Blockchain Applications Part 3

Blockchain Applications: Blockchain Pilot Project at Cook County Recorder of Deeds. Part 3. Current Paper-Based Processes and Blockchain.

What makes blockchain a perfect solution for solving the inefficiencies in the real estate industry is the difference between transfer of ownership and a record about the transfer. In many parts of the country and the world, these are two different and separate acts. This means that two parties can transfer ownership rights to a piece of real estate without having the government or any other party present during the transaction. The reason why third parties are present is that the process is complex, not because they have to be there by law.

These third parties serve as trusted intermediaries, which increases transaction costs and lengthens the process of completing a transaction, sometimes very significantly. With blockchain, it is possible to transact without any third parties, which means that the process could work much faster and be much more efficient.

Even today, notification of the Recorder of Deeds about a transaction is only the last step in the process and not even a required step. A party can take possession of a property before it notifies the Recorder of Deeds about the transaction involving the property because the transfer of rights occurs when parties sign and deliver signed documents, not when they notify the government about the transaction.

 

Paper-based transactions. Advances in technology.

While in the State of Illinois, just like in most other states, the records system about land and real estate properties is paper-based, in many cases there are no specific laws that say that the system has to be paper-based. This is because over centuries paper has become the means of storing important information and for many people, it is unthinkable that information such as a property deed can exist exclusively on a hard drive of a computer. However, many things that have been unthinkable even twenty years ago are a reality today. For example, for someone living in the nineteenth century, it would be almost impossible to imagine that one day a person could have a card that would allow a person to borrow money and there would be no need to go to a bank or apply for a loan in person.

For someone in the 1980s, shopping via a phone with a screen while on a public bus or on the subway would sound completely unthinkable. Even as early as twenty years ago, it was almost impossible to imagine that computers would not have CD or DVD drives and all the transfer of information would be happening via a wireless network in the way it occurs with most smartphones and tablets today. All of this proves that what people think is impossible is not possible only until it does become possible.

 

 

Potential issues with implementation of blockchain technology

Two biggest reasons that prevent blockchain technology from becoming the prevalent way of doing business are the dependencies on physical representation of documents because of the way storage and reproduction of documents have been occurring throughout the history and because notarization, the act of having a trusted third party confirm the identities of the parties and validity of the documents in a transaction, has historically been occurring on paper, too. Because of these reasons, even when offices such as the Recorder of Deeds in the Cook County in the state of Illinois, encourage people to submit documents in an electronic format, many parties still choose to submit paper.

Up until 1924, parties would bring the documents about the transaction to the Recorder of Deeds, and employees of the Recorder of Deeds would copy the documents by hand into paper ledgers. Upon completion, the employees would return the original documents to their owners. In 1924, Cook County Recorder of Deeds in the State of Illinois has become the first Recorder of Deeds in the country to use overhead cameras to copy the documents with the help of technology instead of doing so by hand. In the 1950s, CCRD, just like many other Recorders of Deeds all around the country, switched to microfilm. The decision to switch to microfilm made a lot of sense at the time, yet has proven to be very problematic moving forward because converting film to digital files is expensive. This is something that many governments all around the country struggle with today because film is deteriorating, making the conversion a priority that they can’t always afford. This is also yet another reason why so many governments and organizations are very slow when it comes to embracing technology. Many times in the past they’ve tried to implement new technology to only find out that the implementation was more expensive than they have originally thought and come with a set of problems that they did not expect. Today many of the technology companies are moving forward with head-spinning speeds, introducing new products several times a year. Trying to stay on top of technology is very expensive and requires a lot of resources, which is why many of the businesses and governments often choose to ignore new technology, including blockchain.

In the 1980s and 1990s, the governments started a transition from film to electronic databases. Practically, this means that they store documents as scans of paper files. A party in a transaction would sign a document on paper, scan it, and submit electronic version of the document to the government.

This means that today an office such as Cook County Recorder of Deeds will accept documents in one of three ways. The documents can arrive by mail, be submitted in-person over the counter or submitted in the form of a digital file. After a document arrives, the workflow of making it a part of the public record is the same. If a person submits a document over the counter while in the office, an employee would scan the document and return the original right away. With documents sent via mail, the same occurs, it is just that the documents are also returned via mail.