Blockchain Applications Part 1

Blockchain Applications: Blockchain Pilot Project at Cook County Recorder of Deeds. Part 1. Goals of the Project.

In September of 2016, Cook County Recorder of Deeds announced a blockchain pilot program. The goal of the program was to create blockchain software for real estate asset records, which the program has accomplished successfully. By doing so, the Cook County Recorder of Deeds has used blockchain technology to store government records in a secure manner on websites that were not maintained by the government. The county has also used the concept of “oracles” to create a property information website for the public.

 

Blockchain Oracles

A blockchain oracle is a tool that a blockchain network with smart contract functionality, such as Ethereum, uses to validate external conditions in smart contracts. Because a blockchain network may not have access to the information stored not on the chain, it needs a way to process information that comes from outside of the network. This is where the network would use oracles. A blockchain oracle provides a blockchain network with data necessary to trigger the execution of smart contracts. These conditions could be almost anything. For example, a smart contract between an insurance company and a farmer could include a condition about the temperature of the weather in the farmer’s zip code. If the weather stays hot for too long, then the farmer gets an insurance payment. A smart contract could also include information about price fluctuations. Oracles are how smart contracts interact with external data.

 

Pilot program at CCRD as a test

It is important to note that the program did not have a goal of transferring or converting of all existing records onto a blockchain for future storage of the records on the blockchain. The goal of the program was to test blockchain technology in real life and to make sure that distributed ledgers can be cross-compatible with regular client-server ways of storing digital information. To do so, the county chose about 2,000 vacant properties in Chicago that were about to be demolished and tested moving the information about them onto a blockchain. Altogether, the county has over 190 million data entries and over twenty terabytes of digital images and converting all this information into a new format was not a goal of the pilot because such a goal would require a massive effort and investment of various resources.

The test was not just technological, but also legal, because the ways of storing information on a blockchain also needed to comply with the legal policies of the Cook County Recorder of Deeds.

 

What does a registrar do?

In the United States, local governments keep land records. The ways they do it vary significantly. On top of that, many people have misconceptions about what a recorder or a registrar actually does. For example, some homeowners don’t even know how exactly they own their home, including joint tenancy, common tenants, and so on. Others wouldn’t even know what exactly constitutes and proves their ownership and think that they would only own their home after they are done paying the mortgage in thirty or so years. Most of these issues and misconceptions occur because of the complexity of real estate transactions and the need to rely on third parties. The large number of such parties is what often makes it hard for people to understand what is going on. When you go to a coffee shop and buy a $2 cup of coffee, the transaction is very simple. You pay with cash or card and you get your cup of coffee. With real estate, there are appraisals, inspections, bank that gives out the mortgage, attorneys, state records, and more. With blockchain, parties that do not trust each other can engage in a transaction without having to hire a third-party, which is why blockchain could be so beneficial to the real estate industry.

Currently, a government office that maintains land records is simply a place that provides interested parties with information about land transactions, including ownership, liens and mortgages. What happens during a real estate transaction depends by the documents that parties use (specifically, the type of deed), and the requirements of local laws (since federal requirements are the same everywhere). Public databases that recorder/clerk/registrar offices maintain play an important role in the market because they allow residents to prove ownership of property, thus enabling them to engage in all kinds of transactions and to attract capital.