An in-depth presentation on why and how blockchain technology can be applied to keeping government records of real estate transactions. Information on how bitcoin and blockchains function.

1. T H E F U T U R E O F L A N D R E C O R D S M A N A G E M E N T
KAREN A. YARBROUGH – COOK COUNTY RECORDER OF DEEDS
JOHN D. MIRKOVIC - DEPUTY RECORDER, COOK COUNTY

2. WHAT IS “BLOCKCHAIN”?
A new way of keeping a shared
transactional record (database)
A “distributed ledger” with frequent
reconciliation, all users hold identical
copy
A protocol: a set of rules, like the
Internet

3. WHAT IS “BLOCKCHAIN”?
Designed to be permanent and “immutable”
The “digital infrastructure” that makes
Bitcoin possible
A technology that allows two people to
exchange value without a bank or third-
party settlement service

4. …it is the first native digital medium for
value, just as the internet was the first
native digital medium for information…
Don and Alex Tapscott, Harvard Business Review
“

5. WHAT “BLOCKCHAIN” IS NOT
Not a company (decentralized, peer-to-
peer)
Not patentable (it’s open source)
Not an online drug market (Silk Road)
Not inseparable from Bitcoin (private
blockchains)

6. WHAT MAKES BLOCKCHAIN
REVOLUTIONARY?
Allowed the creation of online “cash”
without banks; near-instant settlement
A system that can only be used as
designed (enforced trust)
Utilizes technology and game theory;
more lucrative to participate than hack

7. WHAT MAKES BLOCKCHAIN
REVOLUTIONARY?
Allows automated legal agreements
(smart contracts) that guarantee
performance
Allows middlemen who add little value to
be “disintermediated” saving everyone
$$$$$

8. WHY BLOCKCHAIN MAKES
SENSE FOR LAND RECORDS
Enables an “unhackable” public record
Distributes storage across all offices
Allows us to focus on accuracy,
efficiency

9. WHY BLOCKCHAIN MAKES
SENSE FOR LAND RECORDS
Can “lock” conveyances from
unauthorized transfer
Land records already kept in a “chain”
Path to paperless transactions and
electronic recording in all jurisdictions

10. WHY SHOULD
CLERKS/RECORDERS CARE?
The idea behind blockchain is not going
away
Some believe it would make us obsolete
Can restore trust in government

11. WHY SHOULD
CLERKS/RECORDERS CARE?
Can help reverse the march towards
complexity (TRID)
Combines instrument (deed) + act of
conveyance (digital signatures) into one
transaction
An open record that is more private (digital
signatures)

12. WHY SHOULD
CLERKS/RECORDERS CARE?

13. “The next push of the envelope...
“[NSA Director James Clapper is] worried about not just data
destruction and theft but about what he calls the “next push of
the envelope”: data manipulation, whereby adversaries subtly
edit and corrupt information inside US computer systems,
undermining confidence in government or industry records.”
WIRED MAGAZINE, DECEMBER 2016

14. PART 2

15. What is the problem?
If blockchain is a solution, what is the
problem?
Resources: dwindling, more with less
Accuracy: data manually entered more than once; perpetuates
the system; data spread across multiple agencies
Efficiency: documents touched by many hands; unify the
conveyance and the public record
Security: records from all of us held by all of us
Stagnancy: electronic recording has taken a long time to be
adopted, meanwhile new technologies have vastly increased
our capabilities

16. Let’s get more detail…
A blockchain is a replicated, autonomous, Byzantine-
fault-tolerant log with consensus based on blocks that
permits external auditing and lightweight nodes, and
provides non-repudiation of the log entries.
BITFURY GROUP, 11/29/16
“

17. Let’s get more detail…
“Very loosely, a blockchain system is a package which
contains a normal database plus some software that
adds new rows, validates that new rows conform to
pre-agreed rules, and listens and broadcasts new rows
to its peers across a network, ensuring that all peers
have the same data in their databases.”
Source: bitsonblocks.net

