All posts by Manuel Lamiroy

Legal IT

Token Economics for Lawyers (2): the value of tokens

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This is the second part of a two-part article. In the first part we explained what tokens and token economics are. We also discussed some legal issues and the relevance for lawyers. In this second part, we look at the value of tokens. Tokens are digital assets. Assets have a value. How is that value assessed? What are the factors in determining the value of tokens? And what are the most common value models for digital tokens?

Factors determining the value of tokens

The value of tokens is determined by a variety of factors, including supply and demand, market sentiment, and the underlying technology. Let’s have a look at those.

Supply and Demand: Like any other asset, the value of tokens is determined by the balance of supply and demand. If there is a high demand for a particular token and a limited supply, the price of the token will go up. Conversely, if there is a low demand and a high supply, the price of the token will go down.

Market Sentiment: The value of tokens is also influenced by market sentiment. If investors believe that a particular token has a strong future, they will be more likely to buy it, increasing its value. Conversely, if there are concerns about the future of a token, investors may sell their holdings, causing the value to drop.

Underlying Technology: The underlying technology of a token can also influence its value. If a token is built on a strong, reliable blockchain network, it may be seen as more valuable than a token built on a less secure network. Similarly, if a new technology is more environmentally friendly than its competitors, it will be considered more valuable.

Terminology

The value of a token is largely determined by the token model. The term token model refers to the design and structure of a token, and how these aim to create a self-sustaining ecosystem that incentivizes network participation and rewards valuable contributions. These models typically include elements such as token distribution, inflation rate, governance mechanisms, and utility functions, among others.

There are several different value models of tokens, each with its own unique characteristics and potential benefits. But before we explain those, it is good to first familiarize ourselves with some of the terminology regarding these characteristics.

A hard cap is the maximum amount of funds that a token sale or initial coin offering (ICO) can raise. Once this cap is reached, no more tokens will be sold or created. A soft cap, on the other hand, is a lower funding threshold that must be met for the project to proceed. If the soft cap is not met, the project may be cancelled or delayed, and investors may receive a refund.

The total token supply is the total number of tokens that will ever be created for a given project. This includes both tokens that have already been distributed and tokens that have not yet been released. The circulating supply, on the other hand, is the number of tokens that are currently in circulation and available for trading. This excludes tokens that are locked up or held by the project team, for example.

The market cap, short for market capitalization, is the total value of all tokens in circulation. It is calculated by multiplying the current price of a token by the circulating supply of tokens. Market cap can be used as an indicator of the overall size and success of a project and is often used to compare different projects within the same industry or sector.

Token value models

There are basically four common types of token value models:

Deflationary tokens

Deflationary tokens are designed to decrease in supply over time, either through burning tokens or reducing the rate of token issuance. In other words, there is a hard cap on the number of tokens created. which acts as a deflationary mechanism as demand increases over time, but supply does not. This creates scarcity and can lead to a rise in the value of the token as demand outstrips supply. The goal is to incentivize long-term holding of the token and discourage short-term speculation. However, there is a risk that the decreasing supply may make the token less attractive for use in transactions, reducing its utility. Examples of deflationary tokens are Bitcoin (BTC), Litecoin (LTC), and Bitcoin Cash (BCH).

Inflationary tokens

Inflationary tokens are the opposite of deflationary tokens. They are designed to increase in supply over time, either through regular token issuance or through other mechanisms such as staking rewards. The goal is to encourage spending and discourage hoarding, as the value of the token may decrease over time due to increased supply. This can also incentivize network participation and development, as new tokens are issued to those who contribute to the network. In this model, there is no hard cap on the number of tokens created. Instead, there are various iterations of the tokens being issued. Some token issuers limit token creation to a yearly basis, while others stick to a set schedule. And some adjust the supply, based on demand data. Examples of inflationary tokens are Ethereum (ETH), Polkadot (DOT), and Solana (SOL).

Dual-tokens model

In a dual-tokens model, there are two tokens: one that serves as a utility token for network access or use, and another that serves as a store of value or governance token. This can help separate the utility and speculative aspects of the token, and potentially provide more stable value for both. The utility token can be inflationary or deflationary depending on the specific model, while the store of value/governance token is typically designed to be more stable. Examples of this are VeChain (VET), VeChain Thor Energy (VTHO), NEO, GAS, Ontology Coin (ONT), Ontology Gas (ONG)

Asset-backed tokens

Asset-backed tokens are tokens that are backed by a physical asset or reserve, such as gold or fiat currency. This provides a degree of stability and confidence in the token’s value, as it is tied to a tangible asset. However, the value of the token may be limited by the value of the underlying asset, and there may be challenges in ensuring the proper reserve ratio and maintaining transparency. Examples are Pax Gold (PAXG), which is linked to the price of gold, as well as Tether (USDT) and USD Coin (USDC), which are both linked to the US Dollar.

Additional considerations

It’s worth noting that these different value models are not mutually exclusive, and hybrid models may also be used to achieve specific goals. Ultimately, the choice of value model depends on the specific use case and goals of the token and its associated network. Overall, the deflationary utility token model is the most popular, with the inflationary token model in second place.

The design of token models plays a crucial role in determining the value of tokens within a given ecosystem. A well-designed token model can create a strong network effect and incentivize various stakeholders to participate in the network. This, in turn, can increase the demand for tokens.

For example, a token with a deflationary supply mechanism may see an increase in its value as the supply decreases over time. Similarly, a token with strong governance mechanisms that allow token holders to have a say in the network’s decision-making process may be more attractive to investors and users, increasing the demand for tokens.

On the other hand, poorly designed token models may lead to a lack of adoption, low network activity, and a decrease in the token’s value. For example, a token with excessive inflation or high transaction fees may discourage users from participating in the network, leading to a decrease in demand and a corresponding decrease in the token’s value.

The value of tokens: conclusion

The value of tokens is determined by a variety of factors, including supply and demand, market sentiment, and the underlying technology. Overall, the value of tokens is closely tied to the token model’s ability to incentivize network participation, promote adoption, and balance the supply and demand dynamics within the network. The success of a token model depends on its ability to provide clear value propositions, promote adoption and usage, and maintain a healthy balance between supply and demand dynamics.

 

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Legal IT

Token Economics for Lawyers – part 1

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In this article as well as the next, we have a look at token economics. Now, the expression “token economics” can mean different things depending on the context. What these two articles are about is tokens as digital assets. It is not about token economics in the context of behavioural therapy. (Which is what the entry in the Wikipedia entry is about. So, that may be confusing). In this article, we will discuss definitions of tokens and token economics. We will answer the question “what are digital tokens used for?”. We will also talk about some of the legal issues of token economics, and finally look at the relevance of token economics for lawyers. In the follow-up article, we will focus on the values of tokens as digital assets.

Definitions of tokens and token economics

In today’s digital world, tokens have become a buzzword among investors, entrepreneurs, and businesses. From cryptocurrencies to utility tokens, the rise of tokens has created a new economy where the value of tokens is determined by a complex interplay of supply and demand.

So, what are we talking about? Let’s start with tokens and give an example that everybody probably is familiar with. If you go to a casino, you don’t play with real money. Instead, you exchange real money for tokens, and each token has a specific monetary value. While you are playing, you are using tokens. When you leave, you can exchange the tokens again for real money. A token therefore is something that symbolizes or represents something else.

In the context of token economics, tokens are digital assets, and they are typically created and managed through blockchain technology. They are unique assets that can represent a wide range of things, from cryptocurrencies to loyalty points to real-world assets like stocks and commodities. The key feature of tokens is their ability to store value and be traded freely on digital marketplaces. This means that tokens can be bought and sold like any other asset, allowing investors to benefit from price movements and businesses to raise funds through initial coin offerings (ICOs).

The article on the ESPEO Blockchain website defines token economics as “the study of a new type of economy that can be defined as the design of a particular ecosystem in a blockchain environment. There are as many ecosystems as startups and projects in the blockchain industry, where tokenization is a popular process.” In this context, the expression “token economics” is often shortened to tokenomics.

What are digital tokens used for?

Digital tokens can be used in a variety of ways, depending on the type of token. Some common uses include:

  • Currency: Cryptocurrencies like Bitcoin and Ethereum are tokens that are used as a medium of exchange. They can be used to purchase goods and services or traded for other currencies.
  • Utility Tokens: Utility tokens are tokens that are used to access a particular product or service. For example, a company may create a token that can be used to access their platform or to pay for a specific service.
  • Security Tokens: Security tokens represent ownership of an asset, like stocks, bonds, or real estate. They are governed by securities regulations and offer investors the opportunity to earn dividends or other forms of income.
  • Fungible and non-fungible tokens:
    • Fungible tokens are interchangeable with other tokens of the same type, meaning that each token has the same value and can be exchanged for another token without any loss of value. For example, a 5€ bill is a fungible token, because any two 5€ bills have the same value and can be exchanged for one another without any loss of value.
    • Non-fungible tokens, NFTs, on the other hand, are unique and cannot be exchanged for another token without a loss of value. Each token represents a specific asset, such as a piece of artwork or a collectible item and has its own unique value. For example, a unique piece of digital art might be represented as a non-fungible token. (We talked about non-fungible tokens in a previous article).

