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Title and code: Real Estate Transaction Recording in the Blockchain in Brazil (RCPLAC-01)-Case Study 1 Document Control Version history Version Date By Version notes

Abstract and Figures

This document reports on a pilot study of the application of Blockchain technology to land transaction recording in the Municipality of Pelotas, Rio Grande do Sol, Brazil. It was carried out between May to September, 2017 as part of the University of British Columbia’s “Records in the Chain” Project and CNPQ UFSM Ged/A Digital Records Research Group.
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University*of*British*Columbia**
Records*in*the*Chain*Project*
Title and code:!
Real Estate Transaction Recording in the
Blockchain in Brazil (RCPLAC-01) Case Study
1!
Document type:!
Case Study!
Status:!
Pre-press!
Version:!
1.1!
Research domain:!
N/A!
Date submitted:!
September 3, 2017!
Last reviewed:!
January 9, 2018!
Author:!
Records in the Chain Project!
Writers:!
Daniel Flores, !CNPq UFSM Ged/A Research Group
Claudia Lacombe, National Archives of Brazil!
Victoria Lemieux, University of British Columbia!
Test bed participants:!
Rafael Mezzari, !Real Estate Registry Office, Pelotas RS, Brazil
Nathan Wosnack, Ubitquity LLC.!
Research team:!
Daniel Flores, CNPq UFSM Ged/A Research Group
Claudia Lacombe, National Archives of Brazil!
Victoria Lemieux, University of British Columbia!
Sérgio Rodrigues, CNPq UFSM Ged/A Research Group
Matheus Baumgarten, CNPq UFSM Ged/A Research Group
Danielle Batista, University of British Columbia!
Document Control
Version history
Version
Date
By
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
2
Records in the Chain Project
0.1
18 August
2017
Victoria
Lemieux
0.2
25 August
2017
Daniel Flores
0.3
3 Sept. 2017
Victoria
Lemieux
0.4
3 November,
2017
Daniel Flores
1.0
December 18,
2017
Victoria
Lemieux
1.1
December 27,
2018
Nathan
Wosnack
Anastasiya
Maslova
1.2
January 4,
2018
Victoria
Lemieux
1.3
January 8,
2018
Daniel Flores
1.4
January 21,
2018
Danielle
Batista
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
Table of Contents
Abstract ........................................................................................................................................... 4!
A.!Overview ................................................................................................................................. 5!
Case study goals .......................................................................................................................... 5!
B.!Statement of Methodology ...................................................................................................... 6!
C.!Description of Context ............................................................................................................ 7!
1.!Provenancial ........................................................................................................................ 7!
2.!Juridical-Administrative ..................................................................................................... 7!
3.!Legal ................................................................................................................................... 8!
4.!Procedural ........................................................................................................................... 8!
5.!Documentary ....................................................................................................................... 9!
6.!Technological ...................................................................................................................... 9!
D.!Project’s Applicable Set of Questions: ................................................................................... 9!
E.!Conclusions ........................................................................................................................... 31!
!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Abstract
This document reports on a pilot study of the application of Blockchain technology to land
transaction recording in the Municipality of Pelotas, Rio Grande do Sol, Brazil. It was carried out
between May to September, 2017 as part of the University of British Columbia’s “Records in the
Chain” Project and CNPQ UFSM Ged/A Digital Records Research Group.
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
A.!Overview
This case study has been conducted in cooperation with the Real Estate Registry Office – Pelotas
– RS, Brazil, Ubitquity LLC, the National Archives of Brazil, and CNPq UFSM Ged/A Research
Group. It discusses a solution developed by a US-incorporated blockchain technology company
called Ubitquity which specializes in blockchain-based recording of titles and ownership transfers.
The solution is currently being piloted in partnership with the Cartório de Registro de Imóveis (the
real estate registry office) in the Brazilian State of Rio Grande do Sul, Municipalities of Pelotas
and Morro Redondo. This paper concentrates on the pilot in Pelotas. Data on the solution were
gathered between May to July, 2017 from examination of company documentation, videos,
newspaper articles and other reports about the project. Information about the architecture of the
system was validated by Ubitquity and the Real Estate Registry Office. The gathering of
information about the operation of the solution involved interviews with staff of the real estate
registry office and further verification of information about the functioning of the solution. The
report uses a version of the InterPARES case study report template specifically adapted for the
Record in the Chain Project. The report summarises the current state of the areas covered in the
case study template related to the case study goals. It could also function as a base for further
cooperation or studies.
Case study goals
The case study has several broad goals, which are to describe:
!How the Blockchain solution is being be used
!What Blockchain platform is being used
!How the Blockchain solution is using information
!How the Blockchain solution operates
!How the blockchain solution works under the law
!How the Blockchain solution affect the citizens of Brazil
!How the blockchain solution affects the trustworthiness and long-term preservation of
records
!
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Records in the Chain Project
B.!Statement of Methodology
The research was carried out under the overall direction of Dr. Victoria Lemieux of the University
of British Columbia. Dr. Lemieux first contacted Claudia Lacombe, Digital Archive Specialist at
the National Archives of Brazil in April 2017 to collaborate on the preparation of the case study
of a pilot project on blockchain-based real estate transaction recording taking place in the state of
Rio Grande do Sul, municipality of Pelotas. Claudia Lacombe then reached out to the CNPq
UFSM Ged/A Research Group to participate in the study.
As soon as the CNPq UFSM Ged/A team received the invitation through the Digital Archive
Specialist of the National Archives, Cláudia Lacombe, the team proceeded to investigate and
systematize sources about Blockchain.
An initial videoconference was carried out in order to familiarize the team with the project’s
theoretical framework and methodology and later with the specific theme of Blockchain. The first
video conference was held with the leader of the Brazil-based research group, Prof. Daniel Flores,
and Cláudia Lacombe.
In the second video conference, the team was enlarged and included Prof. Daniel Flores, CNPq
Group researcher Sérgio Rodrigues, CNPq Group technician Matheus Baumgarten, Cláudia
Lacombe and Mr. Rafael Mezzari, from the Real Estate Registry Office in Pelotas - RS.
A subsequent meeting was held in Pelotas - RS. During the visit, audio recordings were made of
interviews, and the 5 files of audio recordings contents are: observations, dialogues and
documentary surveys, as well as direct archival analysis of the institution, its blockchain system
and its records, have been stored in a Google drive to facilitate transcription, as shown in Figure
1.
Figure 1: Audio files that recorded interviews with the Real Estate Office
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Records in the Chain Project
There were 5 audio files in .m4a format, which were transcribed, revised and, following this, the
information in the transcriptions then was used to answer the specific research questions.
C.!Description of Context
1.!Provenancial
Test-bed Name
Real Estate Registry Office - Pelotas, RS.
Location
• Pelotas – RS, Brazil.
Origins of the Test Bed
According to information given by the notary Mr. Mario Mezzari, the government carries out
public tenders for Notaries and Notary Officers (Lawyers), which are appointed to a Civil Registry
Office or to a Real Estate Office. The mandate of the Notary at the office lasts until his retirement
or transference to another Real Estate Office.
2.!Juridical-Administrative
Brazil lacks an integrated system of land management. Thus, land administration is fragmented
and occurs at different government levels, depending on the type of land and its use.1 The World
Bank’s doing business index provides a detailed analysis of the steps, time and cost involved in
registering property in Brazil, assuming a case of an entrepreneur who wants to purchase land and
a building in Rio de Janeiro that is already registered and free of title dispute. The process entails
at least 13 separate steps. The cadastral database and the registration databases kept by the real
estate registry offices are not integrated and different identifiers are used for the same piece of
land, creating uncertainty around identification of the property. There is also no electronic database
for checking encumbrances (liens, mortgages, restrictions, etc.).2 According to some sources, lack
of integration and systematization in Brazil’s system of land registration opens the door to abuse
by wealthy landowners who sometimes bribe land registry offices to register someone else’s land
in their name.3
Recently, Brazil introduced the SRE - Electronic Property Registry System project to modernize
the current paper-based land registry system and established the National Registry Operator
responsible for coordinating property registration between previously isolated property
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Z$74.!LPSN!
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Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
registration offices and to define the architecture and operating model for an Electronic Property
Registry System.4
On April 5, 2017, Ubitquity announced a pilot project in partnership with the real estate registry
office in the State of Rio Grande do Sul, Municipalities of Pelotas and Morro Redondo. The goal
of the project was to create a pilot program for the region’s official land records in an effort to help
lower costs while improving accuracy, security, and transparency of land records. This ongoing
pilot aims to introduce a parallel platform to replicate the existing legal structure of property
ownership and transferring recording . In announcing the pilot, Nathan Wosnack, President/CEO
of Ubitquity articulated the aims of the project: “The blockchain allows ownership and title
disputes to be handled in a fair and transparent fashion, and serves as a backup in case the original
is destroyed or misplaced.”5 Longer term, the project anticipates creating a system that
incorporates the features of blockchain technology to transform the existing recording and property
transfer processes.
