You’ve probably heard a lot of buzz around Bitcoin and Blockchain in recent years. And for good reason – these digital currency and ledger systems are increasing in usage. The more common they become, the more often you hear about them.
But what exactly are Bitcoin and Blockchain and are they relevant to the practices of solo and small firm lawyers? Find out below.
What is “Bitcoin” and how does it work?
Here’s a working definition of bitcoin:
Bitcoin is a digital currency (also called crypto-currency) that is not backed by any country’s central bank or government. Bitcoins can be traded for goods or services with vendors who accept Bitcoins as payment.
Here’s a technical explanation of how Bitcoin works, as explained at Investopedia:
Bitcoin is a type of cryptocurrency: Balances are kept using public and private “keys,” which are long strings of numbers and letters linked through the mathematical encryption algorithm that was used to create them. The public key (comparable to a bank account number) serves as the address which is published to the world and to which others may send bitcoins. The private key (comparable to an ATM PIN) is meant to be a guarded secret, and only used to authorize Bitcoin transmissions.
To use Bitcoin, you’ll have to sign up for a Bitcoin Wallet app online or download a Bitcoin Wallet app to your smartphone (iOS or Android). Your Wallet acts as a virtual bank account of sorts that allows you to send or receive bitcoins. You can buy bitcoins using your traditional bank account through a Bitcoin Exchange. Then you can spend bitcoins by locating businesses that accept it using a directory like this one.
What is “Blockchain” and how does it work?
Blockchain is defined as follows:
A blockchain is a public ledger of all cryptocurrency transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings.
Here’s how blockchains work, as described in this Law Technology Today post:
(B)lockchain is a distributed ledger (or register) made up of digitally recorded and encrypted (cryptographically hashed) data in the form of blocks, which when connected via the distributed network of computers storing the blocks, form the blockchain.
In other words, Blockchain is essentially a chronological history of bitcoin transactions, and each individual “block” is similar to a bank statement.
Why should solo and small firm lawyers care about Bitcoin and Blockchain?
Simply put – Bitcoin is an emerging currency that is increasingly being used by consumers. As the general population begins to use Bitcoin more often, potential legal clients may expect law firms to accept this type of digital currency.
This is important because, as you likely already know, the more types of payment you accept, the more easily clients can pay your law firm for services rendered. That’s why so many lawyers now allow clients to pay online by making ACH payments or credit card payments. And, just as accepting debit and credit cards online makes you more marketable and appealing to potential and current clients, so too does accepting other forms of payment such as Bitcoin.
Of course, demand will vary by geographic region and practice area. So, see if other lawyers in your area are accepting Bitcoin by checking directories like this one. If you’re still unsure whether Bitcoin makes sense for your firm, talk to colleagues who are similarly situated and see if they’ve noticed an increase in clients wanting to use it. Their input will certainly help, but at the end of the day, only you are in a position to assess how likely it is that potential clients will want to pay legal fees using Bitcoin.
Another reason to familiarize yourself with how Bitcoin works is because it may soon begin to affect certain practice areas. As explained in this Above the Law post, lawyers who handle securities law or financial litigation matters may find that their practices are increasingly impacted by Bitcoin.
That’s why now is as good a time as any to get up to speed on Bitcoin and Blockchain. Educate yourself and then make an informed decision as to whether accepting Bitcoin makes sense for your law firm. It will be time well spent. You’ll learn something new and, if you decide to accept Bitcoin, you’ll offer potential clients an additional reason to retain your firm.