Will Blockchain Technology See the Demise of Lawyers, Brokers and Other Intermediaries?

Innovation and technological developments have always been a threat to jobs – computers and word processing software eliminated the need for typing pools; automation eliminated thousands of assembly line positions; robots are now substituting people in distribution warehouses. But new technological innovations may threaten white collar professions, such as lawyers, brokers and other financial intermediaries, and this could be devastating for economies overly reliant on financial services, such as in Canada. The Blockchain technology may completely change how companies and individuals transact, eliminating central clearing mechanisms and eliminating intermediaries.

Originally devised for digital crypto-currency, Bitcoin, blockchain is a technology that produces digitized, decentralized, public ledgers that can track any kind of transaction. The blockchain database is hosted and reconciled by all the computers in the designated network simultaneously and, in this system, intermediaries like banks and bourses or central clearing houses are made redundant. 

But blockchain is not just for crypto-currencies - just a couple of weeks ago, one of the first large-scale transactions using a blockchain technology was implemented in trading electricity: energy companies E. ON and Enel in Europe traded electricity for the first time using blockchain technology. The first peer-to-peer energy contracts over the blockchain were executed via a software called Enerchain.

Because blockchain eliminates a need for a central clearing house, it offers savings on transaction fees, intermediary commissions, and proponents of this technology argue that it also drastically reduces the time needed to process transactions.

However, where there are proponents, there are also critics.  One criticism of blockchain notes that trading using this structure and network could be too slow because of the need to constantly reconcile the ledger on all computers in the network. As well, by its very nature, any information on blockchain is irreversible, which means that any mistakes made by the transacting parties could also be irreversible, and this could create inefficiencies and potentially losses or other costs. In most instances, the central clearing house plays an important role in maintaining the integrity of the marketplace. The centralized authority brings rules which the marketplace participants want to adhere to, and need to be enforced, to maintain order within the system. In the blockchain, keeping order may be more complicated as market players would need to agree to and maintain the rules on their own. In many cases, the number of players in the system could be very large, with different rules and regulations, which might make it difficult to ‘decentralize’ through a blockchain structure.

 
This might mean that blockchain technologies may only be successful in certain select cases where a central clearing and policing body is needed less. Perhaps some professions and white collar positions may be safe, at least in the foreseeable future.

Ukrainian Credit Union Limited