3.!Legal
The real estate registry office is subordinate to the judiciary branch of government, with notaries
now being nominated through public tenders.
The real estate registry office operates according to Government of Brazil, Title IV, Chapter
2 Lei No 6.216 (30 June, 1975).
Funding
The financial control is managed by the Notary himself.
Resources (Physical)
With respect to facilities, the Office is located in a building occupying two full floors and one
more room in a third floor. There are three rooms for archiving the records, one of them is used
for active and semi-active records, because it is in a place of easy access.
Human Resources
Each Real Estate Office usually has an average of 25 Employees hired under CLT regime.
Among them there are: IT professionals (3), Cashier (1), Protocol unit (1), Registration unit (7),
Certificate unit (8), Mr. Rafael Mezzari, who is responsible for the IT Security, and Mr. Mario
Mezzari (referenced as the Notary) is the Oficial de Registrio (Registrar).
The personnel management is outsourced.
4.!Procedural
There are two activities related to real estate registration:
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;*7)!J'&!"7)>3&',*>!(&'I)&34!_)<*-3&%3*',!!"#$%&#'(C)*+,-.)/01+()2$%324$56247(+%85%9(Z%,$%&4HZ$,)!LPSNR!TLH
TT!
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:33I-8UUA)#*$AW>'AUf,%3:%,V'-,%>\XNTYMPU$?*3g$*34H3:)HJ*&-3H?7'>\>:%*,H-)>$&)#HI7%3J'&AHJ'&H&)%7H
)-3%3)H&)>'&#\))I*,<H%,,'$,>)-H:*-3'&*>HQM>L?P#hJihT!%>>)--)#!YS!Z$74.!LPSN!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
1.!Request for property information, addressed to certificate/information unit, with
immediate response.
2.!Property registration, which initiates in the Protocol unit, is then sent to the Registration
unit (which researches the property), then to the Certificate unit. At the end, if everything
is acceptable, the property registration record is created and delivered to the requesting
party, after payment of the fees at the cashier.
Currently, the certificate creation and the recording of some information is done digitally and
printed at the end (hybrid process). Some records are in paper form: Negative Ownership
Certificates, Positive Copy and Property Registration, while others remain in digital form (those
that are kept at the institution): the Registry act, the enrollment, the certificate of enrollment,
internal enrollment and the public deed of sale.
Previously, the index books were handwritten (which are still in use when necessary), and
included:
-!Name Indicator - indexed by people’s names;
-!Real Indicator - by address, street names.
There is still in use for consultation an Auxiliary Register that was used from January 1976 to
October 1996, which contains endorsement and data of a given property, on typewritten cards
indexed by enrollments. However, currently, this register is almost unused, following the
introduction of IT systems in the office. In case of doubt about the digital record, it is sometimes
used to confirm data.
Regarding the Blockchain, which is used just as a test with a little more than half a dozen
records, to date nothing has changed the institution’s workflow.
5.!Documentary
There is no Classification Plan. There is no archivist in the institution, because, according to those
interviewed for this case study, the records management at the office is straightforward.
The real estate registry’s records are stored in corrugated polyethylene boxes. These boxes are
indexed by the creation date, and receive new documentation every two or three days, according
to the daily movement, until the box is full. There is still a large amount of files in metal binders
within the Office, which are used to store some auxiliary recordings.
6.!Technological
There is a real estate management system in the institution preserved in a database, but there is no
archival management system or Archival Repository that complies with standards or requirements
nationally or internationally recognized, like e-ARQ Brasil, Moreq-JUS, Moreq, DoD 5015, and
so on.
D.!Answers to the Project’s Applicable Set of Questions:
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
!How is/will the Blockchain be used?
Blockchain will be used to ensure the authenticity of information related to real estate property,
that is, to affirm for sure that a particular property belongs to a particular person. The real estate
registry office is only running a test with half a dozen records, to try out the security that
Blockchain’s methodology offers. Mr. Mezzari affirms that such service is very expensive and
they need to calculate the cost-benefit ratio, but he considers that it would be possible to use
Blockchain in a distant future.
!What Blockchain platform is being used? How is the Blockchain using information? How
is the Blockchain run?
The solution uses Ubiquity Platform Blockchain version 1.1, Colu's API (alpha).
Ubitquity’s solution operates using a software-as-a-service (SaaS) business model, for the
recording of land transactions on behalf of companies and government agencies. Fees are
charged for adding and updating documents onto its blockchain platform. An overview of the
Ubitquity platform is depicted in Figure 2 below.
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Records in the Chain Project
Figure 2. Ubitqity Platform Architecture6
The solution comprises a web front end (see screenshot of the front end in Figure 3 below), that
captures information taken from the real estate registry’s “Book 2” – the general real estate
registry7, as well as a web server and backend storage. Book 2, the general real estate registry
exists as a database, containing the registration number for the property, the name of the owner,
the address of the property, as well as the image of the property, photos of books, and the
certificate. Ubitquity’s backend storage hosts the images of the property as well as PDFs of
deeds and other documents relating to the property.
Figure 3. Ubitquity Web Front End User Interface. The screenshot shows a land transfer of a
doctor’s house in the southern city of Pelotas that was entered on March 30, 2017. The address
information was given to Ubitquity as a test by the real estate registry office, and more
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Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
registrations have been added since, both from the city of Pelotas and the nearby, more rural
municipality of Morro Redondo.8
These components communicate with the Colu Application Programming Interface (API),
translating what is entered using the front end web user interface into a format that permits assets
(i.e., land) and transactions involving those assets (i.e., land transfers) to be recorded on a
blockchain. At present the solution uses the Colu “Colored Coins” protocol to record transactions
on the Bitcoin blockchain; however, Ubitquity is looking into migrating away from Colu to using
the Colored Coins Open Assets protocol in order to ensure the solution is adhering to the best
practices for data storage within the jurisdiction.9 The future plan is to link directly into Colored
Coin's decentralized protocol which will be installed within the proper jurisdictions in Brazil,
thus adhering to any data export rules.10
Colored Coins is a group of protocols and methods for representing and managing real world
assets, such as real estate, as a data layer on top of a blockchain. In this case, Bitcoin is being
used as the blockchain recording layer, but it is possible to use other blockchains.11 The Colored
Coins implementation developed by Colu and released in June of 2015 attaches metadata to
transaction outputs using the OP_RETURN field as well as using a multisignature (“multisig”)
address when necessary.12 A multisig is a digital signature scheme that allows multiple parties to
partially control a Bitcoin address or wallet. When multisig is implemented, if someone wants to
complete a transaction, such as transfer land ownership, they need other people to sign their
transaction in order for the transaction to be completed. The needed number of signatures is
agreed upon in advance when the address is created.13 Multisig addresses can be used for storage
when!there!is!free!space!left!after!storing!the!digital!signatures; for example, when only one of
three signatures is used, there is an additional 32 bytes of space for each unused signature that
can store data. This allows for the storage of additional data “on chain” in other than the space-
constrained number of bytes available using OP_RETURN.14 Storage of information on chain in
this manner allows for association of that transaction output (more commonly referred to as a
“utxo”) with a piece of property – a process known as “coloring”, hence the use of the label
Colored Coins as the name of the protocol.
Since the OP_RETURN field and use of multisigs is still limited and may be insufficient for the
amount of data a user wishes to associate with a particular transaction, Colu's “coloring
scheme” allows for association of unlimited amounts of metadata (e.g., the name, address, photo
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Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
of property, location data, property value, etc.) through the use of publicly available torrent files
as described in Box 1.
Box 1. Recording Data using the Colored Coins Protocol, Colu API15
In this way, data or metadata relating to the asset can be stored and associated with a transaction
using BitTorrent. This is a peer-to-peer protocol in which peers coordinate to distribute requested
files, much as Bitcoin nodes coordinate to record transactions on a distributed ledger. And, as
with Bitcoin, peers can be located anywhere in the world. Data is uploaded to BitTorrent
through a process called “seeding”, which, in theory, is handled by Colu. Ubitquity has
successfully tested the seeding process. The continued existence of the data online depends upon
at least one, preferably many, peers holding the downloaded data and continuing to participate in
the public BitTorrent network. At time of writing, data and metadata relating to land transactions
in the Municipality of Pelotas has not been seeded to BitTorrent and is, therefore, currently
unavailable on the Internet.
Other possible methods of storing data linked to land transactions recorded through Ubitquity’s
platform include establishing a private consortium to the seed torrents rather than using the
public BitTorrent network, using another decentralized storage solution such as the Inter
Planetary File System (IPFS), or – more traditionally - setting up centralized storage in the Cloud
or in a database.
A magnet link (see Figure 4) is a hypertext link that contains information that the torrent client
uses to find data linked to a blockchain transaction that a user wishes to download from
BitTorrent. This link affords an easy way to download files from BitTorrent peers without the
need to run a torrent server. Magnet links can therefore be distributed by email, messaging, web
interfaces and other forms of communication to anyone in order to provide access to BitTorrent
content.16 Thus to download content, a user running a torrent client (e.g., µTorrent) is able to
15!]1'7'&)#!1'*,-!^!1'7'&)#H1'*,-H(&'3'>'7H2I)>*J*>%3*',!^!1'7'&*,<!2>:)A)`!CK5$I<L!LPSMR!
