Page 14 - 2018 October Bar Journal

BarJournal REAL ESTATE LAW

JULY/AUGUST 2015
fEaTUrE The New Real Estate “Fixer Upper”

Blockchain

BY MARK STOCKMAN & MIA uLERY

he real estate industry is poised governmental authority administering or 220, which amends existing law to explicitly
to transform tremendously controlling its creation or maintenance. recognize contracts created through Blockchain
with the eminent adoption of Cryptocurrency transactions are recorded technology as legally enforceable. Legislators and
Blockchain technology. Record and verified through their own specific peer- business leaders are supporting the “Blockland”
T keeping is the foundation to-peer computer network that operates on initiative, focused on making Northeast Ohio
of the industry and many of the issues and Blockchain technology. a hub for Blockchain technology advancement.
inefficiencies in real estate transactions While the underlying Blockchain technology
can be remedied by having an accurate, advanTagES Of BlOCkCHaIn is already fairly developed, the initiative aims
absolute, and shared archive of information. to put Northeast Ohio ahead of the curve on
Implementing Blockchain technology has Shared Ledger researching and designing the various industry-
the potential to reduce transaction risks The Blockchain records all transactions and specific platforms that will run on Blockchain.
and the costs of mitigating those risks, makes the record, and all additions to it,
such as information discrepancies, lack of available to all participants. The ledger is aPPlICaTIOn In THE rEal ESTaTE
uniformity, and fraud. With the momentum vastly more reliable than the communicating IndUSTry
of the Blockland initiative, Northeast and recording systems we currently utilize
Ohio has the opportunity to capitalize on because nothing is erased from it; information Smart Contracts
this technological innovation to facilitate can only be added. The prior history of the As Ohio has already recognized, one of the
advancement of the real estate industry. asset in question is never obscured — there most apparent applications in real estate
is only a new layer of information added. The is the utilization of smart contracts — a
WHaT IS BlOCkCHaIn? shared record is the one, true, agreed-upon contract between parties where the provisions
Blockchain is a software program that record of the transaction. are stored and shared electronically using
creates an electronically-stored ledger that The shared ledger is also verified Blockchain technology. All parties can always
tracks the history and present status of an by replicating it across a network of see the current status of the agreement
asset. The asset can be tangible, such as land, computers, decentralizing the location of and all prior changes to the agreement,
a house, a car, or a currency; or intangible, the data. This verification process makes the and acknowledgement of the parties that
including patents or copyrights. It gets its information less vulnerable to tampering certain conditions have been satisfied (such
name from the method it uses to store data. or hacks. Further, immediate accessibility as acceptance of title) could cause other
Data is stored in a series of “Blocks,” and and transparency makes any changes or provisions (such as transfer of deposit
each new block is linked to the immediately tampering visible to all participants. money) to be self-executing by the contract
preceding block to form a successive “Chain.” program without any further action needed
Blocks and Chains are replicated identically Permissions by the parties.
across a peer-to-peer computer system, and While information on Blockchain is available A smart contract could be comprised
the system records the time and sequence to all participants, the parties within a of form provisions that are recognized as
of each change, giving instant access to network control participation and grant industry standards. Adopting standard
all subscribed participants. A network of permission to access and change information provisions would facilitate the negotiation
chosen participants all agree to the rules and through consensus. No single person process — the parties could agree to the
methods of a specific Blockchain system. controls access to the information. Once a vast majority of a form contract without
Since 2009, digital currencies, or participant is part of a network, he or she can worrying about obscure, convoluted, or
“cryptocurrencies” such as Bitcoin or access it worldwide and make changes with conflicting language. The parties then could
Ethereum, have been utilizing Blockchain near-instant transaction time. The parties include customization options for specific
technology as their supporting platform. In themselves conduct the process, reducing the circumstances, and each party must agree for
those circumstances, Blockchain is akin to risk of fraud or theft by making interactions any changes to be final.
the “operating system,” such as Windows or more direct and transparent. Using a smart contract can facilitate
Mac OS, and Bitcoin is akin to a program that and automate crowd-funded real estate
runs on the operating system, such as Word STaTE laW and BlOCkland investments. For example, an investor could
or Outlook. An important characteristic InITIaTIvE pledge an investment if certain conditions
of cryptocurrencies is that there is no The Ohio legislature recently passed Senate Bill precedent are met. When the conditions
14 | Cleveland Metropolitan Bar Journal clemetrobar.org