Legal3 refers to the interoperability between blockchains and the national and local legal systems where they operate. It is an emerging paradigm with the power to make the legal system more efficient while speeding up the mass adoption of cryptocurrencies and DAOs.
At the core of Legal3 are new technologies that can ensure that all users have effective means to enforce their legal rights. These technologies enhance blockchain’s most powerful features – like self-custody, smart contracts, and tokenization, with legal protections like consumer protection laws, commercial contracts, and intellectual property made enforceable on-chain. At the same time, Legal3 technology makes legal services more accessible for real-world applications, like buying a house or preventing fraud in transactions for goods and services.
This post will delve into Legal3, cover its key pillars, why the legal and blockchain industries need it, and how Jurat is leading the on-chain legal revolution.
Legal3: Upgrading our Legal Systems With Blockchain Technology
By coupling blockchain with Legal3 technology, we can revolutionize multiple core functions of today’s legal practice, making the delivery of legal services cheaper and more efficient. Let’s take a look at several blockchain use cases that benefit from Legal3 integration.
Legal smart contracts
Smart contracts are a prime example. These self-executing computer programs can be deployed on compatible blockchains such as Ethereum and can automate transactions such as the transfer of assets and distribution of funds.
Unfortunately, smart contracts are currently unusable in most mainstream applications because oracles are insufficient. For example, there is no ready source of truth that can decide if a graphic designer delivered a quality product or if a fraudster is lying about something that happened off-chain.
These “oracle-like” functions are allocated to courts, but courts are not oracles in the technological sense. Moreover, smart contract code often fails to capture the user’s intent, causing unjust results. Again, people rely on courts when contract problems arise in the real world, but there is no practical access to courts when smart contracts are automated.
Legal3 technology solves these problems, making possible legal smart contracts that provide the best of both worlds by combining the advantages of automated execution and elimination of intermediaries with access to the legal system.
For example, Legal3 smart contracts can include dispute resolution by encoding an interface for court rulings through Jurat. Once smart contracts can respond to disputes that arise in the real world by complying with actual legal rulings, real world commerce can migrate onto the blockchain.
Tokenization of Real-World Assets
The digitization of the ownership rights to real-world assets – under the umbrella term ‘tokenization’ – is arguably one of the most interesting use cases of Legal3. Tokenization creates easily transferable evidence of ownership to real-world property, such as bonds, stocks, real estate, and almost anything else one can own.
These assets can be traded and stored on blockchains, vastly reducing friction and costs to close a transaction (think of how expensive it is to close on a home purchase). In addition to saving costs, tokenization can ease cooperation, improve transparency, and help owners tap previously unavailable liquidity through fractionalized investment.
However, tokenization in its current form has significant limitations and must generally rely on centralized providers, custodians, and intermediaries, all of which increase expense and reduce privacy and autonomy.
Legal3 tech eliminates much of this burden by providing the bridge between digital property rights and the legal possession of real-world assets. For example, consider the legal issues that might emerge if someone steals the digital deed to a home or sells a real-world asset without the token holder’s permission.
Legal3: Fighting On-Chain Crime and Fraud
Although estimates vary, it’s clear that crypto fraud and crime are a weight around the neck of the Web3 industry. Fraudulent behavior ranges from small-scale scams and low-level hacking to state-sponsored groups stealing hundreds of millions of dollars. The lack of on-chain enforcement has left the crypto industry in legal limbo, scaring away would-be users who could benefit from the technology.
Crypto Recovery Tools: The Answer to Crypto-Crime
Crypto recovery tools that offer on-chain legal enforcement are a missing piece needed to bring legality to the blockchain. The standard crypto-recovery tools tend to rely on the following techniques to recover funds:
- Scanning Blockchains: Recovery tools can scan blockchains to identify incidents of fraud or misappropriation and then attempt to redirect the funds back to the rightful owner.
- Urging CEXs: Recovery companies can request CEXs like Binance or Coinbase to freeze the accounts holding stolen funds and return them. However, the companies do not control whether the CEXs cooperate
- Cracking Passwords: Some recovery tools offered by companies attempt to hack the criminal’s passwords and key phrases to recover stolen funds. However, this is controversial and usually unavailable, especially when dealing with well-funded criminal organizations.
While these recovery tools have helped recover stolen crypto in some cases (mainly higher profile ones where law enforcement is willing to get involved), they are unsure and inefficient. Jurat approaches crypto recovery holistically by linking on-chain disputes directly to courts and judges.
On-Chain Law with Jurat
Jurat is bringing fully integrated legal rights onto the blockchain through JTC, which uses technology built on a Bitcoin fork completed in January 2022.
Jurat nodes in the JTC blockchain can link to courts in the United States, allowing JTC to participate in on-chain enforcement, including stolen crypto recovery. The blockchain directly executes court decisions, allowing it to freeze disputed funds and effectively award the coins as per a court’s order.
$JTC and On-Chain Enforcement
Jurat used a Bitcoin hard fork to create the $JTC coin, linking $JTC to all Bitcoin accounts that existed before the fork on January 8, 2022. Bitcoin owners can claim their JTCs using the Jurat Wallet, while people who had their BTC stolen or lost their private key may be able to recover their JTCs in court.
Jurat In Action: The North Korean Crypto Criminals
Earlier this year, a United States federal court utilized Jurat’s technology in an international crypto theft case involving the North Korean crypto hackers known as the ‘Lazarus Group.’ Along with the group, believed to be sponsored by North Korea, 16 other Defendant’s sanctioned crypto accounts were adjudicated.
The federal court in Chicago ruled that all wallets associated with the defendants should be frozen. The court placed the order on the public docket, enabling Jurat blockchain nodes to access it so that the miners could execute the court’s ruling.
“It is encouraging to witness this invention in action, fighting criminals who misuse blockchains and give cryptocurrency a bad name,” said Mike Kanovitz, CEO of Jurat Blockchains, in response to the landmark case.
The legal case is a watershed moment for Jurat, Legal3, and the crypto industry as a whole. It shows that Legal3, powered by technologies like Jurat, can bring on-chain enforcement against crypto fraudsters, securing the legal rights of every blockchain user. It offers us the first real glimpse into the future of Web3 with a legal enforcement layer to deter crypto fraud and large-scale hacking.
Billions of dollars are lost to crypto hacks, but Jurat makes it possible to freeze wallet addresses and compensate victims.
Conclusion: The Importance of Legal3
Legal3 will improve our existing legal frameworks through better smart contracts, tokenization, and on-chain governance. Legal3 solutions for fraud, such as those provided by Jurat, can make the crypto market safer for investors and help stop criminal organizations from misusing blockchains. Therefore, Legal3 is crucial as a tool to enhance the functioning of the legal system in the real world and contribute to a safer and more equitable crypto industry.