:33I-8UU<*3:$?W>'AU1'7'&)#H1'*,-U1'7'&)#H1'*,-H(&'3'>'7H2I)>*J*>%3*',UV*\*U1'7'&*,<mLP2>:)A)!YS!Z$74.!
LPSN!!
16!;%&3*,!5&*,\A%,.!][:%3!E-!0!;%<,)3!@*,\!0,#!e'V!G')-!E3!G*JJ)&!=&'A!9'&&),3-n`!CJI4FG#?2%$!Z$,)!T.!LPSP!
)#*3)#!G)>)A?)&!L.!LPSLR!!
:33I-8UUVVVW<:%>\-W,)3ULPSPUPMUPTUV:%3H*-H%HA%<,)3H7*,\H%,#H:'VH#')-H*3H#*JJ)&HJ&'AH3'&&),3-U!
%>>)--)#!YS!Z$74.!LPSN!!
We start by trying to fit everything into the 80 bytes available after the OP_RETURN command.
Without me tadata there is always enough room to fit all asset manipulation instructions after the OP_RETURN.
With metadat a we always have the SHA1 torrent info hash that needs to be recorded on the blockchain.
If SHA-256 of the metadata is not required for verifica tion, the SHA1 torrent info hash is always encoded inside
the OP_RETURN.
If a SHA-256 of the metadata is required, there cannot be enough room for it and the SHA1 torrent info hash
inside the 80 bytes OP_RETURN and therefore the SHA-256 hash must go into a multisig address.
If we have enough room left within the available 80 bytes in the OP_RETURN for the SHA1
torrent info hash then we use a (1|2) multisig address for storing the SHA-256 of the metadata.
Otherwise, when we cannot fit the SHA1 torrent info hash into the OP_RETURN, both the
SHA-256 of the metadata and the SHA1 torrent info hash are encoded in a (1|3) multisig address.
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
14
Records in the Chain Project
enter the magnet link into their browser to begin downloading – as long as the content has been
seeded to the BitTorrent network.17
Coloring of blockchain transactions facilitates easier identification, search and retrieval of those
transactions as in the example at Figure 4. In this example, the property is represented by the
Asset ID, which corresponds to a colored token. Conducting a title search involves searching for
the Asset ID using the Colored Coin public search engine, which returns all the transactions
involving that asset (see Figure 5). In this manner it is theoretically possible to see the title of
ownership transferred to different people by going back through the transactional history of a
specific coloured token (i.e., the one that represents the piece of property). In the example
below, however, no transfer transactions are found because this entry represents the first
recording of title to ownership on the blockchain. The UTXO hash provided in the search results
also allows a user to search for the transaction, and check its validity, on the public Bitcoin
blockchain as in the example in Figure 6.
Figure 4. Results returned for the March 30, 2017 transfer of a doctor’s house using the
Ubitquity Platform. The search was conducted using the Colored Coins public search engine for
digital assets, based on the Colu Coloredcoins implementation.18
17!5&%A!1':),.!]9:)!5*39'&&),3!(&'3'>'7!2I)>*J*>%3*',`!CE5$M633%2$?63JN!=)?&$%&4!Q.!LPSNR!!
:33I8UUVVVW?*33'&&),3W'&<U?)I-U?)IXPPPYW:3A7!%>>)--)#!YS!Z$74.!LPSN!
18!2))!
o:33I8UU>'7'&)#>'*,-W'&<U)KI7'&)&U%--)3U@%NY-_6#Fi32Gc$_gYNa@L2p:F9ih(D,G<##1AUPh>NiQYhMi>JL
PhL))MN??PQS?JLJ#?SPJ)TJJJ?i>T))LNhPhYYS#S)?MPYLiTLUPq!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
Figure 5. Results for title search concerning the piece of land sold in the March 30, 2017 using
the Colored Coins Block Explorer.
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
16
Records in the Chain Project
Figure 6. Search results for the March 30, 2017 transaction using Bitcoin Block Explorer19
The solution does not incorporate records management or digital preservation and it does not
serve as a digital repository; it only keeps the information about the property (real estate x
owner) with a digital signature.
!How does the blockchain work under the law?
This section presents a discussion of some related legal and financial issues associated with the
use of blockchains for recordkeeping.
Legal recognition, admissibility and weight
An “archivally” reliable record does not necessarily imply a legally reliable record. The record
also must be recognized and accepted in law as a memorial of the transaction, which often
requires updating relevant legislation to recognize blockchain-based land registration, as a
number of jurisdictions have begun to do.20 Among the laws that may need updating are those
relating to the signing of contracts. Legal acceptance of digital signatures is a necessary
precondition for acceptance of blockchain-based records as legally binding records of property
transfers. In cases where physical signatures alone are acceptable, the law can present a barrier to
using blockchain-based land transaction recording.21 There is currently no state regulation
recognizing blockchain-based land registration in Brazil. Study participants indicated that
recognizing such records could be threatening to governments, because blockchain and Bitcoin is
not vulnerable to political pressures, disintermediating enormous government power.
Data localization, protection and privacy
Data localization laws may stem from laws and rules requiring retention of documents at a
business premise or from laws that address data protection and privacy in relation to
technology.22 For countries relying on storing elements of their public records on the Bitcoin
Blockchain, or any blockchain not operating entirely within a particular country’s sovereign
jurisdiction, it is necessary to consider whether the system complies with data localization, data
protection and privacy laws and rules. In the case of the Brazilian pilot, the platform’s metadata
files contain details of property transfers which are kept on a Colu server located in Israel.
19!2))!
o:33I-8UU?7'>\)KI7'&)&W>'AU3KUPh>NiQYhMi>JLPhL))MN??PQS?JLJ#?SPJ)TJJJ?i>T))LNhPhYYS#S)?MPYLiTL
q!
20!2:)II%&#!;$77),.!]+)b%#%!(%--)-!(&'H?7'>\:%*,!@%V.`!CZ$,)!SQ.!LPSNR!
:33I8UUVVVWa#-$I&%W>'AU7)<%7,)V-U,)b%#%HI%--)-HI&'H?7'>\>:%*,H7%VHSTMPQU!%>>)--)#!YS!Z$74.!LPSN!
21!;%3-!2,ä77!C,!MLR!N!
22!+*<)7!1'&4.!]1&'--H5'&#)&!G%3%!=7'V-8![:)&)!0&)!3:)!5%&&*)&-.!%,#![:%3!G'!9:)4!1'-3n`!C)2O63&4$562(
M%FI2676J"(P()22684$562(Q6<2;4$562.!;%4!S.!LPSNR!!
:33I-8UU*3*JW'&<UI$?7*>%3*',-ULPSNUPTUPSU>&'--H?'&#)&H#%3%HJ7'V-HV:)&)H%&)H?%&&*)&-H%,#HV:%3H#'H3:)4H
>'-3!%>>)--)#!YS!Z$74.!LPSN!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
Although there are currently no laws or rules that preclude this architecture,23 Ubitquity is
actively looking at providers within Brazil in order to ensure adherence to good, ethical practice
with data handling and in anticipation of possible data localization requirements.24
!How does the blockchain affect others?
There is no regulation in Brazil for Blockchain use as yet. Governments in general are afraid of
this kind of technology, because Blockchain and Bitcoin enable the existence of a “central bank“
regulated by mathematical formulas such as digital signatures. Moreover, it is not vulnerable to
political pressures, which is perceived as taking away power from government.
When blockchain authenticates transactions between parties that do not trust each other, it gives
the financial market what internet brought to information. It enables transmission of financial
information instantly around the world at almost (supposedly) little cost.
!How does the blockchain affect the trustworthiness and long-term preservation of
records?
This section presents an archival theoretic evaluation of the aforementioned solution.
In archival science, a record is said to be trustworthy if it is assessed as being accurate, reliable
and authentic. These main attributes can be decomposed as shown in Figure 7. Each of these
characteristics is discussed below in relation to the solutions presented in the previous section.
23!E,!2)I3)A?)&!LPSY.!5&%6*7!?)<%,!>',-*#)&*,<!%!I'7*>4!3:%3!V'$7#!:%b)!J'&>)#!E,3)&,)3H?%-)#!>'AI%,*)-.!
-$>:!%-!F''<7)!%,#!=%>)?''\.!3'!-3'&)!#%3%!&)7%3*,<!3'!5&%6*7*%,-!*,!7'>%7!#%3%!>),3)&-W!E3!V*3:#&)V!3:*-!
I&'b*-*',!J&'A!3:)!J*,%7!>'I4!'J!3:)!?*77W!=$&3:)&A'&).!*,!LPSM.!5&%6*7*%,!<'b)&,A),3!%<),>*)-.!*,>7$#*,<!3:)!
