Episode 2: How Blockchain Could Change Everything

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LESLIE KENDRICK: Hi, everyone, and welcome back to Common Law. I'm Leslie Kendrick.

RISA GOLUBOFF: And I'm Risa Goluboff. This is the second episode of our first season. And if you listened to the first episode, you'll know that we're focusing this season on topics that are related to the future of law. And today's topic absolutely fits that bill. We're going to be talking about blockchain technology and what blockchain technology has to do with corporate law.

LESLIE KENDRICK: Now, when we say blockchain, you probably think about cryptocurrencies like Bitcoin. That's certainly what I think about. But it's also the case that blockchain has enormously far-reaching implications for not just currency markets, but all kinds of other markets that involve transactions or record keeping, which is pretty much everything.

RISA GOLUBOFF: Pretty much everything. Right. So blockchain is the technology underlying cryptocurrencies. And it's a way of recording information, it's a way of recording ownership and transferring ownership. And it's pretty much everywhere, right?

LESLIE KENDRICK: Yeah. So I have learned — and see what you think about this — that if we were in a situation, as we were around Thanksgiving, where Romaine lettuce needed to be recalled because there was an E. coli contamination, blockchain technology could allow retailers and food producers to identify to the second, or to a couple of seconds, the provenance of the lettuce that we eat.

Where it came from, what farm, what day it was loaded, what day it was put on the truck, what day it was shipped to our retailer. And it would tell us where the contaminated food is.

RISA GOLUBOFF: So we wouldn't have to throw out all our lettuce.

LESLIE KENDRICK: You don't have to recall all the lettuce. You could think about, instead of having massive recalls on vehicles, you could have more targeted recalls on vehicles. The applications turn out to be endless. So we're going to learn about blockchain.

RISA GOLUBOFF: Well, we have two guests today. The first one is George Geis, a faculty member here at UVA, who's been thinking and writing recently about blockchain's implications for corporate law. He's a corporate law scholar. And this new technology is going to really change the way we do corporate law, maybe. And so he's going to talk about some of that.

And then later in the show, we'll hear from Mayme Donohue who is a practicing lawyer, who will tell us about how this is playing out in the real world, and what it looks like to have a blockchain practice in a law firm.

LESLIE KENDRICK: George Geis is an expert in contracts corporate law and finance, and shareholder litigation. He's worked as a McKinsey consultant, and has both a JD and an MBA. Last fall, he published a paper called "Traceable Shares in Corporate Law," which explains how blockchain may affect shareholder rights and accountability for corporate leadership. And we're so pleased to have him here today to tell us more about that.

RISA GOLUBOFF: So George, why don't you begin by telling us a little bit more about the blockchain?

GEORGE GEIS: So I think the easiest way to approach the blockchain, and distributed ledger, and what it does, is actually to go to a legal concept that Leslie, you teach about in your property class. This relates just to the way that we register real property through our real property ownership systems.

LESLIE KENDRICK: The deed room.

GEORGE GEIS: I think that's the best analogy for what distributed ledgers actually do. It's been a while since I've taken property rights, but if you think about what we do there, we're essentially tracking the provenance of who owned a specific parcel of land over time, as far back as we can go. And so if you wanted to, you could go into some musty basement and look around, and find the record of ownership, and see how the ownership rights of that parcel of land transferred over time.

LESLIE KENDRICK: I've spent a lot of time in deed rooms. My dad's a property lawyer, and I basically grew up in the deed room in our little town.

GEORGE GEIS: Alright.

LESLIE KENDRICK: It's very interesting. It's totally right. You can see the chain of title going back all the way, as far as it goes.

RISA GOLUBOFF: But the difference is, here, you're not just following one title.

GEORGE GEIS: That's right. So this is right up your alley. So with a distributed ledger, you might imagine that we take a system like that, where we're going to historically trace the provenance of something, some asset, and we're going to go back in time. But we're going to do it in a way that is distributed. And by that, I mean there's not one room.

We're going to split off the deed room into thousands or millions of identical versions of that room, that many, many people can update on sort of a simultaneous way. Only one person is going to be able to change it at a given moment in time, but thousands of people might have the right to change that. That's going to allow us to track the ownership history of this specific type of asset in a way that can be seen very easily, and change very easily by thousands and thousands of people.

RISA GOLUBOFF: And how do you make sure that people aren't committing fraud, that they're not trying to make changes that are illegitimate?

GEORGE GEIS: So I think the real way that this works — and that sort of brings us into the blockchain technology itself, which is how you get a distributed ledger. The way that it's going to work is that you are going to take a collection of asset transactions that are ready to be transferred.