Top of Form

Legal issues of token economics

As tokens are assets, there are several legal challenges and issues regarding token economics that one should be aware of.

One of the main challenges is the regulatory uncertainty surrounding tokens. In our article on NFTs, e.g., we mentioned the issues about whether or when NFTs become securities. Depending on their economic characteristics, tokens may be subject to various regulatory regimes, including securities laws, commodities laws, or money transmission laws. This can make it difficult for issuers and investors to navigate the legal landscape and comply with applicable regulations.

Another issue is the potential for fraudulent or abusive practices in token offerings or trading. Due to the lack of regulation and oversight in some token markets, there have been cases of fraud, market manipulation, and other forms of misconduct. Lawyers may need to advise clients on how to comply with anti-fraud laws and regulations, as well as how to mitigate legal risks associated with token-based transactions.

Additionally, there are intellectual property issues related to token economics, particularly with respect to the ownership and licensing of the underlying technology and protocols that support token ecosystems. Lawyers may need to advise clients on patent, copyright, and trademark issues related to token-related technologies, as well as on licensing and commercialization strategies.

Finally, there are data privacy and cybersecurity concerns associated with token transactions, which can be particularly acute in decentralized networks where personal data is stored and transmitted across multiple nodes. Lawyers may need to advise clients on how to comply with data protection.

Relevance for lawyers

So, how are token economics relevant to lawyers?

As mentioned above, token economics can impact the regulatory treatment of tokens. For example, if a token is classified as a security, it may be subject to more stringent regulations than if it is classified as a utility token. Lawyers may need to be familiar with the various factors that determine the classification of a token, such as its economic purpose, distribution, and governance.

Secondly, lawyers may need to understand token economics to advise clients on the legal implications of launching a token-based project or participating in a token sale. This could include drafting legal documents such as token purchase agreements, whitepapers, or terms of service that incorporate the economic features of the token.

Thirdly, token economics can affect the way that tokens are valued and traded in the market. Lawyers may need to understand the mechanics of token supply, demand, and circulation to advise clients on issues such as token pricing, market manipulation, or insider trading. We will discuss those in our next article.

Finally, token economics is a rapidly evolving field that requires interdisciplinary knowledge and collaboration between legal and technical experts. Lawyers who are familiar with token economics may be better positioned to engage with clients in emerging sectors such as decentralized finance (DeFi) or non-fungible tokens (NFTs), where the legal implications of token economics are still being defined.

Conclusion

Tokens are digital assets that are typically created and managed through blockchain technology. They are assets that can represent a wide range of things, from cryptocurrencies to loyalty points to real-world assets like stocks and commodities. They can be used in a variety of ways, including as currency, utility tokens, and security tokens. As the digital world continues to evolve, the importance of tokens in the economy is likely to grow. By understanding token economics and the value of tokens, lawyers can assist their clients in making informed decisions and navigating this new landscape with confidence.

 

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Legal IT

Generative AI

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In a previous article, we talked about ChatGPT. It is a prime example of generative AI (artificial intelligence). In this article, we will explore generative ai a bit more in detail. We’ll answer questions like, “What is Generative AI?”, “Why is Generative AI important?”, “What can it do?”, “What are the downsides?”, and “What are the Generative AI applications for lawyers?”.

What is Generative AI?

A website dedicated to generative AI defines it as “the part of Artificial Intelligence that can generate all kinds of data, including audio, code, images, text, simulations, 3D objects, videos, and so forth. It takes inspiration from existing data, but also generates new and unexpected outputs, breaking new ground in the world of product design, art, and many more.” (generativeai.net)

The definition Sabrina Ortiz gives on ZDNet is complementary: “All it refers to is AI algorithms that generate or create an output, such as text, photo, video, code, data, and 3D renderings, from data they are trained on. The premise of generative AI is to create content, as opposed to other forms of AI, which might be used for other purposes, such as analysing data or helping to control a self-driving car.” As such, Generative AI is a type of machine learning that is specifically designed to create (generate) content.

Two types of generative AI have been making headlines. There are programs that can create visual art, like Midjourney or DALL-E2. And there are applications like ChatGPT that can generate almost any desired text output and excels in conversation in natural language.

Why is Generative AI important?

Generative AI is still in its early stages and already it can perform impressive tasks. As it grows and becomes more powerful, it will fundamentally change the way we operate and live. Many experts agree it will have an impact that is at least as big as the introduction of the Internet. Just think of how much the Internet has become of our daily lives. Generative AI, too, is expected to become fully integrated into our lives. And it is expected to do so quickly. One expert predicts that on average we will have new and twice as powerful generative AI systems every 18 months. Only four months after ChatGPT 3.5 was released, on 14 March 2023, a new, more powerful, more accurate, and more sophisticated version 4.0 was released. The new version is a first step towards a multimodal generative AI, i.e., one that can work with several media simultaneously: text, graphics, video, audio. It can create output of over 25 000 words of text, which allows it to be more creative and collaborative. And it’s safer and faster.

Let us next have a look at what generative AI can already do, and what it will be able to do soon.

What can it do?

One of the first areas where generative AI was making major breakthroughs was to create visual art. Sabrina Ortiz explains, “Generative AI art is created by AI models that are trained on existing art. The model is trained on billions of images found across the internet. The model uses this data to learn styles of pictures and then uses this insight to generate new art when prompted by an individual through text.” These are five free AI art generators that you can try out for yourself:

We already know from our previous article that ChatGPT can create virtually any text output. It can write emails and other correspondence, papers, a range of legal documents including contracts, programming code, episodes of TV series, etc. It can assist in research, make summaries of text, describe artwork, etc.

More and more search engines are starting to use generative AI as well. Bing, DuckDuckGo, and You.com, e.g., all already have a chat interface. When you ask a question, you get an answer in natural language, instead of a list of URLs. Bing even gives the references that it based its feedback on. Google is expected to launch its own generative AI enabled search engine soon.

More specifically to programming, one of the major platforms for developers (GitHub) announced it now has an AI Copilot for Business which is an AI-powered developer tool that can write code, debug and give feedback on existing code. It can solve any issues it may detect in the code.

Google’s MusicLM already can write music upon request, and the new ChatGPT version 4 announced a similar offering, too. YouTube also has announced that it will start offering generative AI assistance for video creation.

Generative AI tools can be useful writing assistants. The article on g2.com, mentioned in the sources, lists 48 free writing assistants, though many of them use a freemium model. Writer’s block may soon be a thing of the past, as several of these writing assistants only need a key word to start producing a first draft. You even get to choose the writing style.

Generative AI can also accelerate scientific research and increase our knowledge. It can, e.g., lower healthcare costs and speed up drug development.

In Britain, a nightclub successfully organized a dance event where the DJ was an AI bot.

All existing chatbots can get an upgrade where they will become far better at natural language conversations. And generative AI integrated with the right customer processes will improve customer experience.

As you can see, even though we’re only at the beginning of the generative AI revolution, the possibilities are endless.

What are the downsides?

At present, generative AI tools are mostly tools that assist. The output needs to be supervised. Sometimes, ChatGPT, e.g., gives incorrect answers. Worse, it can just make things up, and an experiment with a legal chatbot discovered that the bot just started lying because it had concluded that that was the most effective way to get the desired end result. So, there are no guarantees that the produced output is correct. And the AI system does not care whether what it does is morally or legally acceptable. Extra safeguards will have to be built in, which is why there are several calls to regulate AI.

There also is an ongoing debate about intellectual property rights. If a program takes an existing image and merely applies one or more filters, does this infringe on the intellectual property of the original artist? Where do you draw the line? And who owns the copyright on what generative AI creates? If, e.g., a pharmaceutical company uses an AI tool to create a new drug, who can take a patent? Is it the pharmaceutical company, the company that created the AI tool, or the AI tool itself?

And as generative AI becomes better, it will transform the knowledge and creative marketplaces, which will inevitably lead to the loss of jobs.

Generative AI applications for lawyers

As a result of the quick progress in generative AI, existing legal chatbots are already being upgraded. A first improvement has to do with user convenience and user-friendliness because users can now interact with the bots through a natural language interface. The new generation of bots understand more and are also expected to become faster, safer, and more accurate. The new ChatGPT 4 scored in the 90th percentile for the bar exams, where ChatGPT 3 – only a few months earlier – barely passed some exams.