2)>&)3%&4!'J!E,J'&A%3*',!9)>:,'7'<4!'J!3:)!;*,*-3&4!'J!(7%,,*,<.!G)b)7'IA),3.!%,#!;%,%<)A),3.!:%b)!
*,>7$#)#!J'&>)#!#%3%!7'>%7*6%3*',!%-!%!&)g$*&)A),3!J'&!I$?7*>!I&'>$&)A),3!>',3&%>3-!*,b'7b*,<!>7'$#H
>'AI$3*,<!-)&b*>)-!r2))!1'&4!C,!SSSR!
24!='&!<$*#%,>)!',!<''#!I&%>3*>).!D?*3g$*34!:%-!?)),!J'77'V*,<!3:)!N!?)-3!I&%>3*>)-!?4!3:)!0A)&*>%,!@%,#!
9*37)!0--'>*%3*',!r2))!0A)&*>%,!@%,#!9*37)-!0--'>*%3*',.!]0@90!5)-3!(&%>3*>)-!=&%A)V'&\8!9*37)!E,-$&%,>)!
%,#!2)337)A),3!1'AI%,*)-!5)-3!(&%>3*>)-.!j)&-*',!LWT`!C0@90!O>3'?)&!N.!LPSMR!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
Figure 7: A taxonomy of key archival concepts and their relationship to trust25
Accuracy. Accuracy is “The degree to which data, information, documents or records are precise,
correct, truthful, free of error or distortion, or pertinent to the matter.”26 Accuracy thus refers
directly to the truth-value of the content (facts) of the record. Although one of the project’s aims
is to improve accuracy of land transaction records, there is nothing inherent in the blockchain
that fundamentally alters the accuracy of recording. Rather, accuracy is dependent upon the
procedural and technical controls over entry of data into these systems. If the data are derived ex
postfacto from a land registry’s registration database, as in the case of the current Ubitquity pilot
in Brazil, accuracy of land transaction records depends upon the accuracy of the entries recorded
in the original registry of land ownership as well as upon what is transcribed into the new
blockchain-based land transaction recording system. It is possible to increase the accuracy of
data transferred from such systems using system controls and audits. For example, where data
are manually transferred from an original paper registry to a computerized blockchain-based
system multisigs could be used to help improve accuracy of any data transferred into the
blockchain by requiring that one key be used to record the entry and one or more keys be used to
validate the correctness of the data entered into the blockchain system (i.e., a check that the data
match). The roles could be divided between staff within the land registry itself (i.e., one data
entry clerk and one quality control clerk) or between staff within the land registry and the
company providing the blockchain-based recording system. For cases where data are transferred
from a computerized registry into a blockchain-based system, an original record in the registry
could be hashed and automatically compared with the hash of its mirror entry in the blockchain-
25!0$3:'&`-!'V,!&),#)&*,<!
26!_W!()%&>)H;'-)-.!C)#R!]0>>$&%>4`!E,!E,3)&(0_"2!9&$-3!9)&A*,'7'<4!G%3%?%-)!CLPSNR!
:33I8UU%&-3V)?W>7%43',W)#$U*,3)&7)KU)KI%,#)#2)%&>:WI:In3)&As%>>$&%>4!%>>)--)#!M!0I&*7.!LPSN!!
9&$-3
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Records in the Chain RPCLAC-01 - Case Study 1 December 2017
19
Records in the Chain Project
based land transaction recording system. A comparison of the hashes would ensure that the
records match before a final commit to the blockchain. Proof of the accuracy of the blockchain-
based records could be affixed as metadata to the blockchain transaction record (i.e., by
including the hash of the original record with the metadata associated with the blockchain
transaction). This could be designed to work in a manner similar to how the Colu Colored Coin
protocol handles the insertion of hashes of data seeded to BitTorrent described in Box 1. Note
that this approach would only ensure that the land transaction records have been accurately
transcribed from the original registry into a blockchain-based system, not that the original
records were accurate in the first place.
If the data are derived contemporaneously with a land transaction, such as by means of end user
input or data drawn from linked systems (cf. Swedish Land Registry pilot), accuracy depends
upon the degree to which data from originating sources are precise, correct, truthful, etc. In such
cases, increasing the probability that data will be accurate relies upon establishing data entry
input controls and constraints (e.g., uniqueness constraints, logical value constraints, etc.) and
requirements for linking to transaction records that support or corroborate the truthfulness of data
entered into the system (e.g., the requirement to upload and attach digital copies of property
deeds.
One question that frequently arises with respect to the treatment of records on the blockchain is
what to do when inaccurate information has been discovered. Since the blockchain is intended to
provide an immutable ledger, information cannot (or, more accurately, should not) simply be
overwritten or updated as with traditional database technology. None of the information
gathered about the solution has so far indicated how this requirement will be handled, but in
other solutions corrections to transactional records on the blockchain are being made by entering
a transaction that corrects the information. One challenge with this approach is ensuring that an
end user or linked system is accessing the latest version of a transaction. For example, if a user
is retrieving information using the utxo hash (transaction A) but there has been another
transaction (transaction B) which has updated information relating to the previous hash, a search
using the hash for transaction A may not reveal the existence of transaction B and the user may
only see the outdated information. The risk of this occurring is less likely when assets are
colored, since a user is able to search for all transactions relating to that asset and thus would be
able to see a transaction updating information relating to an earlier transaction. In principle, any
solution which instantiates and preserves the archival bond (see below) should be able to address
this issue in a similar manner. However, an unresolved issue occurs in a scenario involving the
use of the original, erroneous transaction in a downstream, unlinked system or manual
transaction (e.g., use of the land title as security for a loan). In such a scenario, the downstream
transaction may be invalidated by the inaccuracy of the supporting blockchain-based record. In
this case, it will be incumbent upon those who must have accurate information on ownership of
land to see subsequent certification of land title (e.g., through requesting a certificate of title from
the land registration authority).
Reliability. In archival science, the term reliability refers to “the trustworthiness of a record as a
statement of fact; that is, to its ability to stand for the facts it is about (emphasis added).”27 Thus,
an original copy of a land title registration stands for the transfer of title to a piece of land to a
27!@$>*%,%!G$&%,3*!%,#!1'&&*,,)!_'<)&-.!]9&$-3!*,!#*<*3%7!&)>'&#-8!0,!*,>&)%-*,<74!>7'$#4!7)<%7!%&)%`!rLPSLt!
LiWL!.6&R<$%3(=49(P(!%F<35$"(+%85%9!TLT!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
new landholder. In some jurisdictions, registration is the act that actually gives effect to the land
transfer; in other jurisdictions, registration serves only to provide proof that the act has taken
place (in a manner similar to the registration of an act of marriage), and execution of a document
transferring deed of title gives effect to the land transfer.
One important sub-component of reliability is the existence of formal rules of procedure for the
creation and keeping of records, and proof that a given record was made and kept in a manner
consistent with such procedures. In the case of land transaction records, these procedures – at
least at a high level – are defined by law.
At present, the consistency of the records retained on the Ubitquity platform - wherein data are
entered ex postfacto from the original land registry - with formal procedures for creation and
keeping of records depends upon two conditions: 1) consistency of the original records on which
the blockchain records are based with formal rules of records creation and keeping, as defined in
law and 2) the existence of formal rules of creation for reliably generating the “mirror” records
on the blockchain system. Rules for the completion of a registration and its recording in a
property registry are defined in Title IV, Chapter 2 of Law Number 6.216 of 30 June,
1975.28 Rules for generation of “mirror” records on the Ubitquity platform have not yet been
worked out, given the newness of the pilot project, but will be needed to ensure that creation of
the blockchain-based registration record is compliant with legal requirements and that initial
reliability is not lost in the process of transcribing pre-existing records to the blockchain. Table
1 presents a comparison of these rules with the metadata entered into the Ubitquity system.
There is significant variation in what is captured in the Ubitquity platform with what is required
by law for the registration of the property, which, if legally required information were missing,
or the information in the Ubitquity platform were not to match what is recorded in the register,
could lead to a legal dispute challenging the validity of the registration.
Table 1. Comparison of registration recording requirements under Brazilian Law with Metadata
recorded in Ubitquity blockchain solution for property transfer recording
Registration+
Requirements+
Registration+Recording+
Requirements+
Ubitquity+Metadata+
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Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
%,#!>',J&',3%3*',-.!
