Abstract
This paper discusses how to use blockchain tokens to represent real estate titles. Tokens on the blockchain as a technological concept is the closest solution to the legal concept of titles, because it provides for evidence of ownership and can be transferred from one address to another, while giving exclusive access to such an address to the owner. This paper contains the analysis of the concept of tokens in the context of its applicability to title rights on real estate. There is also a discussion of the outcomes of conducted interviews with professionals in the field of Computer Science, technologies, blockchain and smart contracts. Some critical mismatches were found: tokens are not able to satisfy current demand to manage title rights online. To develop a mature and sustainable electronic system, there are certain issues that need to be addressed: inheritance procedures, litigation, guardianship, delegation of rights and rights of third parties (liens and encumbrances) as well as the legal concept of bundle of rights (possession, disposition, enjoyment, etc.), which requires a strong mathematical model. During the abovementioned interviews, some weaknesses were found in the existing ideas of the use of the blockchain for real estate, mostly related to the undesirable centralization and issues with security. As the result of this research, it is obvious what needs to be developed is the concept of a high-level design of the technology, capable of managing title rights on the blockchain, which includes a three-level mechanism of (1) e-voting, which provides for a democratic implementation of governing algorithms; (2) Smart Laws, as the concept of high level “smart” algorithms that implement (by e-voting) existing laws related to property rights in a form of the program/protocol; and (3) smart contract templates which are based on the smart laws, that allow people to manage their title rights online.
O. Konashevych—Erasmus Mundus Joint International Doctoral Fellow in Law, Science and Technology.
Supervisors: Prof. Marta Poblet Balcell and Prof. Pompeu Casanovas.
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Notes
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There are a couple of main theories about property rights, and they vary from 3 to 5 main rights: possession, disposition, enjoyment (use), control, exclusion etc. However, they do not have principal differences for this stage of research, and so it is not critical to make a choice now which theory fits best to design the technology. Our aim here is just to argue that these kinds of legal concepts create the necessity to find a solution to develop the technology.
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Surveying or land surveying is the technique of determining the terrestrial or three-dimensional positions of points and the distances and angles between embodied on the plan of the plot.
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MLS is a standard of listing real estate and services of brokers, http://www.mls.com/.
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DLT is a Distributed Ledger Technology which means shared ledger technologies similar but not equal to the blockchain.
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During the research we also found some ideas not to use tokens, but only to make deed records on the blockchain. However, the same as with tokens it requires a third party manually to track all legal facts which are occurred with the title and reflect its validity in case it has been recognized as invalid.
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The expression “code is law” was proposed by Lawrence Lessig in his Book “Code and Other Laws of Cyberspace” (1999).
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i.e. special servers, from which a smart contract receives reliable information from outside the smart contract.
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In many countries, governments adopt a “Model Company Charter” which people may use when they list a new company, so they do not need to write articles of incorporation (statute, charter) from scratch, but just to refer to this model paper which they submit as the official application to a registrar.
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Acknowledgments
This paper is an outcome of the PhD research performed inside of the Joint International Doctoral (Ph.D.) Degree in Law, Science and Technology, coordinated by the University of Bologna, CIRSFID in cooperation with University of Turin, Universitat Autònoma de Barcelona, Tilburg University, Mykolas Romeris University, The University of Luxembourg. Thanks to my supervisor Prof. Marta Poblet Balcell, RMIT University (Melbourne, Australia), and Pompeu Casanovas, Universitat Autònoma de Barcelona (Barcelona, Spain).
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Konashevych, O. (2019). Comparative Analysis of the Legal Concept of Title Rights in Real Estate and the Technology of Tokens: How Can Titles Become Tokens?. In: Zohar, A., et al. Financial Cryptography and Data Security. FC 2018. Lecture Notes in Computer Science(), vol 10958. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-58820-8_23
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