Virtual Legal Assistants (VLA) are getting more and more effective in:

  • Legal research
  • Drafting, reviewing, and summarizing legal documents: contracts, demand letters, discovery demands, nondisclosure agreements, employment agreements, etc.
  • Correspondence
  • Creative collaboration
  • Brainstorming, etc.

As mentioned before, at present these AI assistants are just that, i.e., assistants. They can create draft versions of legal documents, but those still need revision by an actual human lawyer. These VLAs still make errors. But at the same time, they can already considerably enhance productivity by saving you a lot of time. And they are getting better and better fast, as the example of the bar exams confirms.

 

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Legal IT

Legal Technology Predictions for 2023

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Towards the end of every calendar year, the American Bar Association publishes the results of its annual legal technology survey. Several legal service providers, experts, and reporters, too, analyse existing trends and subsequently make their own legal technology predictions for 2023. Some items stand out that most pay attention to. In this article, we will look at automation, artificial intelligence, cloud-native solutions, virtual legal assistants, data privacy and cybersecurity, crypto technologies, blockchain, and smart contracts. We will briefly pay attention to some other trends, as well.

Automation

Automation keeps being a major driver of change in many industries. The legal sector is no exception, even though it lags compared to many other sectors. Lawyers seem to take longer to catch up that automation is beneficial. It is making many processes in the legal industry faster, more efficient, and less expensive. Automation has proven to be successful in fields like legal research, e-discovery and document review and management. In 2023, we can expect to see this trend continue, with a renewed focus on automating the law firm administration and on the creation and review of legal documents. Automated workflows can be used to streamline legal processes, such as litigation support, e-discovery, and case management. Automation can also assist in organizing and tracking progress and regulatory changes, data collection, reporting, and communication. An increase in automation will help to improve the accuracy of legal processes, reducing the risk of errors, and increasing efficiency.

Artificial Intelligence

Artificial Intelligence is becoming ubiquitous. In many aspects of our lives, there now are AI solutions available that make life easier. In the legal sector, too, AI is starting to make waves. In all the above-mentioned examples of automation, AI is playing a crucial role. As mentioned above, AI has already been successfully assisting lawyers with legal research, with process and workflow automation, with the generation of legal documents, as well as with e-discovery. But those are still fairly simple applications of AI. It can do far more. These days, AI is also being used to digest vast volumes of text and voice conversations, identify patterns, or carry out impressive feats of predictive modelling. The virtual legal assistants that we’ll discuss below, too, are all AI applications. If properly used, AI can save law firms much time and money. In 2023, we can expect to see a more widespread adoption of AI in the legal sector. (More on Artificial Intelligence and the Law).

Cloud-Native Solutions

Cloud computing has been a game-changer for many industries. Previous reports had already revealed that lawyers, too, are more and more relying on cloud solutions. This should not come as a surprise, as Cloud-based solutions provide many benefits, including reduced costs, increased scalability, and improved data security. They help lawyers and clients share files and data across disparate platforms rather than relying solely on emails. Additionally, cloud-based solutions are more accessible, allowing legal firms to work from anywhere and collaborate more effectively with clients and other stakeholders. In 2023, we can expect this trend to continue. (In the past, we have published articles on cloud solutions for lawyers, on managing your law firm in the cloud, an on lawyers in the cloud).

Virtual Legal Assistants (VLAs)

In the past, we have talked on several occasions about legal chatbots. Chatbots have sufficiently matured to now start playing the role of virtual legal assistants. VLAs are AI-powered chatbots that build on basic neural network computing models to harness the power of deep learning. They use artificial intelligence algorithms to assist law firms with various tasks. Gartner predicts VLAs can answer one-quarter of internal requests made to legal departments. They extend the operational capacity of law firms as well as of in-house corporate legal teams. As a result, they assist in reducing lawyers’ average response time and producing distinct service delivery efficiencies. Furthermore, as VLAs are a form of automation, all the benefits of automation apply here too: virtual legal assistants can help to improve the accuracy of legal work, reduce the risk of errors and increase efficiency. At present, virtual legal assistants are still primarily being used in uncomplicated and repetitive operations. Recent breakthroughs, however, indicate that they are already able to take on more complex tasks and will continue to do so.

Data Privacy and Cybersecurity

Ever since the GDPR, data privacy and cybersecurity have become increasingly important. In 2023, we can expect to see an ongoing emphasis on data privacy and as well as an increase in attention to cybersecurity in the legal sector. (The examples of high-profile Big Tech corporations receiving massive fines seem to be a good incentive). Law firms have understood that they too need to make sure that they have robust data privacy and cybersecurity measures in place to protect their clients’ confidential information. Several law firms also provide their clients assistance with the legal aspects of data protection.

Crypto technologies, Blockchain, and smart contracts

The market of cryptocurrencies was volatile in 2022. That did not stop an increase in interest in the underlying crypto technologies. Experts predict rises in a) regulation of cryptocurrencies and crypto technologies, in b) the adoption of cryptocurrency, c) a growing interest in decentralized finance (DeFi), and d) an increase in attempts at cryptocurrency taxation. We are already witnessing an intensification in litigation with regard to cryptocurrency and crypto technologies. This trend is expected to continue. Litigation about NFTs, e.g., is one of the areas where litigation is expected to rapidly increase.

Experts also expect an ongoing interest in and an increased adoption of Blockchain technology. Blockchain can be used to securely store and manage legal data, reducing the risk of data breaches and ensuring the integrity of legal records. Additionally, blockchain can be used to automate many legal processes, such as contract management and dispute resolution, by enabling the creation of smart contracts. As we mentioned in previous articles, smart contracts can streamline many legal processes, reducing the time and cost associated with contract management and dispute resolution. They can also help to increase the transparency and accountability of legal transactions, reducing the risk of fraud and improving the overall efficiency of legal processes.

Other Trends

The ABA survey report noticed that law firms are spending more money on legal technology than ever before. In many cases, this involved investing more in tightening cybersecurity.

The trend to work remotely and to use video conferencing for virtual meetings that started during the pandemic is ongoing.

More than ever before lawyers pay attention to their own work experience, as well as to the user experience for their clients by making their law firms more client centred. There is an ongoing focus on work-life balance, not only for the lawyers but also for the employees of law firms. Law firms are finally starting to consider things like employee satisfaction.

While billable hours remain the most used fee model, there has been a noticeable increase in lawyers using a subscription fee model.

Finally, the trend that law firms are increasingly hiring people with hybrid profiles is continuing. By increasing cognitive diversity, law firms want to close the gap between professionals with knowledge of legal matters and those with enough legal tech expertise to manage the digitization and automation of workflows. Gartner predicts that by the end of 2023, one third of corporate legal departments will have a legal tech expert in charge of managing the digital transformation and automation of internal processes. Large law firms are also increasingly hiring lawyers that are familiar with business administration.

 

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Legal IT

ChatGPT for Lawyers

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In this article we will first talk about recent evolutions in the field of generative Artificial Intelligence (AI) in general, and about a new generation of chat bots. Then we focus on one particular one that is getting a lot of attention, i.e., ChatGPT. What is ChatGPT? What can it do, and what are the limits? Finally, we look at the relevance of ChatGPT for lawyers.

Introduction

We are witnessing the emergence of a new generation of chat bots that are more powerful than ever before. (We discussed legal chat bots before, here and here). Several of them excel in conversation. Some of these conversationalist chat bots recently made headlines on several occasions. In a first example, in December 2022, the DoNotPay chat bot renegotiated a customer’s contract with Comcast’s chat bot and managed to save 120 USD per year. (You read that correctly, two bots effectively renegotiating a contract). Shortly afterwards, a computer using a cloned voice of a customer was connected to the DoNotPay chat bot. A call was made to the support desk of a company and the speaking chat bot negotiated successfully with a live person for a reduction of a commercial penalty. The search engine You.com has added a conversation chat bot that allows people to ask a question and the reply is presented in a conversational format rather than a list of links. Microsoft has announced that its Bing search engine will start offering a conversational interface as well.

Conversationalist chat bots are a form of generative AI. Generative AI has made tremendous progress in other fields like the creation of digital artwork, or in filters and effects for all kinds of digital media, or in the generation of documents. These can be any documents: legal documents, blog or magazine articles, papers, programming code… Only days ago, the C-NET technology website revealed that they had started publishing articles since November 2022 that were entirely written by generative AI. Over a period of two months, they published 74 articles that were written by a bot, and the readers did not notice.

One chat bot in particular has been in the news on a nearly daily basis since it was launched in November 2022. Its name is ChatGPT and the underlying technology has also been used in some of the examples mentioned above.

What is ChatGPT?