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Records in the Chain RPCLAC-01 - Case Study 1 December 2017
22
Records in the Chain Project
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Another important aspect of archival reliability is completeness. In archival terms, completeness
is linked to the transactional nature of records and refers to the presence of all the elements
required by the creator and a legal-administrative system for the record to be capable of
generating consequences.29 This typically includes signatures and dates of creation.30 Thus, a
contract for sale of land that does not possess a signature and date would not be considered
complete. Legal acceptance of digital signatures is still a barrier in many jurisdictions, and is one
of the factors that is holding back the transition to full implementation of blockchain land
recording in Brazil. Dating of land transaction records is also potentially an issue in blockchain
land registration. Although blockchain transactions are time ordered, and often time stamped,
system generated time stamps may be out of sync with or unrelated to calendar time. Further, the
timing of the actual validation of transactions may be subject to factors unrelated to the actual
timing of a land transfer (e.g., length of time it takes to mine a transaction).31 Thus, it may be
necessary to create an additional link between a transaction and calendar time through, for
example, publication of the transaction hash in a newspaper.32
A trustworthy record is also one that possesses physical and formal elements which are
consistent with authentic records of similar type and provenance (e.g., in paper recordkeeping
systems, whether the ink used to write a document is contemporaneous with the document's
purported date, or whether the style and language of the document is consistent with other related
documents that are accepted as authentic).33 With blockchain recordkeeping forms being very
new and, as yet, lacking in standardization, especially in the context of pilot projects, there is the
possibility of inconsistency of formal elements even between records of the same type and
provenance.
29!_W!()%&>)H;'-)-!C)#R.!]1'AI7)3),)--`!*,!E,3)&(0_"2!9&$-3!9)&A*,'7'<4!G%3%?%-)!CLPSNR!
:33I8UU%&-3V)?W>7%43',W)#$U*,3)&7)KU)KI%,#)#2)%&>:WI:In3)&As>'AI7)3),)--!!%>>)--)#!M!0I&*7.!LPSN!!
30!@$>*%,%!G$&%,3*.!]_)7*%?*7*34!%,#!%$3:),3*>*348!3:)!>',>)I3-!%,#!3:)*&!*AI7*>%3*',-`!rShhTt!Yh!,3FI584354!!TH
SPW!
31!F%77)<'!C,!LSR!!
32!9:*-!*-!%,!%II&'%>:!)AI7'4)#!*,!",*<*'!%,#!F$%&#3*A)!?7'>\>:%*,!-'7$3*',-.!J'&!)K%AI7)!
33!E?*#!
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Records in the Chain Project
Reliability also depends on the competence of a document’s author to carry out a transaction and
hold power sufficient to give effect to that transaction’s intended outcomes.34 It must be possible
to establish that the parties entering into the contract consent to enter into the contract freely, that
they were not incapacitated or limited in the powers to enact the transaction, that the parties were
of sound mind, and that if they went through a legal representative, that representative had the
power to act.35 It is difficult to imagine how a blockchain system alone could be used to establish
such facts.
What can be achieved within the scope of a blockchain system, having independently verified
the competence of the parties to the transaction, is the establishment of procedures which strictly
determine which users should be allowed to modify information relating to a piece of land.
Clearly, to prevent fraud and to avoid losing the ability to further transfer ownership of an asset,
this must be tightly controlled and carefully thought out, both in relation to a scenario where the
land registration authority alone (or agent operating on its behalf) records the information as well
as for a situation in which multiple stakeholders update information as the process of transferring
title proceeds (e.g., the future state proposed for the Brazilian pilot or the current status of the
Swedish pilot).
In any system, such as blockchain-based land transaction recording, that relies on cryptography,
he who holds the key, in theory holds the power to transfer land, although in practice this
depends on how the system is procedurally designed and the specific requirements for legal
transfer of property within a given jurisdiction. Key management includes consideration and
design of processes and technical features of key generation, exchange, storage, use and
replacement of keys. In a system where each property is associated with a token and a Bitcoin
address, potentially millions of keys must be accessible, linked to a competent and legally
responsible authority, resistant to digital theft and resilient to loss or inaccessibility (i.e., when a
death occurs and the heirs do not have access to the key). These requirements have often been
difficult to meet in cryptographic systems, and there is no reason to expect that it would be any
easier in a blockchain system.36 The complexity of key management potentially leaves private
keys, such as those created to support blockchain-based systems, vulnerable to loss, open to
theft, and subject to exploitation.
To illustrate, it would be undesirable if a single private individual (e.g., the purchaser of a
property) were to hold the private key that ultimately records his own ownership of title, since it
may be possible for such individual to record fraudulent or inaccurate information, or to confer
upon himself recording power that exceeds what he is legally competent to effect under the law.
To protect against potential fraud, the registration authority has a continuing role to play in
ensuring that this does not happen by assuming some oversight of the recording process.
Registration authorities have a role to play in this regard because, in theory at least, they are
disinterested in the outcome of transactions, and therefore, able to act as trusted intermediaries.
In the case of the Ubitquity pilot in Brazil, Ubitquity holds the private key, acting as the
designated (but not yet legally recognized) agent of the real estate registration authority, and is
34!G$&%,3*!%,#!_'<)&-!C,!MiR!!
35!F%77)<'!C,!LSR!
36!2W!"-\%,#%&*.!GW!5%&&)&%.!"W!23'?)&3.!ZW!17%&\.!]0!=*&-3!@''\!%3!3:)!D-%?*7*34!'J!5*3>'*,!p)4!;%,%<)A),3`!CS!1.(
@TAD.!2%,!G*)<'.!10R!:33I8UUVVVW*,3)&,)3-'>*)34W'&<U-*3)-U#)J%$73UJ*7)-UPTXYXYWI#J!%>>)--)#!LS!+'b)A?)&.!
LPST!!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
recording ownership of the property. This arrangement is only temporary due to the preliminary
stage of the pilot. Conferring oversight of the blockchain registration process on the registration
authority does not assure complete protection from fraud or misuse, however. In practice,
registration authorities may also be bad actors. For this reason, good practice suggests that it
would be wise to adhere to the “four eyes” principle in which two individuals (at least) involved
in the property transfer process must sign off on a transaction in order to have it recorded in the
blockchain. This approach reduces the possibility of fraudulent or inaccurate recordings.
Bitcoin software manages several private keys by storing them on a node’s local storage in a file
or database in a pre-configured file system path. A file containing private keys can be read by
any application with access to the user’s application folder. Attackers may exploit this to gain
immediate access to the transaction records. Users must be careful to not inadvertently share
their Bitcoin application folder (e.g., through peer-to-peer file sharing networks, off-site backups
or on a shared network drive), and must also be cautious about the possibility of physical theft
when using portable computers or smartphones.37 In the Ubitquity pilot, all current private keys
are backed up and encrypted in cold storage off device to prevent such exploits. To access a land
holder’s private keys on the platform an attacker would need to break through the “*nix “server,
bypassing Ubitquity’s .htaccess security. The ultimate goal is for the Ubitquity API to link
directly into Cartorios and e-recording companies without a front-end platform as an attack
vector.38
Another threat is loss of keys as a result of general equipment failure due to natural disasters and
electrical failures, acts of war or mistaken erasure (e.g., formatting the wrong drive or deleting
the wrong folder).39 To prevent loss of control of an asset, and the inability to transfer it to new
ownership in future, it is likely a good policy to design a multisig system wherein two of three
signatures is required to unlock and sign a transaction. Currently, Ubitquity holds the private
keys for the pilot solution, since it is very early days in the testing of the prototype. However,
the solution’s technical road map includes plans to implement multisig with the options of 2-of-3
and 3-of-5 multisignature.40 Future plans for key management will include a feature to allow for
an escrow holding, home owner holding, and another party such as another duly designated
representative (lawyer, spouse). This way, if one of the users who usually signs the transaction
loses their private key, or the key is compromised, two other users can sign the transaction
instead to make sure that it completes – essentially a “breakglass” procedure. If one of the
authorities loses their private key, a challenge will be to manage key re-issuance. This may be a
simple matter of transferring the asset to a new address or wallet with a new private key over
which the signing authority has control.
Reliability also depends on reliable operation of a system and all of its component parts. One of
the most important aspects of reliability is determined by the manner in which the nodes on a
blockchain network determine the validity of transaction entries and blocks of transactions,
otherwise known as the consensus mechanism. These consensus algorithms may be untested and
37!E?*#!
38!"A%*7!A)--%<)!J&'A!+%3:%,!['-,%>\!3'!j*>3'&*%!@)A*)$K.!2)I3)A?)&!Si.!LPSNW!
39!2W!"-\%,#%&*!)3!%7!C,!NiR!
40!"A%*7!A)--%<)!J&'A!+%3:%,!['-,%>\!3'!j*>3'&*%!@)A*)$K.!2)I3)A?)&!Si.!LPSNW!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
may not always perform reliably to validate transactions.41 In the case of the Ubitquity pilot,
which currently records transactions using the Bitcoin network, validation is made easier by the
relatively open and transparent nature of the network.
The Ubitquity solution is, in principle, blockchain platform agnostic, meaning that transactions
could be recorded in future using Ethereum, Hyperledger or some other blockhcain platform.
Some caution is required in this regard, however, because there are non-trivial variations in the
way in which the consensus algorithms work across these platforms, even in cases when the
blockchain uses the same general approach to transaction validation. For example, Bitcoin and
Ethereum currently both use the “Proof of Work” consensus mechanism, but there are
importance differences in the design of their algorithms which result in different behaviour of the
nodes on the network.42 Benchmarking the performance of consensus algorithms to ensure
reliable validation of transactions is thus a necessary development in the advancement of
blockchain technology and an ongoing area of research.
