Australian law firm Corrs Chambers Westgarth has teamed up with ConsenSys startup OpenLaw to tap the potential of the Ethereum blockchain and smart contracts in settling real estate and property transactions.
Corrs and OpenLaw developed and simulated an end-to-end real estate transaction on the Ethereum blockchain. Ethereum is an emerging, decentralized ledger and computing platform that is used to experiment with and deploy smart contracts.
The project showcases how smart contracts (developed and executed via OpenLaw’s protocol) might be used to manage and streamline the sale of land, reducing commercial friction and transaction costs.
With the success of the initial phase of this project, Corrs and OpenLaw have demonstrated that it is possible to transfer a house or plot of land based on Ethereum’s new ERC721 non-fungible token standard (a token that can be embedded with additional information to represent, for instance, a unique physical asset).
While only the first iteration, it lays the foundation for international, tamper-resistant land registries that may provide an improved way of tracking the chain of custody in real property, where an accurate record of who owns what is critical.
A blockchain-based system that automatically and indelibly tracks the transfer of title may significantly reduce record keeping costs, curtail fraud and avoid many of the risks inherent in traditional land registries and deeds-based systems. This is particularly true in developing jurisdictions where corruption, the risk of destroyed records or human error may be high.
“It’s an exciting and very promising first step,” said Corrs lead partner on the project, Robert Franklyn. “There are still many practical challenges to overcome to enable the implementation of this sort of technology in Australia and elsewhere, including the introduction of necessary enabling legislation.
“We also need to develop the smart contract to accommodate and keep track of the other sorts of information that we would normally see associated with a property like mortgagee rights, caveats, easements, restrictive covenants and so on.”
The project is being led by Franklyn and Corrs lawyer Michael Kingsbury, who specialize in emerging technologies, with a focus on blockchain technology and machine learning.