“Who guards the guardians?” asked the Roman poet Juvenal. For many today, the answer is to replace them altogether with blockchain technology. Blockchains are designed to be resistant to data modification, with each storage block (viz. record) containing an unalterable cryptographic timestamp. As such, the chain of block can act as a transaction ledger without being overseen by any overarching authority. Originally created to underpin the bitcoin cryptocurrency, it was only a matter of time before other industries began to use it.
One such industry is that of real estate. One of the largest U.S. counties, Cook County, Illinois, has already begun storing land records in the blockchain. A Final Report, issued from the Cook County Recorder’s office, details the results of using blockchain for land recording, most of which have been successful. The report also contains a number of sections detailing the reasons the county has for adopting blockchain in the first place. These stem from an analysis of some of the most commonly used concepts relating to transferring land. No philosopher could read this without reaching for the proverbial red pen. Yet it is critical to ensure that we have a strong grasp of the concepts we employ, before exploring the possibility of implementing a major policy change, such as that of adopting blockchain technology to record land documents.
Central to the Cook County report is the claim that the “essence” of a conveyance is information. But this is a poor analysis of the concept that could seriously undermine current systems of real estate law. For one, there is no such thing as the essence of a conveyance. Use, as Wittgenstein taught us, is tantamount to meaning and the word “conveyance” has at least two different uses within legal contexts alone. It can be used to refer to either (a) an act viz. the assigning, sale, or transfer of property or (b) an object, such as a deed or mortgage instrument.
In the first sense, conveyances involve the passing around of documents from one person to another. No doubt, these documents contain information. But, the conveyance act does not itself amount to the information in question. The second, object, sense of “conveyance”, may at first sight seem a promising candidate for information. But while a deed or any other kind of document may be said to contain information, it is hardly identical with this information. Deeds, unlike the information they contain, must be written in a certain way and signed in front of a notary who also signs and stamps them. This entire process transforms a piece of paper into a document with specific legal, at times, also historic significance. In contrast to the information it contains, a deed must comply with detailed statutory requirements in order to be valid.
The upshot of the above is that one cannot simply replace a land conveyance with information recorded on a blockchain. The U.S. currently has two systems for dealing with land records: land recording and land registration. Land registration is widely used in countries around the world, whereas land recording is a uniquely American phenomenon. In a system of land registration, the act of registering a deed with the government itself creates a conveyance. In a system of land recording, by far the preferred system in the U.S., the act of recording a deed with the government gives a conveyance official legal priority over other conveyances. However, despite their differences, both systems for dealing with land records see the government’s role as one of paramount importance. The government is seen as either the creator of property rights or as the official protector of such rights. Storing information on a blockchain cannot magically transform a land claim into a conveyance or coat a conveyance with proper legal protection, because inherent in the concept of land conveyances is the government role as the arbiter of private property rights.
By claiming that a conveyance is simply information, the Cook County Final Report suggests that a transition to blockchain is a lot less dramatic that it really is. To replace conveyances with digital information would be to altogether eliminate a legal procedure whereby the government asserts its role as the creator or protector of private property rights. Blockchain technology is, of course, lauded by those who want to see technology remove government (or any other authority that may, in principle, be biased, corruptible, and so on) from industry and have it replaced by a peer to peer network. Whatever the merits and demerits of such a stance may be, its application to real estate rights should be based on a proper understanding of what is being given up and this, in turn, requires conceptual clarity.