Security vulnerabilities in blockchain solutions also can prevent reliable operation of the system.
A detailed information technology security risk analysis of the solution goes beyond the scope of
this paper; however, it is worthwhile highlighting security risks to which solutions may be prone
given their decentralized and distributed architectures. One such vulnerability is the possibility
that a miner on the Bitcoin network or set of colluding miners gains 51% of mining power –
called a 51% attack. If this occurs, then validity of transactions recorded on the blockchain is
open to manipulation.43 Given this, it is crucial to ask whether concentration of Bitcoin miners
(nodes that validate transactions) with their combined computing power could allow collusion
among nodes and erode the basis of trust upon which the blockchain solution is built.
Whenever one system passes information to another system there exists a possibility for a Man-
in-the-Middle Attack (MitMA).44 MitMA occurs when an attacker secretly intercepts and
possibly alters the communication between two parties who believe they are directly
communicating with each other. In the case of the Ubitquity solution, there are two points,
where the solution may have been vulnerable to a MitMA. The first is at the point at which a
new land registration entry (an entry) in the registration database system enters the Ubitquity
solution, particularly if the transmission is unencrypted. The second is at the point at which the
solution anchors the transaction in the Bitcoin Blockchain. Since Bitcoin miners do not audit
these transactions for validity, it is possible to insert invalid transactions designed to look like
valid transactions into the Blockchain. The probability of this type of attack is more likely in an
environment where system hacking is already occurring, and where the data may pass between
systems in unprotected form.
Another potential vulnerability is a SYN Flood attack, which is a form of Denial-of-Service
attack in which an attacker sends repeated, rapid SYN requests to a target's system in an attempt
41!1:&*-3*%,!1%>:*,!%,#!;%&\'!j$\'7*>.!]57'>\>:%*,!1',-),-$-!(&'3'>'7-!*,!3:)![*7#`!C,3H58(Z$74!SN.!LPSNR!
:33I-8UU%&K*bW'&<UI#JUSNPNWPSiNYWI#J!%>>)--)#!SN!Z$74.!LPSNW!
42!5*3>'*,!#')-!,'3!&)g$*&)!3:)!A*,*,<!'J!$,>7)-!^!'&I:%,)#!>:%*,-!^!',!3:)!,)3V'&\l!V:)&)%-.!"3:)&)$A!
#')-W!9:*-!*-!*,!'&#)&!3'!),-$&)!3:%3!3:)!J%-3)&!-I))#!'J!3&%,-%>3*',!I&'>)--*,<!',!3:)!"3:)&)$A!,)3V'&\!#')-!
,'3!<),)&%3)!%!7%&<)!,$A?)&!'J!$,>',J*&A)#!3&%,-%>3*',-!%,#!J'&\-!3:%3!>&)%3)#!A$73*I7)!>'AI)3*,<!b)&-*',-!
'J!3:)!3&$3:W!
43!0&b*,#!+%&%4%,%,.!Z'-)I:!5',,)%$.!"#V%&#!=)73',.!0,#&)V!;*77)&.!%,#!23)b),!F'7#J)#)&!C,!LSR!
44!2:',!e%&&*-!%,#!=)&,%,#'!;%4A*.!.)!!*(1H4&(K<5;%N(C$I(1;5$562!C;>F&%VHe*77.!LPSMR!LSNHLSi!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
to consume enough server resources to make the system unresponsive to legitimate traffic.45 A
SYN request is made when a server requests a connection to communicate with another server
by sending a SYN (synchronize) message to the server. This is followed by a “handshake”
procedure in which the two servers acknowledge one another. In a SYN Flood attack the server
receiving the request is unable to complete the handshake procedure before a new request comes
in, which ultimately floods the server’s resources with requests and causes it to become
unresponsive. Although the Bitcoin Blockchain has implemented several measures to prevent
denial-of-service attacks, such as SYN Flood attacks46, it is still difficult to rule out such attacks,
especially in a technology solution that relies heavily on broadcast of communications over a
public network. As it seems to imply that Bitcoin is perhaps not protected against SYN Flood
Attacks. Ubitquity servers have implemented SYN Flood protections for its website and
platform, and have anti-DDoS solutions in place at its internet provider level at Vultr:
Ubitquity also utilizes the CloudFlare Content Delivery Network (CDN) for traffic providing an
extra measure to address SYN attacks. Very likely similar measures are in place at Colu,
although this has not been confirmed.47
A Sybil attack occurs when an attacker fills a Blockchain mesh network with nodes controlled by
him, which increases the probability of connecting only to attacker nodes.48 This type of attack
can allow an attacker to refuse to relay blocks and transactions, even disconnecting an entry
registration communication from the network. It can also allow an attacker to relay only blocks
that he creates.49 The probability of this type of attack is likely increasing with growing use of
pools of miners.
45!e%&&*-!%,#!;%4A*!C,!iQR!MhMHMhN!
46!5*3>'*,V*\*.!]57'>\!e%-:*,<!07<'&*3:A`!CE5$F65295G5!!LPSTR!!
:33I-8UU),W?*3>'*,W*3UV*\*U57'>\X:%-:*,<X%7<'&*3:A!LS!+'b)A?)&.!LPST!!
47!"A%*7!J&'A!+%3:%,!['-,%>\!3'!j*>3'&*%!@)A*)$K.!2)I3)A?)&!Si.!LPSNW!!
48!][)%\,)--)-`!CE5$F65295G5(LPSSR!:33I-8UU),W?*3>'*,W*3UV*\*U[)%\,)--)-k24?*7X%33%>\!%>>)--)#!LS!
+'b)A?)&.!LPST!!
49!E?*#!
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Records in the Chain Project
In the Bitcoin Blockchain, each individual block contains a list of transactions and a timestamp
representing the approximate time the block was created, among other additional information.
The block timestamps allow the system to regulate the production of Bitcoins and generate proof
of the chronological order of the transactions as a guard against the double-spending problem.
Nodes usually calculate the timestamp based on the median time of a node's peers, which is sent
in the version message as nodes connect.50 Given the reliance of Blockchain technology upon
timestamps, it is extremely important that the counters of all the nodes that keep track of the
network time be working properly in order to prevent timestamp errors. In addition, even when
the counters are working properly, it is possible for an attacker to slow down or speed up a
node's network time counter by connecting as multiple peer nodes and reporting inaccurate
timestamps.51 Similar to Sybil attacks, growing concentration of Bitcoin miners may increase the
probability of this type of attack.
It must be emphasized that the above analysis by no means represents a complete security risk
analysis. It is merely meant to illustrate some of the security risks to which the solution may be
subject or more prone.
Finally, reliable records will possess naturalness. This refers to the fact that, typically, records
are generated in the course of business or daily life, and are thus not usually designed
purposefully to disseminate knowledge or opinion, like, for example, books or other
publications. As such, they have traditionally been thought to possess qualities of
unselfconsciousness that underpin their reliability as records.52 This notion relates to the legal
“business records exception to hearsay” rule in common law, which accepts a record as standing
for the facts referred to in it by virtue of the naturalness of its creation.53 From this perspective, a
system that generates blockchain-based records in real-time as an integrated element of the
buying and selling of property, such as the proposed future state for pilot project, is superior to a
system that transcribes land registration information from an existing paper-based or
computerized land registry, as in the current state of the pilot project. That said, the simple
transcription of information from an existing system onto the blockchain can be a useful
incremental path of progression to blockchain-based systems supporting a business network
given the fact that changes to laws, procedures and the interaction of stakeholders must all be
developed and agreed in advance.
Authenticity.
To be considered trustworthy, records must also be judged to be authentic. Archival authenticity
is defined as “the trustworthiness of a record as a record; i.e., the quality of a record that
establishes that it is what it purports to be and that it is free from tampering or corruption.”54
There are two preconditions for authenticity: identity and integrity of the record.
50!1$7$?%-.!]9*A)a%>\*,<!v!5*3>'*,`!rLPSTt!:33I8UU>$7$?%-W?7'<-I'3W>'AULPSSUPTU3*A)a%>\*,<H
?*3>'*,XiPLW:3A7!%>>)--)#!LS!+'b)A?)&.!LPST!!
51!E?*#!!
52!@$>*%,%!G$&%,3*.!_)7*%?*7*34!%,#!%$3:),3*>*348!3:)!>',>)I3-!%,#!3:)*&!*AI7*>%3*',-!rShhTt!Yh!0&>:*b%&*%!Yh!
THSP!
53!e)%3:)&!;%>+)*7.!9&$-3!%,#!I&'J)--*',%7!*#),3*348!,%&&%3*b)-.!>'$,3)&,%&&%3*b)-!%,#!7*,<)&*,<!%A?*<$*3*)-`!
rLPSSt!SS!,3FI5847(!F5%2F%!Y.!Q!
