, it simply serves to make the terms more concrete and irreversible. However, if either party fails to meet part of the contract, there’s a detailed record that can be used by a third-party arbitrator, and a court binding verdict can be given digitally, with no parties meeting in-person.

Online dispute resolution is the future. With several companies already paving the way, it’s likely that most civil cases will soon be settled digitally. While there are certainly drawbacks, the increased access to justice is a pro that cannot be denied.

Implications for Personal Injury Lawsuits

There is not much of a direct implication for personal injury at present. However, as more business and contractual disputes are resolved online, it is likely that courts will become less burdened with such cases.

This could pave the way for faster personal injury lawsuit resolution in the future.

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