Blockchain’s Unsuitability for Real Property Transactions

Abstract

This paper attempts to bypass the hyperbole that invariably attends any discussion of the blockchain concept, and focus on its suitability for transfer of high-net-worth items which have a unique identity, or a long shelf life. Real property falls within this classification. As recognised by the World Bank, a stable land tenure system is a necessary ingredient for economic development. Clearly, such a system should not be introduced for such a significant transactional area as land without a proper understanding of the ‘real life’ implications of how it will work. This article concludes that the blockchain concept is, at heart, no more than a medium for transfer of value without third-party intervention. It undoubtedly has its uses, but it is unsuited for transactions of many high-value or unique assets that do not have a limited shelf life. The blockchain construct (at least in terms of what is called its ‘coloured coin’ application) fails to address issues such as the need for independent third-party verification and control of transactions. For ease of reference, the following discussion is separated into sections. Section 1 introduces the blockchain construct, and discusses what makes a system a ‘blockchain’ system. Section 2 applies the blockchain construct to transfer of tangible and intangible property rights at common law, enabling us to understand issues that emerge in terms of introduction of a credible system. Section 3 develops this discussion in terms of a registry for transfer of real property rights under a common law system. This enables us in Section 4 to better understand the verification and control problems that emerge. Finally, in Section 5, the issues of risk and liability through implementation of a blockchain system are raised for discussion.