54!E,3)&(0_"2!9&$-3!9)&A*,'7'<4!(&'a)>3!C,!iR!!
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Records in the Chain Project
Authenticity encompasses the idea that that the origin or authorship of a record is genuine. For a
record to be considered authentic, it must have been created by the individual represented as the
creator. The presence of a signature, whether it be physical or digital, serves as a test for
authenticity; the signature identifies the creator and establishes the relationship between the
creator and the record. Note that, in archival authenticity, genuineness of the creator of the record
does not imply or provide a basis for inferences about the truth-value of the facts in the record; it
merely establishes that the purported creator of the record is genuine.55 An important
requirement to ensure that blockchain transactions have been duly and legally executed is to
ensure that each address or wallet can be unequivocally linked to the competent signing authority
(e.g., a land registration office). This requires integration of an identity management layer into a
blockchain-based land transaction recording solution, an aspect of system functionality that is
not yet well defined for this project. It is also necessary to ensure that, if the creator of a
blockchain record, typically a land registry office, has held more than one address or wallet for a
given asset (i.e., piece of land), that control of each of these addresses or wallets can be traced
back to the competent authority in a continuous unbroken chain of control.
The unique identity of a record as a record is established by the instantiation and maintenance of
the archival bond. A record is an “intellectual object” that is “made or received in the course of
an activity as an instrument or a byproduct of such activity, and set aside for action or
reference.”56 Thus, “a record has a determinate relationship to the activity of which it is a record,
to the actor who kept it as a record and to other records of the same activity. This relationship,
called the “archival bond,” not only relates a record to a specific context of creation and use but
also defines the Archival Aggregate in which it belongs.”57 In paper-based systems the archival
bond often has been established by placing documents relating to the same transaction in the
same physical folder or bundle. Without reference to the archival bond, it is impossible to tell if
a record is genuine or a forgery. The existence of these linkages, moreover, permits the
subsequent reconstruction of a logical chain of events, based on authentic evidence, of
relationships between and among the facts pertaining to those events. To instantiate the archival
bond in a blockchain-based record keeping system, such systems must establish links between
the records, their creators, the transactions that give rise to them, and to other records that form
part of the same relationships.
In the Ubitquity solution, the link between a given blockchain record and its originating
transaction is established via the colouring of the token representing a particular piece of land.
This allows a user to search for transactions relating to a particular property (e.g., as represented
by an Asset ID), which corresponds to a colored token. Conducting a title search for all those
transactions related to that property, then, involves searching for the Asset ID using the Colored
Coin public search engine.
Association of all records relating to the same creator and/or transaction is a more challenging
proposition. In the Brazilian case study, the entry in Ubitquity’s platform, in theory, links back
to a series of documents that are required to ensure that the transfer process has been duly and
55!G$&%,3*!C,!hQR!%,#!;%>+)*7!C,!hTR!
56!E,3)&,%3*',%7!1'$,>*7!',!0&>:*b)-.!)!,,+(U.*QV?()2$%324$56247(!$42;43;(,3FI5847(,<$I635$"(+%F63;(O63(
.63R634$%(E6;5%#N(*%3#62#(42;(Q4&575%#(@2;?(1;(CE10!LPPQR!
57!E?*#!
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Records in the Chain Project
legally carried out.58 Ideally, all of this documentation, whatever its form, would be linked
together and easily retrievable as a set of archival documents relating to a particular land
transaction. This bond is established by embedding a link to the information stored on the Colu
server or, optionally, BitTorrent, into the transaction record. One challenge is to ensure that these
links remain live and are not broken. If the torrent files are kept on private servers, then the
information will not be publicly retrievable using the Colored Coins explorer, but would still be
retrievable through the platform interface assuming that the servers remain operational and the
information is backed up in case of outage. Regular testing is necessary to ensure these
requirements are met.
Integrity is also necessary to establish the authenticity of records. If the integrity of a record is
compromised, it is impossible to establish a record’s genuineness with any degree of certainty.59
In the pre-digital era of land registration, integrity controls included numbered entries in
registers, listing file contents, and numbering individual documents in file folders. In the digital
era, the concept of integrity has expanded to include continued reliable operation of information
systems in which records are created and maintained, and access controls and systems security
controls to prevent tampering. Assuring integrity in such systems consists of a broad range of
measures such as access controls and user authentication and verification to prevent tampering,
audit trails, and documentation that demonstrates the normal functioning, regular maintenance,
and frequency of upgrades of records systems.60 An illustration of the type of controls that
protect integrity of the record is provided by the Ubitquity solution, which currently relies upon
the Colu Colored Coins protocol. In this solution, Both the SHA-1 hash of the information stored
on BitTorrent and a SHA-256 hash of the SHA-1 hash are included in the metadata recorded
with the transaction anchored in the Bitcoin blockchain in order to ensure that the BitTorrent
data retains integrity and that what is retrieved from the BitTorrent is the correct information
related to the blockchain transaction.
One of the main arguments for blockchain technology is that it assures tamper proof
recordkeeping by virtue of the manner in which transactions are recorded and validated (i.e., in a
Proof of Work based platform, such as Bitcoin, through solving of a cryptographic puzzle that
permits detection of any alteration to transaction records after they have been validated).
However, it is not inconceivable for a validated transaction to be overturned after the fact. One of
reason that this might occur is governance of the blockchain. In theory, the blockchain is self-
58!E,!3:)!>%-)!'J!5&%6*7*%,!7%,#!&)<*-3&%3*',.!3:)!#'>$A),3%3*',!*,>7$#)-!'?3%*,*,<!%!LPH4)%&!>)&3*J*>%3)!
C1)&3*#w'!j*,3),x&*%Rl!'?3%*,*,<!3:)!>)&3*J*>%3)-!'J!1)&3*J*>%3)-!'J!_)<*-3&*)-!%,#!G*-I$3)-!C1)&3*#w'!#'-!
1%&3y&*'-!#)!(&'3)-3'-R.!0>g$*&)!%!1*b*7!G*-3&*?$3'&z-!1)&3*J*>%3)!C1)&3*#w'!#'-!G*-3&*?$*#'&)-!1{b*)-R.!%!=*->%7!
"K)>$3*b)!1)&3*J*>%3)!C1)&3*#w'!#)!"K)>$3*b'-!=*->%*-R!%,#!%!5%,\&$I3>4!1)&3*J*>%3)!C1)&3*#w'!#)!=%7),>*%-!)!
1',>'&#%3%-R!J&'A!3:)!1*34!1'$&3!OJJ*>)l!&)g$)-3*,<!%!@%,#H9%K!1)&3*J*>%3)!%,#!%!1%#%-3&%7!1)&3*J*>%3)!
C1)&3*#w'!#)!G%#'-!1%#%-3&%*-!#'!EA'b)7RJ&'A!1*34!e%77l!%>g$*&*,<!%!17)%&%,>)!1)&3*J*>%3)!J&'A!9%K!0<),>4!
%,#!%!=)#)&%7!9%K!17)%&%,>)!1)&3*J*>%3)l!I%4*,<!3&%,-J)&!3%K!CE95!ER!%3!3:)!5%,\l!#&%J3*,<!'J!($?7*>!G))#!'J!
($&>:%-)!%,#!2%7)!C"->&*3$&%!(|?7*>%!#)!j),#%!)!1'AI&%R!?4!%!($?7*>!+'3%&4!C9%?)7*w'!#)!+'3%-Rl!$I#%3*,<!
3:)!7%,#!3%K%3*',!&)>'&#-!CE(9D!^!EAI'-3'!(&)#*%7!)!9)&&*3'&*%7!D&?%,'R!3'!3:)!,)V!'V,)&z-!,%A)!%3!1*34!e%77l!
%,#!&)<*-3)&*,<!3:)!)->&*3$&%!C3&%,-J)&!#))#R!%3!3:)!%II&'I&*%3)!_)%7!"-3%3)!_)<*-3&4!V*3:!a$&*-#*>3*',!'b)&!3:)!
I&'I)&34!3'!J*,%7*6)!&)<*-3&%3*',!%,#!,%A)!>:%,<)!r2)).!F'b)&,A),3!'J!5&%6*7W!=%5(/6(>?@A>((C,!QSRtW!
59!E,3)&(0_"2!L.!]F7'--%&4`!r,W#Wt!:33I8UU*,3)&I%&)-W'&<U*ILU*ILX3)&A*,'7'<4X#?W>JA!!%>>)--)#!YS!Z$74.!LPSN!
60!E,3)&,%3*',%7!O&<%,*6%3*',!J'&!23%,#%&#*6%3*',!CE2OR.!91!QMU21!SSW!)!W(ADXYB-AZ@TA>?()2O63&4$562(42;(
;6F<&%2$4$562?(+%F63;#(&424J%&%2$?(*43$(AZ(K%2%347(@#$(%;?!CE,3)&,%3*',%7!O&<%,*6%3*',!J'&!23%,#%&#*6%3*',!