So you go back to Bitcoin. You might have 1,000 people that have said, I want to give my Bitcoin to someone else. I want to buy something with my Bitcoin that is going to cause me to transfer that to them. Those transactions are going to get collected, and they're going to get queued to be processed on this blockchain, on this distributed ledger.

In addition to the relevant information about those transactions, there's going to be information that's going to be a variety of things. It's going to be the output of the last block in the chain that was completed. It's going to be a timestamp. It's going to be some information that's going to be used to create a new Bitcoin, a new coin, or something else that might be a reward for some that goes to the exercise of doing this.

And also, it's going to have to be combined with some other crypto puzzle, or some other variable — that, in the Bitcoin world, it's called a nonce. And essentially, you have to do is take all that information, shove it through a crypto algorithm. It's something called a hash function.

And that can take a variable length input of data — so it could take thousands and thousands of these transactions — crunch it, and then spit out a fixed-length string of information. So maybe 256 bits, or whatever that string length is. And all these people are going to be competing to process that transaction, create the next block.

And they would then get rewarded, if they do it right, in a way that's going to allow them to have the Bitcoin. Or they might also be paid through commission fees, to be able to process that, as well. And so what you ultimately get is this sort of chain of blocks. Each block has hundreds or thousands of individual transactions.

But because the chain is timestamped, because it's linked to the last output string of the last block, it's thought to only get stronger and stronger as time passes, because it's more and more difficult to go back and override the block. Just like it'd be tough to go into your deed room, and go back and overwrite the deeds that have been put in place there.

RISA GOLUBOFF: But even harder than the deed room, because it's distributed.

GEORGE GEIS: Because it's distributed, and because it's changing rapidly, and because it's self-referencing. And so you might imagine that early on, in the first few blocks in the chain, it might be especially vulnerable. But as you get 100 or 1,000 or a million of these blocks all stringing along, they all refer back to earlier output functions.

And it becomes really hard to imagine that someone could accumulate enough power to go back and rewrite history in a way that would transfer the ownership of those assets over to them or to some accomplice, instead of leaving it as a record of the actual owners in the block.

LESLIE KENDRICK: So this sounds like a really powerful, really robust tracking technology. And it's already being used with Bitcoin. And what's the application that you see, or potential application you see that touches on securities and corporate law?

GEORGE GEIS: Yeah. So I think that, if you were to talk to someone who's sort of an evangelist in the area, they would say, well, the first place where things could get really interesting there is with payment systems. And we have classes on payment systems. It's not my particular area of interest, but that seems the most obvious.

And that makes sense, right? If you want to pay someone for something, you could conceivably use a Bitcoin to do it, or some sort of other currency platform that might sit on top of this distributed ledger. The second application you normally get to is with securities transfers. So that's directly in the area of corporate law, and that's of much more interest to me.

I think that, if the technology plays out the way a lot of people think it might play out, it actually could have pretty big implications on corporate law. Because I think it could change the way that we track ownership histories of stock. But before I get into some of those issues — just to continue on that vein — the third area of interest, or the third generation would be in contracts.

So a lot of people are talking about using distributed ledger to create smart contracts or self-executing contracts. And then beyond that, there's lots and lots of other applications that, I think, could also be relevant for it for lawyers and law students. You hear a lot of talk about things like intellectual property.

I noticed, with our recent election cycle, there was actually an op-ed in the paper the day of the vote saying, we should really move our entire voting system to a blockchain platform, because it's going to be a more secure way for us to implement democracy.

RISA GOLUBOFF: Wow.

GEORGE GEIS: So it's one of those things I think where the more you get into it, the more you can at least see possibilities there. But really, I do think the corporate law is a good place to focus on, because, for me, it's my area of interest, but also it actually is a pretty early place where you can see how tracking ownership histories could be done and could be relevant to a big change, in the way that we have recently done things in this area.

LESLIE KENDRICK: Yeah. So walk us through that a little bit, how this would be a change, in terms of how ownership is tracked in the securities arena.

GEORGE GEIS: So that's a long story in a short story. I'll give you the short story first, and then if you want to hear more, let me know. If we go back to the way that stock has been traded, you know it doesn't happen exactly like you might think it does. So if you're trading a share of stock, you might say, well, I'm going to call up my broker and say, I want to sell Apple, or sell whatever the stock that you don't want to hold is.