18. New made from old
The blockchain is a unique
assembly of (mostly) already
existing ideas
 Encryption (SHA 256) = NSA
 Distributed databases
 Electronic signatures
 MVCC
 Hashcash (PoW algorithm = hard to
solve, easy to verify)
 Peer-to-peer network (Internet)

19. “Double-spend problem”
Bitcoin solved “internet money’s” biggest
problem
If you are using a non-physical asset, how
do you ensure it is not a copy, counterfeit,
or previously sent to someone else
WITHOUT reliance on a trusted third party
Called the “double spend problem”

20. What is Bitcoin?
You can’t appreciate blockchain without
understanding Bitcoin BUT you can’t understand
blockchain without thinking beyond Bitcoin
A digital cryptocurrency ~ like Internet Cash
Has built-in limit on # of coins created and built-in
inflation control
Can be exchanged anonymously w/o need for trust
“Coins” exist only as inputs + outputs (never leave
the ledger, aren’t transferred or moved)
Txs packaged into “blocks” and “mined”

21. Let’s look at a Transaction
Slide Credits: CoinCenter.org

22. What you need to know
Hashing: a function designed to be easy
to generate/verify, extremely difficult to
reverse. Turns any string of characters into
a standard-length output
Mary had a little lamb. =
d2fc16a1f51a653aa01964ef9c923336e10653fec195f493458b3b21890e1b97
Mary had a little Lamb. =
7981d013be9985060dd9fbb8b97e409be7460955e21adf084e505df31ce3cf08
Every file (or Tx) has a unique, permanent
hash value; used for comparing files after a
backup or transfer

23. What you need to know
Public Key Cryptography:
asymmetric key pairs verified using
elliptic curve cryptography
 Two parties can sign and verify transactions while only
knowing each other’s public key
 Public Key = like an email address; encrypts message
 Private Key = mathematically derived from Public Key; used
for decryption
 PKI does not require a secure channel to transmit keys
 Asymmetric vs: symmetric (need for secure transmission
channel)

24. What you need to know
Proof of Work: requiring expenditure
of resources to verify consensus (turns
electricity into money)
 Fast and powerful computers needed to run complex
algorithms that “solve” the puzzle
 These computers require energy, cooling, maintenance, etc
 CAPTCHA: a simple example
 Designed to prevent/deter spam and denial-of-service DDOS
attacks; prevents “cheating”

25. What you need to know
Non-Repudiation: inability to deny
that an action or transaction happened
Function served today by Notaries
Blockchain can “self-notarize” documents
But…unless someone sees you typed in your key,
you can always assert that it wasn’t you (Stolen
key) or that you were coerced

26. Let’s look at the Blockchain

27. Let’s look at the Blockchain

28. Let’s look at a Transaction
“MINERS” use
their computers
and resources to
solve crypto-
puzzles.
Winner shares
their solution, all
ensure it is valid.

29. How is Blockchain so secure?
{One-Way Hash Functions x Elliptic Curve
Cryptography} + Proof-of-Work + Distributed &
Democratic Consensus + Fast Reconciliation Time
= TRUSTED PROTOCOL
Participation more lucrative than attacking
(mining/verification creates new Bitcoin)
Rewriting transactions more expensive than their
value
Network moves too fast, have to rewrite everything

30. Different Types of Blockchains
Public (Bitcoin) vs Private
Permissioned vs Permissionless
Bitcoin vs Ethereum

31. Different Types of Blockchains
Consortium Blockchains:
R3 (Corda), Hyperledger (IBM),
Microsoft (Ethereum-based),
DIY Blockchains
Different types of blockchain allow different types of
transactions (derivatives, native-data and image support
The debate within the “industry” is very contentious
“Blockchain” vs “blockchain”

32. What Can You Do With Blockchains?
Blockchains allow parties to transact business
without having to even know each other’s
name.
Blockchain applications can create “smart
contracts” that use software to guarantee
payments upon milestones or actions.
Blockchain transactions are not reversible (no
chargebacks)

