DLT – Distributed Ledger Technology – underlies almost all cryptocurrencies. When we refer to DLT, we might be speaking specifically about blockchains or perhaps more generally about the larger crypto space, which includes all sorts of other concerns like ICOs, STOs/DSOs, NFTs, smart contracts, and even mining. Since the term “DLT” often encompasses such a broad range of topics, competent DLT lawyers need a wide base of knowledge of all things crypto.
Are you thinking of hiring a DLT lawyer for a blockchain or crypto-related concern? If you are, there are 5 things you should consider before hiring.
1. Do you need general DLT assistance, or is there a narrower niche?
While it’s not uncommon for individuals and businesses to seek out DLT lawyers for general assistance with a plethora of different cryptocurrency issues, it’s also often the case that attorneys are hired for more specific scenarios.
If you’re able to drill down into your concerns prior to hiring a lawyer, you’ll likely be able to explain your concerns more articulately and concisely, make better hiring decisions, and most importantly, save time and money.
With this goal in mind, the first thing to consider before hiring a DLT lawyer is if your concern can be narrowed down or if it’s more general in scope. In order to enhance understanding, let’s first get to know DLT itself on a deeper level.
What is DLT?
Distributed Ledger Technology is an intimidating concept for many people. In fact, it’s probably accurate to say that the general public’s interest and adoption of DLT (and cryptocurrencies, in general) has far exceeded its understanding. You may know several people who already own Bitcoin, but if you ask them to explain DLT to you, it’s likely that they won’t be able to.
We can decrease the complexity of DLT by breaking the term down, word by word.
Distributed: Shared or spread out. Decentralized. Not existing in one location or owned by one entity.
Ledger: A record of financial transactions.
Technology: Application of new ideas for practical purposes.
Putting these simplified definitions together, DLT becomes a shared record of financial transactions – that is newer and more sophisticated than any earlier methods of accomplishing the same goal.
To be as precise as possible, blockchains (which most cryptocurrencies utilize) are one type of DLT. Most often, though, when people talk about DLT, they are referring to blockchains and the larger crypto space, as well.
Common DLT Niches
The first part of understanding your DLT concern on a deeper level is deciding if it fits into a niche. Some of the more common DLT topics for which people currently seek out attorneys include:
ICOs/STOs/DSOs: Emerging projects looking to raise capital create and launch these events in which they sell their first tokens to the general public. In this niche, DLT lawyers often guide their clients through things like regulations and project structuring.
ATS: Many crypto exchanges are technically Alternative Trading Systems. Creating and operating exchanges requires specialized knowledge that DLT lawyers can provide.
NFTs: Non-fungible tokens are one of the newer and more hyped-up niches in crypto. Creating and distributing NFTs may introduce concerns with licensing, regulations, and taxes.
The above three examples of DLT niches represent just a small slice of the larger space, but they serve to demonstrate that oftentimes, DLT issues can be more precisely labeled. Arriving at a more precise label of your own concerns can greatly help you in your hiring process.
2. Does geographic location matter?
With cryptocurrency moving from underground to mainstream, regulatory bodies in various countries have taken notice and stepped in to oversee and mandate certain requirements. Similarly, tax compliance is becoming more important in various DLT matters, as well. As a result, two of the most common reasons for which individuals and businesses turn to DLT lawyers are regulatory compliance and tax concerns.
If your concerns are related to regulations or taxes in DLT situations, then geographic location should be a primary consideration. You’ll need to be sure that you seek out and hire only DLT lawyers with specific knowledge and experience with any laws and frameworks that apply to the relevant country.
Additionally, doing a bit of research about how your location affects your responsibilities could serve to either illuminate new concerns or put your mind at ease. Quite simply, regulations and taxes vary so wildly from country to country that you might either find out that you have more to worry about than you initially thought – or nothing to worry about at all!
3. What is the potential financial impact of hiring a DLT lawyer?
As with many other things in life, one of the best tools at your disposal in your decision-making process of hiring a DLT lawyer will be a cost-benefit analysis. This consideration applies specifically to how much you’ll be willing to spend on a DLT lawyer, which will largely determine other factors such as how experienced and skilled your lawyer is and whether you’ll be hiring a single lawyer or a team.
Before you even begin searching out different DLT lawyers, carefully consider the financial impact of your concerns.
For an example of one of the more financially costly scenarios in which DLT lawyers offer assistance, we can look at Security Token Offerings. Some emerging projects might need assistance from attorneys throughout the entire process of creating and launching their STO. Depending on geographic location, the size of the project, and other variables, this process might necessitate a tremendous amount of guidance from DLT lawyers. In this case, such projects might consider that choosing the wrong professional for the job could end up costing millions of dollars. Consequently, spending larger amounts of time and money in the hiring process would be wise.
On the other end of the spectrum, some individuals may have a simple idea for a project or an exchange which they haven’t fleshed out yet. In the planning phase, they might come across something that a DLT lawyer could help clarify – possibly regarding regulations or tax concerns. In this case, the financial impact would be far lesser and an individual in this type of situation might decide that they can forgo a high-powered legal team and simply pay for an hour or two of consulting.
Do not breeze past this consideration! Understanding and anticipating the costs of not only any DLT lawyer you hire but also the potential financial impact they might have for you is critical.
4. Which qualities in a DLT lawyer are most important to you?
Admittedly, knowledge and skill with your particular concern should likely be the most important qualities that you seek out in your chosen DLT lawyer. Depending on certain other things, however, you might find that other qualities will be important or valuable, as well. Especially if your concern is larger, more complicated, or will be ongoing, you might find yourself working with your DLT lawyer for a longer period of time. In this case, knowledge and skill will remain critical qualities, but others might be worth considering, too.
- Responsiveness. Do you need your DLT lawyer to be available at a moment’s notice? Or will longer response times be OK?
- “Bedside manner.” While it might sound silly to think that bedside manner matters when choosing a lawyer, having an attorney who’s skilled at putting your mind at ease can be hugely beneficial.
- Ability to explain. The types of things that cause us to seek out DLT lawyers in the first place are complex, confusing, and daunting. Is it important to you that your chosen professional can explain things in a way that’s easy for you to understand?
Spending some time analyzing which qualities you want in a DLT lawyer before you start the hiring process might pay future dividends. Most importantly, it will help prepare you before you start your interviews.
If you were to just start talking to different lawyers without considering qualities, for example, you might not even think to ask about something as important as responsiveness. Then, if you were to need an answer right away and your lawyer wasn’t there for you, the consequences could be disastrous.
Getting clear about which qualities are important to you will help you craft a number of questions that you can ask different lawyers in the interviews you conduct. Decide which qualities are important to you and figure out how to ask questions that will reveal these qualities.
5. What is the cost of NOT hiring a DLT lawyer?
While we’re mulling things over, there’s always the possibility that we back out and fail to follow through. If you’ve found yourself reading this article and have entertained doubts that you even need a DLT lawyer, be extremely cautious.
At the end of the day, lawyers are investments. You’re considering hiring a DLT lawyer because you’re uncertain about something and need guidance. If you were to decide to simply try and navigate the issues yourself, what would the worst case scenario be?
Although it’s not fun, imagining the worst case scenario – especially when huge fees and other consequences might be looming – often helps us remember the importance of seeking help in the first place.