Or you might go on the internet, nowadays, and click on E-Trade, or whatever, and sell the stock through an online broker. Once you click that trade or execute the trade, economically, everything's set in place. So you've locked in a price at which you're buying or selling the stock. But it's not settled immediately.

It, historically, might take two or three days for that settlement to take place. And if we go way back, it would take even considerably longer for you or your broker to match up who the other side of your trade really was. If you sold, who was the buyer? If you bought, who was the seller?

RISA GOLUBOFF: So go way back before not only before blockchain, but before computers. How was it done?

GEORGE GEIS: All right. So it was done, Risa, sort of like the way that you would sell a car. So in our file cabinets, if we owned cars, we might have various pink slips or titles lips. And a share of stock was typically designated with a certificate. You might remember — my dad had a file cabinet full of old stock certificates.

And if you wanted to buy or sell stock, you would basically take out your certificate, you would take it down to the notary. You would say, I want to sign this, or you might have your broker do it on your behalf. But basically, you'd have to physically process it, just like you do with the pink slip for your car, when you're willing to sell your car.

Then the brokers would gather in all of those certificates, they would work with the company, or with some agent for the company to rip those up and issue new certificates, maybe a new certificate that would be issued out to the new buyer of the stock.

This worked OK for a while, but eventually, the whole system just sort of bogged down. There was more and more trading volume. And in the 1960s, for example, everything sort of stopped working very well, because this back office processing couldn't keep up with the way that stock was being traded.

And so for a while, there was actually — they called it the paperwork crisis of, I think, it was the late '60s or the early '70s. And the stock market started shutting down every Wednesday. They would just closed the entire markets. And they'd say, hold on, we need a time out. We've got to do paperwork, you can't trade any more stock.

Let's freeze time. Let's actually try to execute on all these certificates. And all these piles were everywhere, and they got lost. People started misplacing certificates. There were congressional hearings, at the time. And someone said, we think that the organized crime has actually stolen several hundred million dollars in securities, because we couldn't process it correctly.

RISA GOLUBOFF: Wow. Did that turn out to be true?

GEORGE GEIS: I don't know if that actually was the case. Yeah, I don't know if they did that. But I think there was widespread suspicion that there might have been crime associated with just these free-flowing certificates. I certainly wouldn't be surprised.

LESLIE KENDRICK: That sounds like a very vulnerable system.

GEORGE GEIS: Yeah, people said, this isn't going to work. We can't have a system where we're processing it — this isn't like your car, because you trade stock maybe very frequently. Also, the certificates wouldn't match up very well. Sometimes you'd want to sell 100 shares, someone would want to buy 150 shares, and so you'd have to sort of combine certificates.

And it was really messy. So there was a version 2.0 that was adopted, that basically said, we're going to replace a system like this. We are trading on the certificates with a new intermediary, and they are going to basically hold all of the record ownership, they call it. They're going to hold all of the formal ownership rights in sort of a centralized, undifferentiated pool.

And now, when you sell or buy shares, you're going to be doing it in a way where we don't actually transfer the certificates most of the time. Rather, we just designate a different beneficial owner. So you can think of it like a pool of all the certificates being shoved into this massive warehouse. And they're just going to sit there immobilized.

And then when you buy or sell stock, there's just a bookkeeping adjustment that's made between the various brokers, but you don't actually have a transfer in the underlying record ownership rights of the stock. That's sort of the system that we have in place now, version 2.0. And it mostly works, but there can be a lot of legal problems that can sometimes arise. I think people are very interested in the possibility that a version 3.0, with blockchain, might change that system even more.

LESLIE KENDRICK: Yeah. That sounds better than the previous system, version 1.0. But what are the problems, and how might those be fixed by blockchain?

GEORGE GEIS: So with version 2.0, every now and then, there are sort of snafus that can really interfere with either corporate governance rights or with trading rights. Sometimes there are lawsuits where shareholders have to prove something in order to be able to maintain a lawsuit against the corporation.

So I'll give you an example. There's a type of securities lawsuit, it's called a Section 11 violation, where if you're a company, and you issue brand new stock pursuant to a registration statement, and you just lie — you just sort of make it up — the purpose of our registration laws are to provide lots of disclosure, so that you know whether you're buying.

A company could conceivably file their big registration statement the SEC, and just totally lie about lots of stuff. Our company's great. We're sitting on goldmine deposits. And it's just not true. You've got a right to go back and sue the company for that false registration statement, but only if you can prove that the stock you bought was actually the stock that was sold as part of that registration statement.

