A great deal of attention has been focused on the emerging technology called “Blockchain” and its potential for bringing a massive change to how business is conducted. Just as the introduction of computers increased the speed and quantity of information that can be used in business, and the introduction of the internet increased the availability information, Blockchain technology is poised to greatly increase the trust parties have in digital information.
Blockchain is a software protocol that creates an electronically-stored ledger that can track the history and present status of an asset. The asset can be tangible, such as land, a building, equipment, or currency; or intangible, such as patents or copyrights. It gets its name from the method it uses to store data. Data is stored in a series of “Blocks,” and each new block is linked to the immediately preceding block to form a successive “Chain”. Blocks and Chains are replicated identically over multiple computer systems across a peer-to-peer computer network, and the system records the time and sequence of each change to the chain, giving instant notice of changes and events to all subscribed participants.
Since 2009, digital currencies, or “cryptocurrencies,” such as Bitcoin or Ethereum have been utilizing Blockchain technology as their supporting platform. In those circumstances, Blockchain is akin to the “operating system,” such as Windows or Mac OS, and Bitcoin is akin to a program that runs on the operating system, such as Word or Outlook. Parties trust cryptocurrency transactions because they gain their validity and security by being recorded and verified through a specific peer-to-peer computer network that operates on Blockchain technology.
Legislators and business leaders are supporting the “Blockland Cleveland” initiative, focused on making Northeast Ohio a hub for Blockchain technology advancement. While the underlying Blockchain technology is already fairly developed, the initiative aims to put Northeast Ohio ahead of the curve on researching and designing the various industry-specific platforms that will run on Blockchain. The Ohio legislature recently passed Senate Bill 220, which amends existing law to explicitly recognize that contracts created through Blockchain technology are legally enforceable.
One area where Ohio leaders are attempting to stay ahead of the curve is in the area of recording real estate documents. Typically, real estate records are printed on paper, signed by the parties in pen, and then the paper document is scanned and the resulting file is indexed in the public records of a county by the county recorder’s office. (Prior to this method, actual paper documents were retained by the county and bound into physical books of records.) The County Auditors Association of Ohio is currently taking the initiative to move real estate record keeping to its next generation, whereby the ownership and other details regarding real estate title (such as mortgages, liens, and easements) will be recorded in a purely electronic means using Blockchain technology. No paper will be needed. Similar efforts are underway in Vermont, Illinois, and California. Theoretically, a Blockchain real estate chain of title would provide instantaneous and fraud-proof transfer of real estate interests. It would not only keep all real estate related records in one place, it would be accessible and changeable directly by the interested parties, with no direct involvement of the county other than to support the technology system.
Of interest will be how the actual mechanics of this system alter the real estate title process in the future. How long will it take for counties to transfer massive amounts of paper data into a Blockchain record? Will parties even sign paper deeds or mortgages in the future, or just log on to their computer to complete the transaction? If the Blockchain record is truly fraud-proof, will the need for title insurance be reduced or eliminated? These are all questions that remain to be answered, but one thing is clear – public real estate records will soon undergo a massive overhaul to the century-old system. Today’s system will be merely a nostalgic remembrance, like life before the internet. Be warned: expect rapid changes!