By introducing a new, decentralized and secure way of handling financial transactions, the adoption of Bitcoin and the Lightning Network could change the legal industry and transform how lawyers do business. However, there are also potential hurdles that law firms should consider before using these emerging tools.
Created in 2009 by an anonymous person or group under the pseudonym Satoshi Nakamoto, Bitcoin is a digital currency on a peer-to-peer network that enables the exchange of value between users without the need for a central authority to facilitate transactions. Although most digital assets (photos, files) can be easily copied or duplicated, Bitcoin solved this issue (also known as the double spend problem) through a combination of cryptographic techniques, network consensus, and decentralized computing power. Every Bitcoin transaction is verified and recorded in a public ledger called the blockchain, which is maintained by a network of decentralized nodes (computers running the Bitcoin software) and secured by Bitcoin miners competing for block rewards and transaction fees. Unlike U.S. dollars and other fiat currencies, Bitcoin achieves digital scarcity with a 21 million bitcoin supply limit.