ChatGPT stands for Chat Generative Pre-trained Transformer. The Wikipedia describes it as “a chatbot launched by OpenAI in November 2022. It is built on top of OpenAI’s GPT-3 family of large language models and is fine-tuned (an approach to transfer learning) with both supervised and reinforcement learning techniques. ChatGPT was launched as a prototype on November 30, 2022, and quickly garnered attention for its detailed responses and articulate answers across many domains of knowledge.”

In other words, it’s a very advanced chat bot that can carry a conversation. It remembers previous questions you asked and the answers it gave. Because it was trained on a large-scale database of texts, retrieved from the Internet, it can converse on a wide variety of topics. And because it was trained on natural language models, it is quite articulate.

What can it do and what are the limits?

Its primary use probably is as a knowledge search engine. You can ask a question just like you ask a question in any search engine. But the feedback it gives does not consist of a series of links. Instead, it consults what it has scanned beforehand and provides you with a summary text containing the reply to the question you asked.

But it doesn’t stop there, as the examples we have already mentioned illustrate. You can ask it to write a paper or an article on a chosen topic. You can determine the tone and style of the output. Lecturers have used it to prepare lectures. Many users asked it to write poetry on topics of their choice. They could even ask it to write sonnets or limericks, and it obliged. And most of the time, with impressive results. It succeeds wonderfully well in carrying a philosophical discussion. Programmers have asked it to write program code, etc. It does a great job of describing existing artwork. In short, if the desired output is text-based, chances are ChatGPT can deliver. As one reporter remarked, the possibilities are endless.

There are of course limitations. If the data sets it learned from contained errors, false information, or biases, the system will inherit those. A reporter who asked ChatGPT to write a product review commented on how the writing style and the structure of the article were very professional, but that the content was largely wrong. Many of the specifications it gave were from the predecessor of the product it was asked to review. In other words, a review by a person who has the required knowledge is still needed.

Sometimes, it does not understand the question, and it needs to be rephrased. On the other hand, sometimes the answers are excessively verbose with little valuable content. (I guess that dataset contained speeches by politicians). There still are plenty of topics that it has no reliable knowledge of. When you ask it if it can give you some legal advice, it will tell you it is not qualified to do so. (But if you rephrase the question, you may get an answer anyway, and it may or may not be accurate). Some of the programming code appeared to be copied from sites used by developers, which would constitute a copyright infringement. And much of the suggested programming code turned out to be insufficiently secure. For those reasons, several sites like StackOverflow are banning replies that are generated by ChatGPT.

Several other concerns were also voiced. As the example of CNET shows, these new generative AI bots have the potential of eliminating the need for a human writer. ChatGPT can also write an entire full essay within seconds, making it easier for students to cheat or to avoid learning how to write properly. Another concern is the possible spread of misinformation. If you know enough sources of the dataset that the chatbot learns from, you could deliberately flood it with false information.

What is the Relevance of ChatGPT for Lawyers?

Lawyers have been using generative AI for a while. It has proven to be successful in drafting and reviewing contracts and other legal documents. Bots like DoNotPay, Lawdroid, and HelloDivorce are successfully assisting in legal matters on a daily basis. For these existing legal bots, ChatGPT can provide a user-friendly conversationalist interface that make them easier to use.

When it comes to ChatGPT itself, several lawyers have reported on their experiences and tests with the system. It turned out that it could mimic the work of lawyers with varying degrees of success. For some items, it did a great job. It, e.g., successfully wrote a draft renting agreement. And it did a good job at comparing different versions of a legal document and highlighting what the differences were. But in other tests, the information it provided was inaccurate or plain wrong, where it, e.g., confused different concepts.

And the concerns that apply to generative AI in general, also apply to ChatGPT. These include concerns about bias and discrimination, privacy and compliance with existing privacy and data protection regulation like the GDPR, fake news and misleading content. For ChatGPT, the issue of intellectual property rights was raised as well. The organization behind ChatGPT claims it never copies texts verbatim, but tests with programming code appear to show differently. (You can’t really paraphrase programming code).

Given the success and interest in ChatGPT, the usual question was raised whether AI will replace the need for lawyers. And the answer stays the same that, no, it won’t. At present, the results are often very impressive, but they are not reliable enough. Still, the progress that has been made shows that it will get better and better at performing some of the tasks that lawyers do. It is good at gathering information, at summarizing it and at comparing texts. And only days ago (13 January 2023) the American Bar Association announced that ChatGPT had successfully passed one of its bar exams on evidence. But lawyers are still needed when it comes to critical thinking or the elaborate application of legal principles.

Conclusion

A new generation of chat bots is showing us the future. Even though tremendous progress has been made, there are still many scenarios where they’re not perfect. Still, they are improving every single day. And while at present supervision is still needed to check the results, they can offer valuable assistance. As one lecturer put it, instead of spending a whole day preparing a lecture, he lets ChatGPT do the preparation for him and write a first draft. He then only needs one hour to review and correct it.

For lawyers, too, the same applies. The legal texts it generates can be a hit and miss, and supervision is needed. You could think of the current status where the chat bot is like a first- or second-year law student doing an internship. They can save you time, but you have to review what they’re doing and correct where necessary. Tom Martin from Lawdroid puts it as follows: “If lawyers frame Generative AI as a push button solution, then it will likely be deemed a failure because some shortcoming can be found with the output from someone’s point of view. On the other hand, if success is defined as productive collaboration, then expectations may be better aligned with Generative AI’s strengths.”

 

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Legal IT

The dark web and the law

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In our previous article, we gave a general introduction to the dark web. In this article, we analyse the relationship between the dark web and the law. The first question we answer is, ‘Is using the dark web legal?’. Next, we have a look at lawyers on the dark web. Then, we focus on the different efforts to fight crime on the dark web. Finally, we look at the need for dark web lawyers.

Is using the dark web legal?

With all the criminal activity taking place on the dark web, one could wonder whether it is even legal to access the dark web. The short answer is that accessing the dark web is perfectly legal in most countries. In more than 130 countries, the right to privacy is a constitutional right. And browsing the dark web to maintain anonymity is one way of exercising that right. In our previous article, we also pointed to the many positive uses there are for the dark web.

But there are some caveats. While access to the dark web may be legal, what you do on there is what counts. Your actions on the dark web must respect the laws of the country you are in. If you buy contraband or pirated goods on a black market, e.g., that is illegal. Also keep in mind that accessing the dark web is not legal everywhere. There are several countries where access to the Internet is restricted and accessing the dark web in those countries may very well be criminalized. Using a VPN or the TOR network typically is illegal as well in those countries. They include, but are not limited to China, Russia, Iran, Saudi Arabia, and Venezuela. If you are visiting those countries, using TOR or a VPN is illegal.

Lawyers on the dark web

There are several legitimate reasons for lawyers too to use the dark web. Because all information is encrypted, using the Tor browser and the dark web can be a safe way for lawyers and their clients to communicate. As such, it helps protect client and attorney information.

Another legitimate reason to use the dark web is to conduct legal research. The dark web can be useful in the discovery process to collect evidence. Lawyers can communicate anonymously with whistleblowers, including corporate ones. Or they can build a case against infringements of intellectual property, of which there are plenty on the dark web. Human rights lawyers often need the anonymity of the dark web to communicate about and to collect evidence of human rights violations. Lawyers can also ask other lawyers for anonymous advice.

Another area where law firms may use the dark web is to test and enhance their cybersecurity.

Finally, when you, as a lawyer, access the dark web, make sure you abide by your code of ethics. If something is not allowed on the surface web, it also will not be allowed on the dark web.

Efforts to fight crime on the dark web

The dark web provides anonymity, and many transactions are paid for with untraceable cybercurrencies. The combination of both – anonymity and untraceable payments – make the dark irresistible to criminals. Any type of crime with covert transactions can be committed on the dark web. These include murder for hire, blackmail and extortion, illegal sales of drugs and arms, sex trafficking, terrorism, child pornography, etc.

The abovementioned combination of anonymizing technologies and the use of cryptocurrencies to hide transactions also poses serious challenges for law enforcement. The transactions are hidden by design. Law enforcement agencies may therefore very well be unaware of their existence. Gathering evidence that would stand in court poses additional challenges.

So, how does one fight crime on the dark web? Several techniques have been used. A common and successful strategy is to go undercover online. In cases where no cryptocurrencies are used, following the money also has been successfully used. And while transactions may be hidden, any goods that are being traded must be shipped. Monitoring shipping procedures therefore is another useful strategy. Finally, using sophisticated technology and hacking techniques has also been successful. Often, this is done in combination with a so-called honeypot trap, where law enforcement agencies set up a dark web site that pretends to be involved in illicit activities. The moment visitors access the trap website, tools are used to undo the anonymity of the visitors. If they commit a crime or conspire to commit a crime, they can be identified.