If that's the only stock that they sold at all, then you're fine. But if they sold even a tiny bit of stock in another way — so maybe there was a small private placement, or maybe an insider had a restriction that opened up, and they were able to sell off just a tiny bit of shares. And all of a sudden, because of this centralized fungible bulk system we have in place, as a plaintiff, you can't really say that your shares are necessarily going to be the ones that were connected to that false registration statement.

And there've been some real interesting cases where there's like a 0.00000000001 percent chance that you would have had those other shares, the court has still said, too bad. We're not going to use statistical tracing. You can't prosecute your lawsuit. You're just out of luck.

LESLIE KENDRICK: Wow.

RISA GOLUBOFF: So to go back to the deeds, you don't know the provenance of the stock that you have bought?

GEORGE GEIS: Yeah, exactly. And so you can see, hopefully, that having a pristine provenance of exactly where the shares that you got came from — like you might, if we moved to more of a distributed ledger technology backbone — would now allow you to very easily say, where'd my shares come from?

And it would very easily allow you to certify a class of everyone that bought shares through that registration statement in a way that might then allow you to maintain a class action, or to prosecute a lawsuit against the corporation, if there really was some sort of a fraudulent registration statement.

RISA GOLUBOFF: So is blockchain currently being used in that way?

GEORGE GEIS: It's not currently being used yet. I still think we're a little bit of a ways away from having a distributed ledger backbone in place. There are definitely pilot efforts in place. So Australia has said, we are going to roll out a distributed ledger backbone for our stock market by 2020. So they've been working on it pretty aggressively.

RISA GOLUBOFF: And what does it take to do that? What are the steps that have to happen? Why 2020?

GEORGE GEIS: I think it's really complicated. Because first of all, you have to set up a distributed ledger in a way that you're comfortable it's working. This is not a minor project, and you've got to get everybody comfortable with the technology and what it's doing, and how, all of a sudden, we're going to take shares that weren't specifically identified, and move them over to a platform that now is going to specifically identify the shares.

You also, I think, have a legacy issue. Take a company that has been trading for a long time, that hasn't done any of this, how do you all of a sudden take all the stock, and migrate it over to this new platform? You can't easily have — I don't think. Maybe you could. But I think it be difficult to have sort of a big bang change, where all of a sudden, it's just going to work.

RISA GOLUBOFF: So it sounds like you're saying there are technological issues you have to overcome. There are cultural issues, or issues of trust that you have to overcome. And I assume there are also legal and regulatory issues. Would there be new regulation that has to be put in place? What form does that take?

GEORGE GEIS: Yeah, I think I think those are all reasons why people haven't been sprinting down this route. The other angle there is that there are a lot of vested interests. There are definitely financial institutions and other players that may not necessarily want to see a dramatic transformation.

Or they might be interested in seeing something like this happen, because there could be conceivably a lot of administrative and logistical cost savings, but they might just be nervous about what their position is going to be in a new order, that's going to dramatically change the way that this processing has been occurring over time.

RISA GOLUBOFF: So in thinking about the winners and losers given the peer to peer nature of this. Are stockbrokers, are banks, these kinds of financial institutions, are they going to be made obsolete? If you end up in a future where a blockchain really becomes the basis for trading stocks and securities, is that the future we see?

GEORGE GEIS: So I think there's a lot of anxiety related to that. Personally, I think the answer is no. But I think it depends. It depends on whether you have what I would call a public blockchain system or a private blockchain system. A public blockchain system in the stock trading industry would look a lot like Bitcoin, or a cyber currency, where anyone could conceivably modify the distributed ledger, as long as they solve some puzzle, or as long as they met some predefined requirement for adding the next block.

And if that was the case, then I'm not sure that we would need a broker. They might be disintermediated, and you or I could just sort of register our trades on this public blockchain in a way that would execute and process the transaction, just like with anything else that's been recorded through this distributed ledger. So that's a version where I think brokers and financial institutions could be really concerned about being cut out of the equation.

I actually don't think we're going to see that, at least not as quickly in the stock area. Because I just think that there's lots of questions about trust and security and governance. And so I think it's more likely that there's a group of financial institutions — you see some pilots here already — band together and, they say, boy, we've got to figure out this distributed ledger thing before we get disintermediated.

Let's take all of our skills and all our advantages, and let's create a platform that's going to be relatively widely-adopted. Let's try to phase that in with a bifurcated system, initially. And then, over time, maybe it replaces the way that we currently settle trades. And so that way, they would still sort of keep a piece in the puzzle. Just the nature of their role would shift.