LPSMR!
Records in the Chain RPCLAC-01 - Case Study 1 December 2017
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Records in the Chain Project
governing, but in practice, its operation is often in the hands of a core group of developers as
recent disputes and action relating to the “forking”, or division, of the Bitcoin blockchain
illustrate.61 Authorities intending to rely upon blockchain-based recordkeeping must consider
the effect of forks and related decisions on the integrity of land transactions records. Given the
uncertainty of relying on public blockchains over which it may be virtually impossible to
exercise control, many organizations are turning to implementing their solutions using private,
permissioned blockchains wherein governance is the responsibility of a consortium of bodies.
This does not eliminate threats to the integrity of blockchain records presented by hard forks or
forced editing of the ledger, but it does present the possibility to establish rules of operation and
procedures for any necessary changes to what is intended to be an immutable record.
Persistence and Preservation
For archival purposes, all of the aforementioned attributes of blockchain records must be made to
persist through space and time; that is, they must be preserved. Within the digital preservation
community, it is recognized that preserving the integrity of the bit structure of data is not a
sufficient form of preservation because semantic loss may prevent later interpretability and
accessibility. To illustrate, it may be possible to preserve a bit stream of a digital version of a
land title, and even to preserve the software that renders the bit stream interpretable, but the
ability to understand the significance and meaning of the bits depends upon preservation of
information about the context of their creation in order to render them interpretable and also so
that the record does not lose its real world effect, such as conferring a title.62 It is, moreover,
possible to have some degree of bit loss without a detrimental impact upon “renderability”,
interpretability, or effect. This understanding characterizes the archival notion of completeness
after creation. Digital records preservation therefore involves preservation of the integrity of the
identity of records, through preservation of the archival bond, in addition to preservation of the
integrity of the general semantic context, content, and form of data. Though it is tempting to
think of digital preservation as a legacy issue and thus something that can be dealt with at a later
point of time, there is now widespread consensus that digital preservation must be designed into
systems.
Digital preservation challenges present themselves in the case of the Ubitquity solution for the
Brazilian pilot. In this case, the components of the system – and the records created and stored
on the system - are loosely coupled, have independent governance, independent lifecycles, and
independent technical features. This creates a complex socio-technical environment for
recordkeeping that problematizes the work of ensuring long-term preservation and access. As
currently configured, long-term preservation depends on long-term cooperation and coordination
among the Brazilian land registry, a US-based blockchain startup (Ubitquity), and an Israeli
blockchain startup (Colu). The geopolitical challenges alone are daunting. This is not to suggest
that such challenges cannot be overcome, as discussed above in regard to Ubitquity’s plans to
alter the solution architecture to support adherence to any data localization rules; rather, they
must be squarely addressed in order to design future ecosystem architectures capable of long-
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Records in the Chain RPCLAC-01 - Case Study 1 December 2017
31
Records in the Chain Project
term preservation. One solution could be to leverage existing trusted archival authorities, such as
state archives, or state land registries, within Brazil for storage, rather than relying on the Colu
servers, to establish a self-supporting, distributed long-term storage network less dependent on
extraterritorial parties or centralized storage options in Brazil. Working together, these trusted
recordkeeping authorities could act, in theory, both as blockchain nodes on a permissioned
blockchain network and as seeds on a coordinated permissioned torrent network designed to
validate and immutably preserve the most important records of the state. At this stage, however,
the viability of this, or any, long-term preservation solution for blockchain records is strictly
speculative and requires further research.
E.!Conclusions
This paper has reviewed a solution designed to record transfers of land ownership in the
Municipality of Pelotas, Rio Grande do Sul, Brazil, and assessed it using an archival science
theoretic lens, since archival criteria for trustworthy records closely aligns to legal requirements
for determining admissibility and weight of evidence and legal status of titles and given the
requirements for long-term trustworthiness and accessibility of land title records. Thus, archival
requirements offer a useful checklist for those considering blockchains for land transaction
recordkeeping. Though the potential benefits of applying blockchain technology in land
registration are great – improved efficiency, reduced transactional friction, better security, etc. –
it is fair to say that, at this point in time, there are many aspects of the solution that need further
examination and, possibly, (re)design from an archival perspective. This finding runs counter to
some arguments that the application of blockchains in land transaction recordkeeping are best
suited to data archiving.63
Attention is due to the technology’s impact upon long-term availability and evidential quality of
blockchain records. A reduction in evidential quality or loss of access to blockchain records may
have a significant negative impact upon transparency and public accountability, and deprive
individuals of their entitlement to land. Changes to the legal, administrative and procedural rules
may be needed in order for such systems to work effectively.
These challenges are only to be expected when the technology is so new, and still evolving, and
where the solutions are still at very early stages of design and piloting. The aim of raising these
issues is not to put off potential adopters of blockchain land transaction recording systems;
rather, the hope is these findings can be used to further develop potential blockchain solutions as
the real estate registry office further pilot tests blockchain land transaction recording.
63!2)).!J'&!)K%AI7).!0&&$,%#%!C,!SYR!
... Due to the fact that blockchains were primarily developed for cryptocurrency, this technology is, on the first hand, not conceived to serve as an institutional repository -such as a real estate archive. Therefore, records stored in blockchains repositories often miss essential elements of modern trusted records such as completeness, authenticating identity, or ownership (Duranti and Rogers, 2012;Flores, Lacombe and Lemieux, 2017). However, it is needless to say that those elements are decisive to any property record that should serve as a legal evidence. ...
... Some of the goals of this project has been to know how blockchain solutions affect Brazilian citizens and how blockchain solutions affect records' trustworthiness in the long-term. In this pilot project, records of land titles, land transactions, and related individuals were replicated and stored in a decentralized database (= blockchain) (Flores, Lacombe, and Lemieux, 2017). ...
... Also, the Ubiquity solution uses Colored Coins and Bitcoin protocols. While the former is being used to represent the real estate virtually, the latter is being used as a blockchain record layer (Flores, Lacombe, and Lemieux, 2017). (Source: Flores, Lacombe and Lemieux, 2017, p.11) ...
Thesis
Full-text available
Aim This research project aimed to identify barriers in implementing blockchain-based solutions for land property records. For this purpose, a literature review was carried out with a particular focus on blockchain technology and land property records. Also, an online survey collected data from different 'professionals to identify the challenges they have been facing. Methodology At the first stage of this research, a review of relevant literature was carried out. It sought to understand blockchain technology and how it has been applied to the real estate sector. Besides, it helped the researcher to identify potential partners for the survey. The research was designed as a multiple-case study. Data collection took place through an online survey conducted with professionals involved in blockchain and land property projects. Through a cross-syntheses method, the collected was analyzed, and so barriers faced by the survey respondents were identified and summarized. Results According to the survey's results, the three main barriers faced by countries in implementing blockchain in land property are: (1) "legal uncertainty" with 83.33%; (2) "lack of awareness by professionals" with 66.67%; (3) "interoperability with other systems" and "lack of awareness by users" with 50%. Conclusion This research concluded that implementing a successful blockchain land property system requires much more than technological infrastructure. To allow this technology to work property, countries will need to make major changes in the land property systems, especially regarding the legal aspect of it. Besides, it is also important that states raise blockchain awareness among stakeholders (professionals and users).
... Uygulamasının Kullanıcı Arayüzü (V. Lemieux, 2018). ...
Article
Full-text available
La tecnología blockchain o DLT (distributed ledger technology) dota a los objetos de una identidad digital permanente en el tiempo, al margen de su naturaleza, y ha irrumpido con fuerza en diversos campos de la mano de las criptomonedas. Más allá del auge en el ámbito financiero, su aplicación en la Administración pública se antoja amplia y rupturista, especialmente en el registro de distintos tipos de activos, y la Unión Europea se configura como uno de sus principales impulsores. No obstante, esta tecnología se encuentra aún en un estado embrionario y la literatura actual tiende a exaltar sus posibles beneficios, sin analizar de forma sistemática su implementación o limitaciones. Asimismo, resulta costoso encontrar ejemplos de proyectos consolidados en el ámbito gubernamental, en su mayoría debido a la reforma normativa que debe preceder su plena adopción. Este artículo aborda esta deficiencia y recoge un compendio de casos reales de registros de identidades y de la propiedad sobre tecnología blockchain, de corte europeo e internacional (países como Estonia, Suecia o Estados Unidos). A partir de dicho análisis y aplicando una doble clasificación funcional y técnica, examina sus diferentes esquemas de funcionamiento y extrae sus principales implicaciones y retos en el marco legal vigente. Se recurre a una perspectiva técnico-jurídica y presta especial atención a aspectos tales como los contratos inteligentes (smart contracts).
Block Hashing Algorithm' (Bitcoinwiki 2015) https://en.bitcoin.it/wiki
  • Bitcoinwiki
Bitcoinwiki, 'Block Hashing Algorithm' (Bitcoinwiki 2015) https://en.bitcoin.it/wiki/Block_hashing_algorithm 21 November, 2015