The article on the US National Institute of Justice, listed below, provides a summary of a 2017 Report on “Identifying Law Enforcement Needs for Conducting Criminal Investigations Involving Evidence on the Dark Web”. The report identified 40 problems or opportunities, and 46 potential solutions. It also gave a series of high-level recommendations for law enforcement agencies on training, information sharing, new structures for cooperation, new laws for package inspection, and research on crime connections.

The need for dark web lawyers

By now, it has become clear that there is a growing need for lawyers who are familiar with the dark web. The ever-increasing number of cybercrime incidents that originate from the dark web (hacking, data leaks, extortion, malware, ransomware, …) is testimony to that. Another bonus is that if your law firm is familiar with the dark web, that will give you a competitive advantage.

Most cases where there is a need for a dark web lawyer are criminal cases. But that is not necessarily the case. There are developers and lawyers who are offering perfectly legal services. And there are legal markets, too. (Though they are by far outnumbered by the black marketplaces, where “caveat emptor” is even more applicable than usual). In all of these, issues may arise where the services of lawyers are needed. We also mentioned before that there are cases where lawyers may need to rely on the dark web to collect evidence like witness testimony or tipoffs, etc.

Still, at present most cases involving the dark web where lawyers are needed are criminal cases. Your client may be the victim or the perpetrator. Victims of hacking, data breaches and data leaks, ransomware attacks, etc. need the assistance of lawyers as well as of cybersecurity experts. Sometimes, these victims may face additional problems. These days, companies and organizations who fall victim to data leaks, e.g., may face substantial fines because information about their clients has been leaked. In all those cases, the assistance of a dark web lawyer is recommended.

Your client may also be the suspect of crimes committed on the dark web. Lawyers defending suspects of dark web cybercrimes often face additional obstacles. One of those is that de facto the assumption of innocence is undermined when it comes to dark web crimes. Prosecutors as well as jury members see the dark web as a place where crime thrives and just being on the dark web may come across as suspicious. Getting a fair trial often becomes an extra challenge.

 

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Legal IT

The dark web

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In this article, we explore the dark web. We will be answering questions like, “What is the dark?”, “What can you find on the dark web?”, ” Why is the dark web important?”, “What do you need to access the dark web?”, and “How to safely access the dark web?” In a follow-up article, we’ll look at how it is relevant for lawyers.

What is the dark web?

To properly explain what the dark web is, it is best to put it in context. Usually, when we use the World Wide Web, we consult websites we know, and we use search engines to find other information that is publicly accessible. This part of the Internet that is available to the public and can be found through search engines is often referred to as the surface web. (The terms clear web and Clearnet are also occasionally used). It’s one part of the Internet that most of us access on a daily basis.

Apart from that, there is information that is not freely accessible to all and that is not indexed by search engines. This includes all the information where access is restricted, and you need credentials to be able to access it. This is called the deep web. It comprises all kinds of subscriptions you may have, all the information your service providers keep on their private databases, your bank account and medical records, email & financial information, academic and scientific databases, legal documents, etc. If, as a lawyer, you use a cloud-based solution to run your firm, all that information is stored in the deep web, too. Even most social media are not indexed by search engines, and therefore are part of the deep web. Most of us access the deep web, too, on a daily basis.

This deep web is by large the biggest part of the Internet. Estimates about what percentage of the Internet is publicly accessible range between 0.1 to 10 percent. In other words, anywhere between 90 to 99.9 percent of the Internet belongs to the deep web.

The dark web, sometimes called the darknet, is a part of the deep web for which you need extra tools to gain access to it. The information is encrypted, and you need at least a specialised browser to access it. A Virtual Private Network (VPN) and good antivirus software and a firewall are usually recommended as well if you want to access it safely.

Summarizing, there are three parts of the World Wide Web: a) the publicly accessible and indexed part, called the surface web, b) the part that is not indexed by search engines and is not accessible to everyone, called the deep web, a c) a part that is hidden and for which special tools are needed, referred to as the dark web.

What can you find on the dark web?

When we think of the dark web, we typically think of hackers, illegal markets and pornography, pirated content, and other types of cybercrimes. But there are positive aspects to the dark web too. It provides safe ways, e.g., for activists and whistleblowers to share information. There are chat rooms for developers. And you’ll even find copies of popular websites on the dark web, which allow people who live in locations where Internet access is restricted to still access them.

Here is a list of examples of what you can find:

  • Link directories to find the URLs for websites on the dark web. (As the content is not indexed by search engines, you have to rely on these link directories).
  • Dark web versions of popular websites: most social media and news outlets, e.g., also have dark net versions.
  • Email services.
  • File uploads and transfers. These include both perfectly legal as well as illegal – e.g., pirated – files.
  • Forums and chat boards, including forums for freedom fighters and protestors, developers, journalists, but also hackers.
  • Whistleblowing websites and tip-off pages, which are commonly used by the press.
  • Blogs run by privacy-conscious individuals.
  • Black Markets.
  • Bitcoin / cryptocurrency services.
  • Hacking groups and services.
  • Financing and fraud.
  • Illegal pornography.
  • Hoaxes and unverified content.
  • Pirated Content.

A report, called Into the Web of Profit and discussed in the CSO Online article, identified 12 categories of tools or services that could present a risk in the form of a network or data breach compromise:

  • Infection or attacks, including malware, distributed denial of service (DDoS) and botnets
  • Access, including remote access Trojans (RATs), keyloggers and exploits
  • Espionage, including services, customization and targeting
  • Support services such as tutorials
  • Credentials
  • Phishing
  • Refunds
  • Customer data
  • Operational data
  • Financial data
  • Intellectual property/trade secrets
  • Other emerging threats

“The report also outlined three risk variables for each category:

  • Devaluing the enterprise, which could include undermining brand trust, reputational damage or losing ground to a competitor
  • Disrupting the enterprise, which could include DDoS attacks or other malware that affects business operations
  • Defrauding the enterprise, which could include IP theft or espionage that impairs a company’s ability to compete or causes a direct financial loss”.

Why is it important?

With all the illegal activity going on, on the dark web, the question is often raised whether it would not be better to shut it down altogether. But that would be a clear case of throwing out the baby with the bath water, as the dark web offers some essential services.

Historically, the dark web was created for US intelligence and counterintelligence services to safely exchange information. Then several civil rights groups started using it as well because it allowed them to also exchange information safely and anonymously.  And then the criminals hopped on board too.

By now, it is also being used by journalists, activists, whistleblowers, and freedom fighters. And as mentioned above, copies of popular websites on the dark web provide access to people who could otherwise would not be able to access them.

What do you need to access it?

So, how can you safely access the dark web? To safely access the dark web, three or four items are recommended. First, you need a browser for the dark web. Next, it is recommended that you always use a Virtual Private Network (VPN), and that you have up-to-date antivirus software. A good firewall comes in handy, too.

A browser for the dark web: the dark web uses encrypted information on web addresses that end on a .onion extension. By default, most browsers cannot read these websites. The TOR browser was created specifically for the dark web. It is a customised version of the Firefox browser with specific enhancements to guarantee privacy and anonymity. It can also route information through trusted nodes, so it cannot be intercepted. But note, that by default, if a normal internet connection is available, Tor will use that one, and you must choose to use the Tor network to make use of its own nodes.

The Tor browser is not the only one that can be used to access the dark web. Two popular browsers, Firefox and Opera, can easily be configured, too, to access the dark web. This is, however, not recommended as they do not have other privacy protecting enhancements built in. Several companies have created customised versions on the Tor browser, typically with enhanced functionality like higher encryption, etc. These include Subgraph OS, Waterfox, Tails, and Whoix.

A Virtual Private Network (VPN): in essence, a virtual private network is a tool that allows you to surf anonymously on the Internet. Usually, when you surf the web, your IP address is visible not only to all websites you visit, but also to all the Internet nodes that relay the information between your computer or mobile device and that website. What a VPN does, is route that traffic through a server and the IP address of that server is used instead. VPN service providers typically have servers in many countries, so you can choose which country you pretend to be surfing from. On top of that, all communication is also encrypted for enhanced security.

Up-to-date antivirus and a firewall: the dark web can be a very dangerous place and accessing dark web websites can be risky. Websites with illegal content will almost always try and install malware on your device, but other sites may be infected, too. Up-to-date antivirus software and a firewall help reduce the risk but cannot eliminate it altogether.

How to access the dark web in five easy steps

The safest way to access the dark web is on a desktop, rather than a mobile device. (Some security experts explicitly advise against using a mobile device to access the dark web). Once you’ve installed TOR, or a compatible browser, and you’ve installed your VPN, you can access the dark web in five easy steps.

