Title Token for Blockchain Estate Registry, Part 2

A blockchain as a repository of evidence does not need a third party to maintain it, but we still need third parties to certify various facts of our life. It is not just about birth and death. A person from Argentina will not buy a bungalow remotely on Bali because the bungalow token that represents the title is just a declaration of the owner. To make the transaction happen remotely, they need a third party whom the buyer and the seller can trust, which will confirm that this token represents this property right. Normally, this job is done by public bodies and registry.

Cross Reference is a basic protocol to maintain the validity of records. A typical scenario is that the end-user creates a token, which can represent a digital identity, property rights, a physical object, a fact or event, and includes the reference (link) to the token, which provides the information of its validity. Changes in both records reflect legal changes in the object. The token owner can make a transfer of the token to change ownership, while the validator can change its validity (legal status).

Use case. Alice creates a token (a key-value record that carries some user’s data) for her title, and Bob, who is a town clerk, creates his token that says “Alice’s Title is valid.” If Alice loses her private key, she will ask Bob to update his token, mark it “invalid,” and reissue a new token certificate.

In a more general scheme, cross-referencing is a method of providing status records by trusted third parties that have knowledge about legal facts and events. The blockchain doesn’t make them valid, but the authority that certifies the fact. Blockchain technology just has a better infrastructure for this system to make sure these records are uncorrupted.

Alice creates a record (token) on a blockchain. Bob says it is valid. If Alice loses her private key, Bob will publish the record that says it is not valid anymore.

If you have heard from some crypto skeptics that the problem of blockchain technology is that it does not tolerate mistakes because no one can alter or delete data, as you can see, the LEDGER immutability is not a problem; it is just a matter of better application design. 

The idea of creating permissioned ledgers to fix mistakes leads us back to centralized registries where censorship and altering records are legitimate tools and all are built around the trust to those who maintain the ledger. Due to no censorship, any junk data is possible on public blockchains. So, the validity here is provided by the traditional trusted parties through cross-referencing. Though their acts are not hidden as in any state-owned database, they are transparent and, hence, accountable. With cross-reference, it is possible to address not only the loss of private keys but legal disputes and various procedures for obtaining permits from the government agencies.

Use case: Building permit. Alice wants to build a house on her land. She applies for permits to: (1) a town clerk; (2) the architecture department; (3) the department for environment and heritage, and so on. Each of these authorities creates its own tokens (certificates) on ledgers to certify permits. Alice adds references to each of these certificates in her token record. To check whether Alice built the house lawfully, the inquirer searches Alice’s token and verifies references whether they are valid and issued by authorized agencies.

Digital authorities and digital dictatorship

But what if Bob, a town clerk, corrupted the system? For example, Alice was unlawfully deprived of her rights to land. There is a system of root records. Firstly, the public body may be hierarchical, and therefore, the higher authorities may deem the clerk’s record as unlawful. Here comes the real power of blockchain technology. The entire time, Alice still owns her token even if Bob issues a transaction that it is invalid. After her claim, Alice has been restored in her rights. She will update her token to include a new reference to Dave’s (a new town clerk) record, who says she has the right.

To eliminate dead-end situations when neither party has access to their records, there is a root record, which can issue patches to the system. Patches are also published on-chain, though they must belong to the root address, which is initially set up in the public registry. We need patches to filter out those records that aren’t relevant or illegal. Technically, we don’t delete them because it is impossible on a blockchain. But because we have an overlaid system scanning records on a blockchain and detecting valid ones from it (as we remember blockchain can carry on a lot of junk data), the patch is the record, which is also published on a blockchain but comes from a trusted address. This patch “tells” your system which record or address must be filtered out.

The root can belong to a court. There might be multiple roots based on branches of power (legislative, executive, judicial), and of course, the root can be controlled collectively through a multi-signature scheme — to make sure that those who have a mandate of power make lawful decisions. Eventually, we will likely see the system of a direct e-voting (e-referendum) where not only the representatives of a collective body (council, parliament, committee) make transactions but all the citizens of a town, a state or a whole country.

The most fundamental thing here is that a digital dictatorship has no chance. Even if abuse of power occurs, acts of public bodies must be recorded on-chain. Otherwise, they will not influence any records on the blockchain, including patches. Each node is independent and can be run by any user because it is a blockchain. And each node adds the list of trusted roots, but we always have the right not to trust them, and this discussion is not about blockchain technology as you see it.

Technically, the system can be completely reset. You specify new roots, from which new authorities publish new patches. Your node scans the ledger from the very beginning, and the system applies new filters and rules provided by the patches. As a result, you get a new representation of the current state of the public property registry.

Governance is not a matter of mathematical consensus. The interpretation of records is a layer above blockchains that represents the social consensus. How we decided which root addresses we trust, how and when we reset roots, is a matter of the political system. The only thing that is unchanged is the blockchain. As a public repository it keeps all kinds of records as evidence of everything that happens in the real world.

This is part two of a three-part series on the theory of title token — read part one on the blockchain estate registry here, and part three on the new generation of public property registries here.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.