RISA GOLUBOFF: Right. So they're adapting to the new world order [INAUDIBLE]

GEORGE GEIS: Yeah. And that's what I suspect that we'll see. Now, that has a disadvantage, though, in that, if you think about a public system, you don't really have to trust anybody. You have to trust the algorithm. You have to trust that the system works. But you're not placing your trust in someone else to administer and process the system correctly, once the initial code has been put out there and released.

LESLIE KENDRICK: So what's next for you, in this area?

GEORGE GEIS: So I think that it's neat to think a little bit more about how distributed ledger technology might work in some specific applications, and also to rethink how it might change some of our theories about what corporate law really means, or even what contract law really means. So on the specific applications, I've been thinking a lot more about voting on the blockchain.

We haven't talked much about corporate voting problems, but there are all these situations that arise every now and then where more shares are voted than exist. And people are wondering how to process that, or various voting concerns that arise in corporate law. Someone suggested to me that we could just vote on the blockchain. And so I think looking more specifically at how a corporate voting project might work on the blockchain is an area of interest.

I also think — and I talked about this a little bit in my "Traceable Shares" paper — but I also think that this would give us at least the opportunity to rethink what it means, from a liability standpoint, to be a shareholder. So historically, when a corporation did something wrong, we never really tried to recover from the shareholders that were in place, at the moment that that bad thing happened.

We sort of just penalized the corporation, and ultimately, the current shareholders bear the price for any sort of penalty that's levied on the corporation. I think it'd be interesting to ask whether and under what circumstances we might want to consider going back to the shareholders that were frozen in place at the moment that the misdeed actually occurred, and maybe recovering something from them and some sort of a restitution theory, or a revised corporate theory.

Because arguably, they're just as blameworthy, if not more blameworthy than the current shareholders, who bear the price when the corporation is punished six months or six years later.

RISA GOLUBOFF: And right now, that's not possible, because we don't have the provenance. We can't trace who owned what at what time, exactly.

GEORGE GEIS: Yeah. Right now, you haven't seen any of that happen. I think would be controversial. You could imagine people that sell their stock, and all of a sudden they get told, six months later, oh, by the way, you sold for too much money. You owe us X. It doesn't have to be that way though, by the way.

You could sell your stock for too little, and all of a sudden get a refund check saying, hey, the company had lied about some good news that was really in place. You're going to get more money back for your sale. But I think it's a controversial idea. But yeah, Risa, you're right. You couldn't historically do it, because we just wouldn't know who to easily collect from, under this fungible bulk model we have in place.

If you now have a pristine provenance of the share's history, it would be much easier for us to at least contemplate and evaluate whether these types of ideas should really be considered.

RISA GOLUBOFF: Well, thanks so much, George, for talking to us. This has been absolutely fascinating. The paper is on SSRN, the Social Science Research Network, if you want to download it. It's called "Traceable Shares and Corporate Law," and it was published in the Northwestern University Law Review.

GEORGE GEIS: Thank you.

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RISA GOLUBOFF: So the idea behind the podcast is to make law more common, and to talk about how legal scholars are actually thinking, day in and day out, about how to improve the law, and how law and technology interact. And our goal is to share that with everybody.

In doing so, I think, we want to not only talk about what goes on in the academy, but also what's going on out there in the world, and how this is affecting the real world practice of lawyers and other people.

LESLIE KENDRICK: Yes, which means every now and then, we'll be talking to someone who's out in legal practice dealing with the exact issues that we're talking about on the podcast.

RISA GOLUBOFF: Exactly, so who do we have today?

LESLIE KENDRICK: We were preparing for today's episode, and blockchain is very new to a lot of people. But it turns out that there are blockchain practices out there in the legal world. And we're talking to Mayme Donohue, who's an attorney at Hunton Andrews Kurth in Richmond, where she handles capital markets and securities, mergers, private equity, corporate governance, and blockchain.

RISA GOLUBOFF: Mayme Donohue, welcome to the show. First question I want to know is how did you get into this field?

MAYME DONOHUE: So funny story. So my brother, who is always scheming, tried to convince me to invest in a Bitcoin mining operation with him back in 2013. And I regret not doing it, because I would have a lot of money right now. But at the time, I thought he was crazy. And so I just started looking into it and doing research.

And I don't know if you've had this experience, but once you start down the rabbit hole of blockchain, you kind of can't stop. It's so interesting, it's so intriguing, there are so many possibilities. So just personal interest and personal research, while I was still in law school. And then, once I got to Hunton, and wasn't brand new anymore, convinced enough folks around the office, and had some great support. And we've got a working blockchain group now, and have clients and matters coming in all the time.

