I credit Eli with the idea that multisignature bitcoin transactions could lead to the emergence of a better common law. As he put it:
The plain, ordinary Common Law developed as the result of competing courts that issued opinions basically as advertisements of how fair and impartial they were. We could see something similar with Bitcoin arbitration. If arbitrators sign their transactions with links to and a cryptographic hash of a PDF that explains why they ruled as they did, we could see real competition in the articulation of rules. Over time, some of these articulations could come to be widely accepted and form a body of Bitcoin precedent.
Like the Lex Mercatoria, I see the primary use case to begin with being in international commerce, especially in trade with developing nations. The space between nations is where legal protection is always most tenuous. Payments could be made in Bitcoins, and trading partners could specify arbitrators that both of them trust—and as many as they want; it need not be only one per transaction. One advantage this has over traditional channels is that it builds a technological mechanism to have the most trustworthy person in your local village have a say in the fairness of a trade.
There are further advantages to moving such arbitrations to something like Bitcoin. The common law is a mess of precedents and the task of finding relevant ones is non-trivial. Startups like Judicata are trying to make searching through precedents as intuitive as searching the web with Google, but this is a time-intensive, expensive process that is not guaranteed to succeed.
On the other hand, if precedents were all recorded on the blockchain, that would be a huge step up over our current way of doing things. In retrospect it’s amusing that Bitcoin’s initial appeal was as a tool for anonymous transactions; it’s actually one of the most transparent systems in existence. Which, for the purposes of a new common law, is excellent—all the precedents would be stored in the blockchain, and all of the transactions they pertained to would be there as well. Certainly it will become increasingly cumbersome to pick through everything as the blockchain balloons in size; but it’s much easier to crawl and build good search mechanisms on top of something that is digital and fully available through the Internet than it is for something thousands of years old that exists almost entirely in paper documents.
It’s all speculation at this point, of course, but the legal implications of having a distributed, hard-encrypted, open-source ledger are one of the things that I find most exciting about the Bitcoin protocol.