  1. The first step is to open your VPN software.
  2. In your VPN software, connect to a server in a different country.
  3. Open the Tor browser.
  4. Click the “Connect” button.
  5. You are now ready to begin browsing the dark web.

Remember, the content of the dark web is not indexed. So, you can’t really use a search engine to find information. Your alternative is to use one of the many dark web directories. But keep in mind that these get outdated fast. Only the dark web versions of popular surface web websites tend to keep the same URLs.

Extra recommendations for safe access

The dark web can be a dangerous place. It is therefore good to take some extra safety measures.

  • Create a Tor-specific user account. Never use an email address or even a password that you have used before. Use an anonymous encrypted email account and aliases that you have never used before either and that cannot be traced to you. Never use this user account outside Tor.
  • Don’t use your mobile phone for 2-step verification on Tor.
  • Never use your real name or photos. Don’t post any of your personal information.
  • Never have dark web stores mail packages delivered to your real address — use a PO box.
  • Don’t send unencrypted data over Tor. For that same reason, do not use HTTP websites on Tor, because they are not encrypted.
  • Don’t forget to delete cookies and local website data.
  • Don’t use Tor for Google search.
  • Don’t connect to the same server with and without Tor simultaneously.
  • Don’t install browser plugins, as they can be manipulated into revealing your IP address.
  • You may even consider using the TAILS operating system (which is booted as a live DVD or live USB), as this leaves no digital footprint on the host machine.

In a follow-up article, we will look at what lawyers need to know about the dark web.

 

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Legal IT

Artificial Intelligence Regulation

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In previous articles, we have discussed how artificial intelligence is biased, and on how this problem of biased artificial intelligence persists. As artificial intelligence (AI) is becoming ever more prevalent, this poses many ethical problems. The question was raised whether the industry could be trusted to self-regulate or whether legal frameworks would be necessary. In this article, we explore current initiatives for Artificial Intelligence regulation. We look at initiatives within the industry to regulate artificial intelligence as well as at attempts to create legal frameworks for Artificial Intelligence. But first we investigate why regulation is necessary.

Why is Artificial Intelligence Regulation necessary?

Last year, the Council of Europe published a paper where it concluded that a legal framework was needed because there were substantive and procedural gaps. UNESCO, too, identified key issues in its Recommendation on Ethics in Artificial Intelligence. Similarly, in its White Paper on Trustworthy AI, The Mozilla Foundation identifies a series of key challenges that need to be addressed and that makes regulation desirable. These are:

  • Monopoly and centralization: Large-scale AI requires a lot of resources and at present only a handful of tech giants have those. This has a stifling effect on innovation and competition.
  • Data privacy and governance:  Developing complex AI systems necessitates vast amounts of data. Many AI systems that are currently being developed by large tech companies harvest people’s personal data through invasive techniques, and often without their knowledge or explicit consent.
  • Bias and discrimination: As was discussed in previous articles, AI relies on computational models, data, and frameworks that reflect existing biases. This in turn results in biased or discriminatory outcomes.
  • Accountability and transparency: Many AI systems just present an outcome without being able to explain how that result was reached. This can be the product of the algorithms and machine learning techniques that are being used, or it may be by design to maintain corporate secrecy. Transparency is needed for accountability and to allow third-party validation.
  • Industry norms: Tech companies tend to build and deploy tech rapidly. As a result, many AI systems are embedded with values and assumptions that are not questioned in the development cycle.
  • Exploitation of workers: Research shows that tech workers who perform the invisible maintenance of AI are vulnerable to exploitation and overwork.
  • Exploitation of the environment: The amount of energy needed for AI data mining makes it very environment unfriendly. The development of large AI systems intensifies energy consumption and speeds up the extraction of natural resources.
  • Safety and security: Cybercriminals have embraced AI. They are able to carry out increasingly sophisticated attacks by exploiting AI systems.

For all these reasons, the regulation of AI is necessary. Many large tech companies still promote the idea that the industry should be allowed to regulate itself. Many countries, as well as the EU, on the other hand believe the time is ripe for governments to impose a legal framework to regulate AI.

Initiatives within the industry to regulate Artificial Intelligence

Firefox and the Mozilla Foundation

The Mozilla Foundation is one of the leaders in the field when it comes to promoting trustworthy AI. They already have launched several initiatives, including advocacy campaigns, responsible computer science challenges, research, funds, and fellowships. The Foundation also points out that “developing a trustworthy AI ecosystem will require a major shift in the norms that underpin our current computing environment and society. The changes we want to see are ambitious, but they are possible.” They are convinced that the “best way to make this happen is to work like a movement: collaborating with citizens, companies, technologists, governments, and organizations around the world.”

IBM

IBM, too, promotes an ethical and trustworthy AI, and has created its own ethics board. It believes AI should be built on the following principles:

  • The purpose of AI is to augment human intelligence
  • Data and insights belong to their creator
  • Technology must be transparent and explainable

To that end, it identified five pillars:

  • Explainability: Good design does not sacrifice transparency in creating a seamless experience.
  • Fairness: Properly calibrated, AI can assist humans in making fairer choices.
  • Robustness: As systems are employed to make crucial decisions, AI must be secure and robust.
  • Transparency: Transparency reinforces trust, and the best way to promote transparency is through disclosure.
  • Privacy: AI systems must prioritize and safeguard consumers’ privacy and data rights.

Google

Google says it “aspires to create technologies that solve important problems and help people in their daily lives. We are optimistic about the incredible potential for AI and other advanced technologies to empower people, widely benefit current and future generations, and work for the common good.

  1. Be socially beneficial
  2. Avoid creating or reinforcing unfair bias
  3. Be built and tested for safety
  4. Be accountable to people
  5. Incorporate privacy design principles
  6. Uphold high standards of scientific excellence
  7. Be made available for uses that accord with these principles.”

It also made it clear that it “will not design or deploy AI in the following application areas:

  1. Technologies that cause or are likely to cause overall harm. Where there is a material risk of harm, we will proceed only where we believe that the benefits substantially outweigh the risks and will incorporate appropriate safety constraints.
  2. Weapons or other technologies whose principal purpose or implementation is to cause or directly facilitate injury to people.
  3. Technologies that gather or use information for surveillance violating internationally accepted norms.
  4. Technologies whose purpose contravenes widely accepted principles of international law and human rights.”

It adds that that list may evolve.

Still, Google seems to have a troubled relationship with ethical AI. It notoriously fired its entire ethics board in 2019, to replace it with a team of ethical AI researchers. When subsequently, on separate occasions, two of those were fired too, it again made headlines.

Facebook / Meta

Whereas others talk about trustworthy and ethical Ai, Meta (the parent company of Facebook) on the other hand has different priorities and talks about responsible AI. It, too, identifies five (or ten) pillars:

  1. Privacy & Security
  2. Fairness & Inclusion
  3. Robustness & Safety
  4. Transparency & Control
  5. Accountability & Governance

Legal frameworks for Artificial Intelligence

Apart from those initiatives within the industry, there are proposals for legal frameworks as well. Best known is the EU AI Act. Others are following suit.

The EU AI Act

The EU describes its AI act as “a proposed European law on artificial intelligence (AI) – the first law on AI by a major regulator anywhere. The law assigns applications of AI to three risk categories. First, applications and systems that create an unacceptable risk, such as government-run social scoring of the type used in China, are banned. Second, high-risk applications, such as a CV-scanning tool that ranks job applicants, are subject to specific legal requirements. Lastly, applications not explicitly banned or listed as high-risk are largely left unregulated.”

The text can be misleading as, effectively, the proposal distinguishes not three but four levels of risk for AI applications: 1) unacceptable risk, which are banned, 2) high-risk, which must be regulated with specific legal requirements, 3) low risk, where most of the time no regulation will be necessary, and 4) no risk, which do not have to be regulated at all.

By including an ‘unacceptable risk‘ category, the proposal introduces the idea that certain types of AI applications should be forbidden because they violate basic human rights. All applications that manipulate human behaviour to deprive users of their free will, as well as systems that allow social scoring fall in this category. Exceptions are allowed for military purposes and law enforcement purposes.

High risk systems “include biometric identification, management of critical infrastructure (water, energy etc), AI systems intended for assignment in educational institutions or for human resources management, and AI applications for access to essential services (bank credits, public services, social benefits, justice, etc.), use for police missions as well as migration management and border control.” Again, there are exceptions, many of which have to do with cases where biometric identification is allowed. These include, e.g., missing children, suspects of terrorism, trafficking, and child pornography. The EU wants to create a database that keeps track of all high-risk applications.

Limited risk or low risk applications includes various bots which companies use to interact with their customers. The idea here is that transparency is required. Users must know, e.g., that they are interacting with a chat bot and to what information the chat bot has access.

All AI systems that do not pose any risk to citizen’s rights are considered no risk applications for which no regulation is necessary. These applications include games, spam filters, etc.