RISA GOLUBOFF: So what's a typical problem that a client might come to you with, that involves blockchain?

MAYME DONOHUE: So that's a really good question. And I think the evolution of the problems we've seen have kind of tracked the evolution of blockchain's adoption in the market. So initially, it was what you see in the media. It's a lot of ICOs.

RISA GOLUBOFF: Entrepreneurs initial coin offerings.

MAYME DONOHUE: Initial coin offerings, right. So companies or individuals with ideas, who are trying to raise money for whatever business opportunity they're working on, through issuing digital tokens or digital coins to the public. We took a pretty conservative approach, when it comes to ICOs and initial coin offerings.

And I think that's paid off, because, as we've seen in even recent weeks, the SEC is cracking down on these as unregistered securities offerings. And so our advice to clients has been, and continues to be, that an initial coin offering is a securities offering, and you must comply with the federal securities laws.

As time grew on, large clients, major corporations, big banks were engaging us to do a whole host of things, whether it's IP-related  — so filing patents, as large banks and financial institutions are developing technology in the space. Also just thinking about the big picture. OK, if we're moving towards an economy that runs on a blockchain-based system, and if we're moving towards an economy that transacts and assets peer-to-peer immediately, how does that change our diligence process, when we're evaluating a transaction?

How does that change our ability to assess reps and warranties? Can they be ongoing? Are they a moment in time still? What's a smart contract? Is that going to change the way all contracts live? So thinking through big picture problems with clients. And that's been really awesome, because you're really thinking about it on the ground level with folks, and understanding, and engaging in a new technology from the legal perspective, legal issue spotting.

But thinking through it from a business perspective, too. And that's been really exciting to do. And as that's gone on, now, we're seeing clients come in and talk to us about supply chain management, and product authenticity, and provenance. We're talking to folks about, well, can I issue a mortgage on a blockchain? And what does that mean to tokenize the title to a physical real-world asset? And what sorts of safeguards do we need in place to make that happen?

There's also of a broader idea here, which is that the world, as it progresses towards a blockchain-based system for finance, and towards any sort of transaction in assets, we're sort of living in a world where we need translation. You and I will have an understanding and agreement of what we want to have happen, but then that will live in code, and execute automatically on a blockchain-based system.

Well, how do I know, as someone who doesn't code, that the code is what it says it is? What if there's a mistake in the code? So thinking through the logistics and the practical implications of moving to a system that is supposed to perfectly resemble and act out what we want it to, in our you know English communications to each other. But I don't have any way, personally, to verify that. So how do we work in a system where we have to sort of translate these contracts into to spoken language and written language, in a way that works for the folks involved?

LESLIE KENDRICK: So this sounds enormous.

MAYME DONOHUE: It's huge.

LESLIE KENDRICK: This sounds as though blockchain could completely revolutionize all our financial systems, and basically all transactional systems. Is that is that how big we're talking?

MAYME DONOHUE: So if you talk to a blockchain evangelist — which I, depending on the day, can be or cannot be — they would tell you yes, and they would say it's already happening. I think the key here is that what the internet allowed us to do, as an economy and as a global community, is communicate instantaneously with people that we don't know, across the world, at the drop of a hat, and for almost free.

But we still can't actually transact in goods. We can talk about it, and communicate with each other about how we want that change in title and change in ownership to occur, but the actual physical ownership of the thing or the custody of the digital asset doesn't actually happen simply by internet. There's a lot of paper that happens behind that system, and there's a lot of back office operations that bring life to transactions that occur on the internet.

I can go on Amazon Prime and buy something, but it still has to get to my door, and the money still has to come out of my account. There's a lot of intermediaries to make that happen. In a blockchain-based system, theoretically, you can move to peer-to-peer transactions, transactions between a customer and a business or a retailer, that don't involve people. You can involve AI, and drones, and all sorts of non-human resources to deploy products to folks.

And also, because of the fact that, theoretically, in this perfect blockchain utopia, we could exist in a world where dollars, currency is traded immediately from me to the company. A record of that is achieved. And the distribution of the products to me occurs automatically, and a record of that is achieved, historically. We can exist in a world where there's no human involved except me, the customer, deciding I want that thing.

RISA GOLUBOFF: So then what role do the lawyers play, in that peer-to-peer world?

MAYME DONOHUE: I think a really significant role. This is a huge translation. This is a huge evolution in the very foundation of what we think it means to do business. The first groundbreaking moment, in terms of who we were comfortable transacting with — perhaps not the first, but a huge moment in it is thinking about dual-entry accounting.