33. What Can You Do With Blockchains?
Blockchains allow proof that a certain
document existed at a certain time.
Blockchains can guarantee a person’s
identity while also protecting it.
Blockchains allow disadvantaged regions to
enter digital commerce where bureaucratic
infrastructure has not yet reached

34. What Is “The Industry” Thinking?
Blockchain evangelists have rightly recognized
the ability of distributed ledgers to eliminate
middlemen
A future where people are buying & selling real
property without even speaking to a human or
entering an office, or knowing the other party to
the transaction
While technically feasible, government interests
do not allow fully anonymous transaction of real
estate

35. Challenges to Blockchain in
Land Records
Amount of data – blockchains best at
transmitting small amounts of data
Technology still “early”
Status quo both biggest opportunity and
barrier
Hard to explain and talk about
We have to do it together

36. About CCRD’s Pilot Program
 “The Cook County Recorder of Deeds will become the first
government agency in the United States with a pilot program to
officially reference conveyances and other instruments recorded
in a blockchain thanks to a pioneering, exclusive partnership
with California-based startup velox.RE. Velox is developing a
platform for conveying properties with blockchain technology.”
 “The ongoing project will include a pilot program to test
cross-compatibility between the client-server database model
and distributed ledgers, as well as a focused effort to deliver
better information on vacant buildings in the City of Chicago
to prevent their fraudulent use and conveyance.”

37. About CCRD’s Pilot Program
 Part 1: Determine whether a legal conveyance can
happen electronically in a blockchain, and how to get a
record into CCRD’s database.
 Part 2: Use the City of Chicago’s “Demolition List” to
demonstrate the “digital abstracts” can be created and
the value of data centralization, why they are important
to blockchain real estate, then cross-notating the “red
flag” in the Bitcoin blockchain

38. About CCRD’s Pilot Program
BROADER GOALS
Promote awareness of the technology
Show a path to easier real estate Txs
Show how a public record can be more
private
Make it harder to convey real estate w/o
permission (private keys)

39. About IL Blockchain Initiative
Possibly the most ambitious statewide
blockchain + FinTech study group
We want innovative companies.
CCRD is a founding member, alongside
IDFPR, Dept. of Insurance, Dept. of Innovation
& Technology, Commerce & Economic
Opportunity
Get in front of regulatory uncertainty
“Guidance” on cryptocurrency + RFI

40. About CCRD’s Pilot Program
BROADER GOALS
Promote unification of
conveyance/recording
Encourage standardization of instruments
Explore “Data Only Records Submission”

41. Recap: what is blockchain?
How to talk about blockchain
A protocol (set of standardized rules, like
“the internet”)
A new way of securely storing data by
spreading it across all users (counties aka
nodes) that enables an irreversible record
protected by cryptography.

42. Recap: what is blockchain?
How to talk about blockchain
A distributed database protected from
revision by advanced cryptography that
guarantees consensus by distributing full
copies of the ledger to all users.

43. Next Steps if interested…
Read, read, read
 CoinDesk.com; “Blockchain Revolution”; “The
Internet of Money,” Coin Center
Get some Bitcoin – best way to learn
See if your state gov’t is exploring (IBI)
Ask questions (me, International
Blockchain Real Estate Assn, iGo)

44. WHY SHOULD
CLERKS/RECORDERS CARE?
The idea behind blockchain is not going
away
Some believe it would make us obsolete
Can restore trust in government

45. WHY SHOULD
CLERKS/RECORDERS CARE?
Can help reverse the march towards
complexity (TRID)
Combines instrument (deed) + act of
conveyance (digital signatures) into one
transaction
An open record that is more private (digital
signatures)
Because it’s still early

46. QUESTIONS?
 John Mirkovic
 (312) 590-5013
 John.Mirkovic@CookCountyIL.gov