Who does the EU AI Act apply to? As is the case with the GDPR, the EU AI Act does not apply exclusively to EU-based organizations and citizens. It also applies to anybody outside of the EU who is offering an AI application (product or service) within the EU, or if an AI system uses information about EU citizens or organizations. Furthermore, it also applies to systems outside of the EU that use results that are generated by AI systems within the EU.

A work in progress: the EU AI Act is still very much a work in progress. The Commission made its proposal and now the legislators can give feedback. At present, more than a thousand amendments have been submitted. Some factions think the framework goes too far, while others claim it does not go far enough. Much of the discussions deal with both defining and categorizing AI systems.

Other noteworthy initiatives

Apart from the European AI Act, there are some other noteworthy initiatives.

Council of Europe: The Council of Europe (responsible for the European Convention on Human Rights) created its own Ad Hoc Committee on Artificial Intelligence. This Ad Hoc Committee published a paper in 2021, called A Legal Framework for AI Systems. The paper was a feasibility study explored the reasons as to why a legal framework on the development, design, and application of AI, based on Council of Europe’s standards on human rights, democracy and the rule of law is needed. It identified several substantive and procedural gaps and concluded that a comprehensive legal framework is needed, combining both binding and non-binding instruments.

UNESCO published a series of Recommendations on Ethics of Artificial Intelligence, which were endorsed by 193 countries in November 2021.

US: On 4 October, the White House released the Blueprint for an AI Bill of Rights to set up a framework that can protect people from the negative effects of AI.

No government initiatives exist yet in the UK. But Cambridge University, on 16 September 2022, published a paper on A Legal Framework for Artificial Intelligence Fairness Reporting.

 

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Legal IT

Web3 for Lawyers

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In this article, we have a look at Web 3 for lawyers. We answer questions like “What is Web3?” and “What are the promised benefits of Web3?”. We look at the concerns about Web3 and at how Web3 and the Metaverse relate to each other. We also pay attention at the relevance of Web3 for lawyers.

What is Web3?

Web 3 (web3, web 3.0) is the name used for what could be the next version of the Internet. Proponents claim it will be based on concepts like decentralization and blockchain technologies. The Wikipedia also includes the concept of token-based economics as a third pillar of web 3. (Think of non-fungible tokens (NFTs) as an example of token-based economics. A future article will be dedicated to token-based economics. In the past, we have already published articles on blockchain and on how it is relevant for lawyers).

But why call it web3? To understand the name, we need to look at the history of the Internet. Before the Internet was accessible to the public in the form of the World Wide Web, there was ARPANET (sometimes referred to as DARPANET). Military strategists had come to the conclusion that centralizing strategic information on just one or some computer servers could leave one vulnerable. So, instead, they built a network of computers that were connected and that replicated crucial information. The information became decentralized. As long as one server remained up and running, essential information would remain accessible.

From this came the first incarnation of the public Internet, the world wide web, which was later also referred to as Web 1.0. It was the Internet of mainly static pages, where the users were in charge of the information they put online. In this setup, the information remained decentralized, where websites were on specific web servers. Then, slowly, we saw the rise of ‘Big Tech’. When social media arrived, they dramatically changed the Internet. Facebook, e.g., became like a privately owned Internet. In this new Internet, which people started referring to as Web 2.0, the information became centralized again in the hands of the Big Tech companies. Microsoft, Google (including YouTube), Meta (Facebook, Instagram, Whatsapp), and Amazon, e.g., are responsible for most of the traffic on the Internet. These companies have tremendous amounts of information on their users, and that information is centralized on their servers. More importantly, users no longer exclusively own what they put on these social media. The Big Tech companies are in control and can use that information. One of the things they do, is monetize this information about their users for marketing purposes, where these users typically do not share in the profits.

With the arrival of cryptocurrencies, the idea of Web 3.0 was born. The purpose of cryptocurrencies was mainly to break away from the power of centralized financial institutions. Similarly, the idea for web3 was to decentralize information and to put users in charge again of their own information, while maintaining their privacy. This would be done by cutting out the Big Tech middlemen and by using the same blockchain technology that had made cryptocurrencies possible. The idea appealed and led to the creation of the Web3 Foundation.

What are the promised benefits of Web3?

By now, billions have already been invested in Web 3 and the underlying technologies. People are enthusiastic because the promises and benefits it holds. Let us have a look at those.

Web 3 will give control back to the users and let the users monetize their information instead of Big Tech. In the article in Livewire, Jeremy Laukkonen writes, “It will represent a transition from big companies controlling and monetizing content on the internet to individual creators and consumers sharing content and interacting through decentralized networks.” NFTs are an example of this, where the creator of a digital artwork is able to sell some rights to his digital artwork. This is done by assigning a unique digital token to the piece of artwork, and all transactions with regard to this token are registered in a Blockchain ledger.

Web 3 will offer increased privacy-protection

If the information is no longer shared with Big Tech companies, users are back in control over their personal data. If you make digital artwork and sell it as NFTs, e.g., the buyer does not need to know anything about you. They just need to know that the token that refers to it is authentic.

Decentralization

With decentralization, the information gets distributed over the Internet again, instead of being in the hands of a handful of Big Tech companies. Dion Hinchcliffe, in ZD Net, describes decentralization as, “the notion that instead of large sections of the Internet being owned and controlled by centralized entities, ownership is instead distributed among its builders and users.”

Technological innovation

The technologies that form the basis for Web 3 already have changed the landscape of Internet technologies. Blockchain is a prime example of that. Web 3 comes with its own set of challenges (see below), and for some of those innovative technological solutions are being proposed. These include solutions to make the Internet more environmentally friendly and sustainable energy-wise. The link between web 3 and the Metaverse also is responsible for the innovations in visual communications, network speed, etc.

Opportunities for enterprises

Commentators identify seven key areas in which Web 3 creates new opportunities for enterprises:

  1. The Metaverse is often cited as an implementation of Web3 technologies, where all its virtual marketplaces rely on them.
  2. Distributed (or Decentralized) Autonomous Organizations (DAOs). “The concept of a DAO is embodied in a smart contract, with the rules posted for all to see. Tokens are issued, and stakeholders have a well-defined decision-making process. Essentially a new type of digital corporation, DAOs can be used in an enterprise context for everything from open innovation and investment to IP-based professional services or industry-scale consortiums.” (Dion Hinchcliffe).
  3. Web3 Apps
  4. Creator Economy for Web3
  5. Crypto & Digital Assets
  6. Blockchain and Distributed Ledger (DLT)
  7. Decentralization

(For more information on this, see the article on ZD Net listed below in the sources, on how decentralization and Web3 will impact the enterprise).

Other benefits

Some advocates of Web 3 also claim it will bring increased data security (because of encryption by default) and increased scalability.

Concerns about Web3

While many people are enthusiastic about the idea of Web 3, there also are some concerns that still must be addressed. A short overview:

Regulation

As most countries by now have Internet-related legislation, the current Internet is largely regulated. That is not the case with web 3, which makes it extremely attractive to cybercriminals. In an environment that is not regulated, the risks of getting exposed to hacking, fraud, theft, harassment and bullying, the dissemination of harmful content like child abuse, unfair business practices, etc., are substantial. An unregulated Web3 is a paradise for criminals.

Environmental Impact

One of the biggest concerns about blockchain technology is its impact on the environment. Blockchain technology requires constant complex calculations that require an exorbitant amount of computing power, which in turn requires a lot of energy. An entire Internet running on Blockchain technology would have a detrimental impact on the environment. Thankfully, new technologies are already being developed that still use the idea of distributed, encrypted ledgers but that require far less computer power. Etherium, e.g., has just moved to such a new technology.

Security

One of the advantages of a centralized network is that typically more attention is being paid to security. (That is why cloud-based solutions typically are safer than technologies that are run on site). In a decentralized Internet, the users become responsible again for security. And that can be problematic. Experience has taught that users still are the most fallible factor in any security solution. (At the moment of writing this article, a hacker made headlines after successfully hacking the Uber network. All he had to was to make one authorized user believe that he was a colleague who needed access).

In a decentralized setup, all the information is in the hands of the users again. Identity theft and identity fraud will be as rampant as it is today, and probably with worse effects for the users whose identities were compromised. In fact, a recent report confirmed that social engineering attacks are already dominating the Metaverse and Web 3.

And there is more. The Pentagon also investigated blockchain technology to see if it could be useful for them. Instead, their investigation found some concerning vulnerabilities on blockchain. Their report revealed that blockchain is neither decentralized nor updated. The market that uses blockchain registered transactions only has a handful of players and it is through them that most transactions take place. On top of that, the report found that it can take a long time for certain transactions to register. That leaves the possibility open for a cybercriminal to, e.g., make a blockchain purchase and then keep on selling the same item several times to different people for as long as the transactions aren’t registered.