The Medici family in Italy, and what they were able to do. Folks who didn't know each other, folks who were passing through towns, and had no reason to trust that one person had the assets that they were trading for the others. Well, the Medici family just wrote everything down. And they made debits and credits on everyone's account. And you didn't have to trust the other individual, you just had to trust that that central bank, essentially, kept their records correctly.

Well, what we've seen is that central banks don't keep their records correctly. And also, sometimes, we can't trust them. And maybe we shouldn't all the time trust them. And what does it mean to give so much power to one single source that controls the record of what's happened? Can they change something in their favor? Have they already? Is there any way for us to know?

Our economy lives and breathes and depends on our ability to trust one another in transactions. And I think creating trust in a blockchain-based system is where the lawyers come in. Because you can't just move all of our economy onto a blockchain, where records of transactions and records of movement of assets is being automatically written, and just trust it.

You have to build in safeguards. What happens if there is a mistake? Who handles that? I think lawyers have to come in, and understand what the technology is doing, and think through all of those risks, and help build it in a way that already takes those into consideration.

RISA GOLUBOFF: Are there particular applications outside of finance where you're already seeing blockchain have an impact?

MAYME DONOHUE: Sure. It's across the board, but if I had to pick one — and this is known across the industry — supply chain management is a space that is really impacted, very importantly, about record keeping. So the record of how products move across the world, from the farm to your table, or from the factory to your car, is something that's really important, and a safety concern.

As a practical example, the Romaine lettuce outbreak around Thanksgiving caused everyone to be without Romaine lettuce on their Chipotle burritos, and in their salads for a long time. But with blockchain technology, you can actually trace the source of that illness in a matter of seconds, because of the transparency of the record and the ability to track from farm to shelf immediately.

There are companies — in particular, Walmart and IBM have a partnership, and they've created a food safety blockchain. And they have been able to reduce the amount of time it takes them to track the origin of sliced packaged mangoes on their shelf from 7 days to two seconds. And that's because, from the farm to the shelf, every transaction along the way — and this is not a transaction in dollars, it's a transaction in the mango, as the asset — every transaction along the way was recorded on a blockchain, which is traceable, transparent, in real time, and definitely true.

And so they can scan the SKU on the mangos on the shelf, and know exactly which farm sourced those mangoes. So whenever there is a foodborne illness, they can pull those particular items off the shelf, and we can go on about our business, and have our mangoes and our Romaine lettuce.

RISA GOLUBOFF: Once you describe it, it's kind of mindblowing that we have not had a system like that before, where we would be able to trace where the food came from and where it ended up.

MAYME DONOHUE: Yeah. It's a huge problem. It's a huge safety issue. And given our globalized food system, at this point, it's something that we should have been doing already. We just didn't have the technology to do it.

LESLIE KENDRICK: You talked a little bit about how important translation is, and that all of us will be dependent upon algorithms and computer codes for executing transactions. So what can we do about that, both as consumers and as lawyers? Do we just bow to our coding overlords now, and we're just going to be dependent on a certain set of folks who will be able to understand and translate this technology? Or how should we go about trying to be active participants in this?

MAYME DONOHUE: So the first thing I'd say is that we already exist in a world where we just trust a lot of technology, and trust a lot of things that we have no idea how they work. If someone asked me, how does a fax machine work? I would have literally no idea. What is the internet? Can anyone define the internet? I have no idea, but I use it every day. It's prolific. It is a part of everything that I do.

The same is true here. So there's a certain piece of just accepting new technology and getting comfortable with new technology, that we, as humans, are very comfortable with and very practiced at. Blockchain started 10 years ago. So in 10 years, think about how much we've learned already and how much we've grown. And I would just encourage folks who feel like they have questions to learn about it.

There's a lot of great resources online. I'm happy to talk to really anyone about it. Really. All day, all night. It's interesting, and it's exciting. And I think that there is a potential to really unlock a lot of pieces and parts of our economy, and players and participants, in a way that could be really profound.

LESLIE KENDRICK: Thank you so much for coming, Mayme.

MAYME DONOHUE: Of course.

LESLIE KENDRICK: That's Mayme Donohue, an attorney at Hunton Andrews Kurth in Richmond. She's the associate editor of the firm's blockchain blog, which you can find out blockchainlegalresource.com.

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So Risa, with your historian hat on, what do you think about all of this?

