Is The Cryptobubble Deflating?​

By Jake Rickman​

What do you need to know this week?

Cryptoassets have had a bad few weeks.

Bitcoin, still the most valuable cryptocurrency on the market, has seen half of its value wiped out in the past six months, having fallen from a high of over $64,000, down to $33,000.

Ether, the flagship cryptocurrency of the Ethereum blockchain network, which has spawned an ecosystem of its own, has likewise fallen over 30% year-on-year.

Why is this important for your interviews?

For over ten years, the value of cryptocurrencies has experienced rates of growth rarely seen in any market. The fact that the value of these assets can climb — and fall — so with such tremendous force is why market analysts consider the crypto market highly volatile (if also highly lucrative).

That said, despite all the recent developments, compared to a few years ago, cryptos are no longer a fringe asset: large institutional banks like JP Morganare accumulating portfolios of cryptocurrencies and investing in the blockchain technology that the crypto market sits upon.

Additionally, for several years now, the concept of the blockchain has also caught the attention of the legal sector. This is because the underlying technology can (at least in theory) lend itself greatly to the work of lawyers.

This is why, all things considered, it is helpful to familiarise yourself with the basics of crypto assets and blockchain technology so that you can form an opinion about them. For instance, is it a bubble long in need of popping? Or is this volatility just short-term growing pains as the society acquaints itself with the future?

Given the relevance of crypto-technologies for law firms, the current market volatility could provide you with a good way to discuss your views and, importantly, what it means for law firms and their clients.

How is this topic relevant to law firms?

Before you understand how crypto-technology might be helpful to law firms, it may be beneficial to have a rudimentary understanding of blockchain technology.

A simple explanation is that blockchain technology uses different decentralised databases shared across a network. Each time new data enters the network, the technology records it somewhere along the “chain”. Once the network records the data, it is theoretically impossible to alter it because the record-keeping system is dispersed across the entire network and the information is recorded in different "blocks".

On this basis, this technology is ideal for sensitive and complex record-keeping, such as unique kinds of contracts that you might find in the derivatives or shipping markets. In a perfect world, these contracts would be able to self-edit key terms in response to specific events without the need for any human involvement (so-called “smart contracts”).

This is one reason among many that the “LegalTech” industry has billions of dollars pouring into this space. Many law firms are directly investing in the industry through the use of “LawTech Incubators”. Some firms with the 'highest-ranked' LegalTech incubators, at least according to Chambers and Partners include Slaughter and May and Allen & Overy.