Negative impact on innovation

Technological innovation is being touted as one of the benefits of Web 3. But there is another side to the coin. Research has shown that decentralization tends to slow down innovation and progress because it hampers technological standardization. It’s the traditional ‘too many cooks in the kitchen’ problem. E-mail is a classic example of decentralization. After 3 decades of the world wide web, there still are no standards for e-mail encryption. If you look at something like WhatsApp or Teams, which are centralized technologies, they had secure encryption by default, shortly after they were launched.

This slowing down of innovation is one of the main reasons many Big Tech companies are revising their position on working from home.

Other controversies

Several high-profile people within Big Tech are warning that Web 3 is more of a hype or marketing buzz than reality. More importantly, they point out that there won’t be much decentralization, as at present the investments in Web 3 start-ups are all being made by a small group of investment bankers. Instead of control over the Internet being centralized in the hands of just a few Big Tech companies, control over Web 3 would be in the hands of a small group of investors and venture capitalists.

Web 3 and the Metaverse

Web3 and the Metaverse are often mentioned in the same breath. Yet, they are not the same thing. The Metaverse has to do with immersive digital worlds that are typically experienced as a virtual or enhanced reality. Web3 has to do with new technologies and concepts like decentralization and token-based economics. There is a considerable overlap, of course: virtual marketplaces that are part of the Metaverse rely heavily on web3 technologies. But one of the main differences is who the proponents of each are. The Metaverse is being promoted by Big Tech companies who see it as a way of maintaining their control, while Web3 is being promoted by investors and venture capitalists who want to cash in on our digital lives.

The relevance of web3 for lawyers

A recent conference in Austin, Texas, concluded there are nine areas where web 3 and web 3 technologies are already relevant for lawyers.

  1. Copyright laws regarding non-fungible tokens, or NFTs
  2. virtual real estate – lease or buy
  3. virtual event planning
  4. cryptocurrency theft
  5. NFT due diligence
  6. prosecuting crimes in the metaverse
  7. starting or ending a business in the metaverse
  8. metaverse marriage and divorce
  9. web3 skip-tracing / due diligence

It is worth pointing out that there already is a need for blockchain and cryptocurrency lawyers, where the demand outweighs the offer. It should also be clear that having knowledge about Web3 and the Metaverse gives lawyers a competitive advantage.

 

Sources:

Legal IT

Pinterest for Lawyers

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Some weeks ago, I was asked by a lawyer whether Pinterest could be useful tool for him as a lawyer. In the past, we have already given introductions to other social media channels like LinkedIn, Facebook, Twitter, and Instagram for lawyers. Pinterest can be a useful addition to that. So, in this article, we will look at Pinterest for Lawyers. We will answer questions like “What is Pinterest?”, “How does Pinterest work?”, “What are the benefits of Pinterest for lawyers?”. We will explain how to get started and what to post.

What is Pinterest?

The Wikipedia describes Pinterest as “an image sharing and social media service designed to enable saving and discovery of information (specifically “ideas”) on the internet using images, and on a smaller scale, animated GIFs and videos, in the form of pinboards.” It has also been described as a social networking tool for visual bookmarking. One author called it a visual Twitter.

Pinterest was created in December 2009 and has its headquarters in San Francisco. Like several other social media, it is a free website that requires registration to use. The service is currently accessible through a web browser, and apps for iOS, Android, and Windows 10 and 11 PCs. In February 2022, it had more than 430 million global monthly active users. (That is approximately 100 million more than Twitter at that time). Interestingly, over 60% of its global users are women.

How does Pinterest work?

So, how does it work? What is the philosophy about it? Think of digital pinboards that you can pin your interests on. (Hence the name). Pinboards are collections of pins. You can create multiple pinboards, all dedicated to different topics that interest you. Say you are browsing the web and find an interesting article, then you can save it as a pin to one of your pinboards. The pinned article will get a thumbnail image that is presented along with the title of the article on your pinboard. All your pins are visually displayed on your pinboard. By default, pinboards and pins are accessible to the public. Just as is the case with other social media networks, you can follow other Pinterest users or just individual pinboards. Pins that are saved on one users’ board can be saved to another user’s board. Pinterest uses advanced keyword analytics to recommend pins and boards on topics of interest to its users.

Pinterest uses its own terminology. The article by Allison C. Shields on LegalEase provides the following mini glossary of Pinterest terms:

  • Pin:An image or video posted to Pinterest by a user.
  • Pinboard:A collection of pins created by a Pinterest user, usually organized around a particular theme.
  • Pinner:A Pinterest user.
  • Pinning:The act of posting content to Pinterest.
  • Repin:Users can share others’ content on Pinterest by “re-pinning” (the equivalent of “re-tweeting” on Twitter). When content is re-pinned, the original “Pinner” receives a notification from Pinterest.

What are the benefits of Pinterest for lawyers?

There are two main areas where Pinterest can be useful for lawyers. These are legal research and social media marketing.

Research: The description of Pinterest as a visual bookmarking tool is quite apt. As lawyer, you can create different pinboards to organize information on the topics that you specialize in. It is possible to create sub-boards, which helps to structure the information. As a family lawyer, e.g., you could create boards for marriage, adoption, divorce, child custody, etc. And as you come across relevant information, you can save it to the appropriate board or sub-board. Keep in mind, though, that Pinterest is not a reference tool like Mendeley or Zotero. But it offers a very easy way to keep track of information: with the Pinterest browser add-on, it is as easy as clicking a button and then choosing the board you want to pin the information on. Also worth knowing is that there is such thing as collaborative pinboards, which means you can give other people access permissions to your pinboard, so you can collaborate with them.

Marketing: like all social media, Pinterest can be a useful marketing channel. Pinboards and pins can be viewed by the public. So, you can create pinboards to provide information to potential clients. And any content you create – blog, podcast, videos, infographics – should also be shared in pins. In other words, your pins and pinboards offer yet another way to attract potential clients to your content. Pinterest therefore can be a useful content marketing tool and can have its place in your content marketing strategy.

Noteworthy is that if you have a Pinterest business account, you have access to analytics. So, you can verify how your pins are performing and whether your content strategy needs fine-tuning.

Getting started with Pinterest

If you haven’t used Pinterest before, it may be useful to use it for a while as a non-professional user first to familiarise yourself with it. Pinterest also has business accounts. One of the advantages of a business account is that it offers analytics and metrics. You can choose a business account when you set up your profile, or you can later convert your private account to a business one.

Once you registered, you set up your profile. Make sure to mention your business name and include a link to your website. Remember to “verify” your website with Pinterest. Provide a compelling professional bio where you address some of the legal issues your potential clients could be dealing with. Don’t forget to include your location. For your profile photo, it is always better to use a photo of you, rather than a company logo. People relate better to other people than to abstract logos.

What to post?

The rule of thumb that applies to other social media applies to Pinterest as well. You want to post both professional information that is relevant to your potential clients, and personal information. Legal consumers want to know the person they will be dealing with.

As mentioned before, you should always include links to the content you create: your blog or vlog, your podcast, any articles you have published on other media. You also want to provide links to relevant pages in your website. As is the case with other social media, here, too, it is a good practice to include links to content provided by other lawyers on relevant topics.

Other items that are popular on Pinterest include quotes and/or one-liners, and “How-to” posts. You can put up photos from events you attended or spoke at. You could even add photos of clients, with their permission. Your pins should portray what you stand for and represent your law firm’s values and culture. In other words, use Pinterest to show value and earn trust.

To cultivate a following, you should also interact with your followers and your colleagues. You can repurpose your best content. Use hashtags and keywords, so your pins can easily be found.

Finally, use the provided analytics to finetune your strategy.

Some additional remarks

Pinterest has full access to the entire browsing history that is saved on your device. So, there may be privacy and confidentiality concerns. This is especially the case if you are using cloud-based software in your law firm that is accessed in a browser.

Another area of concern is copyright infringement. Does pinning and re-pinning on publicly accessible boards constitute copying and distributing the information, or does this fall under fair use? It is a grey area. As a rule of thumb, if there is a complaint about a copyright violation, Pinterest will remove the pins.

In its default setup, Pinterest tends to be overactive in the notifications that it sends. You may want to finetune what you get emails and notifications for.

One annoying aspect of Pinterest is that it is not possible to exclude certain topics. If Pinterest thinks it will be of interest to you because it is of interest to other people who share similar interest, then you will keep receiving suggestions. There is an option where you can click “I don’t want to see this”, but it is of little help.

Conclusion

In conclusion, Pinterest can be useful for lawyers in two ways. It can be a beneficial additional social media marketing channel. It is also useful for keeping track of your legal research.

 

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