RISA GOLUBOFF: I think so many things about all this. The questions about when technology changes, what does that do to workforce, what does that do to employment opportunities? And part of me thinks we often have kind of apocalyptic views of what technology is going to do to our society, and to the way people work, and the way they interact.

And the long view, that I take, says, well, it's not usually quite that apocalyptic, and it doesn't necessarily change overnight. And so when I look at it, I think, well, we've had lots of big technological changes before. And we always keep evolving, and the law keeps evolving right along side, interacting with the changes in technology.

So you can think about the advent of the printing press, you can think about the advent that computer. And there are all these moments where I think people say, that's the end of the world, as we know it. And to some extent, it is. The world does change, and it is radically different today than it was before the printing press or before the computer.

But at the same time, people adapt, rather than just fall off the planet. And so me lumping.

LESLIE KENDRICK: Right.

RISA GOLUBOFF: I see here's a phenomenon that we've seen before. Not this exact phenomenon, but one that we've seen before. And I think we can ask ourselves, what happened in the past? And some of what happened in the past is pretty bad. You could say, printing press, Civil War, Reformation.

LESLIE KENDRICK: Right, right.

RISA GOLUBOFF: There are pretty huge upheavals when there is big technological change. But I'm not a technological determinist, so I think the change is really part of our larger political, legal, economic systems. And the technology doesn't drive all of it.

LESLIE KENDRICK: That's really interesting. So it does make me think about the history of information technology, in particular. And being a First Amendment person, I think a lot about access to information, and how that's changed over time. And you think about the printing press being a really revolutionary shift, in terms of the availability of information to people, but one part of that is, every time there's a shift that makes information more available or that creates transparency, on the one hand, a shift accomplishes that, on the other hand, it often sets up a new group of intermediaries who own the technology or own the means of production.

And that changes the system, as well. So in the '70s, people were talking about how access to media was controlled by the owners of radio and television and newspapers, and that access was extremely constrained for those reasons. And you had arguments that the First Amendment required more access for the rest of us.

And now, you have those same types of conversations happening about social media platforms and technology platforms. And the intermediaries have shifted with the technology, but there's still an intermediary. And we're all kind of wrestling with that. And I think it'll be interesting to see what happens with blockchain, where the technology, on the one hand, provides, potentially, lots more information to other people to everybody about ownership. But the people who understand the technology and who are able to utilize the technology might become the new intermediaries.

And just as brokers are intermediaries, when you're talking about investments, now, will there be other types of intermediaries in that realm in the future. So who are the intermediaries are, and what implications that has, I think, it's a really interesting thing. Because information is free, but there are costs built in somewhere along the way.

RISA GOLUBOFF: Mm-hmm. And it strikes me that a lot of the technologies you're talking about — blockchain included, but also social media, the internet, also the printing press — they're democratization of information access. So more people have access to information and access to producing information. And at the same time, they still create the possibility and the likelihood that experts or owners will become controllers of those various kinds of platforms. And it seems like from, what George says, the same is true with blockchain.

LESLIE KENDRICK: Yep. I think it'll be really interesting to see. It seems like there are always bottlenecks that get created somewhere. And what they look like, and what their implications are, I think, is interesting to think about.

RISA GOLUBOFF: One of the things that strikes me about the democratization, bottleneck, intermediaries is that they often have systematic consequences, that are different for different types of people. So here's not just my historian's hat, but my equality girl hat. So thinking about who has access to the technology, who doesn't have access to it, who's likely to profit from it or benefit from it, and who's not.

I think we see, over time, that there are real inequalities in what that looks like. And obviously, we're talking right now about corporate law, which is really in a rarefied space, anyway. But some of the implications George talks about for shareholders and shareholder litigation, we don't really know yet how will that implicate different groups of people.

LESLIE KENDRICK: Yeah, that's right. That's another question mark.

RISA GOLUBOFF: So that's going to do it for our second episode of Common Law. If you're liking what you hear so far — which I hope you are — please help us spread the word. There are lots of ways you can do that. You can share an episode of the show with a friend or a family member or colleague.

And if you have an extra minute or two, maybe you can leave us a review on Apple Podcast, Stitcher, or wherever you get your podcasts. We're told — and I believe this, as a reader of reviews — that reviews are one of the best ways to get a new podcast noticed by the masses. This episode of Common Law was produced by Tyler Ambrose, Tony Field, and Mary Wood. Common Law is a project of the University of Virginia School of Law. I'm Risa Goluboff.

LESLIE KENDRICK: And I'm Leslie Kendrick. Thanks for listening.