Blockchain: The Roll of Deeds of the Internet

After read­ing Caitlin Moon’s instruct­ive blog Block­chain 101 for Law­yers I com­men­ted that we should ‘think of it as a cybernot­ary who can authen­tic­ate — everything’.

I’ve changed my mind.

For the avoid­ance of doubt, I’m all for catchy ana­lo­gies. They help under­stand much of what’s going on in cyber­space. Even bet­ter than a catchy ana­logy, though, is an ana­logy that’s catchy and apt.

How’s an extremely long chain of data like a not­ary? Simple: it isn’t. Rather, it’s more like some­thing we know in Ger­man as Urkun­den­rolle (lit. roll of deeds). The roll of deeds of a civil law not­ary to be more pre­cise. Like so.

Roll of Deeds, Notarial and Legal Instruments

In civil law jur­is­dic­tions a not­ary must keep a record­ing of every not­ari­al instru­ment executed by him. This is not a log­book itemising what he has done (the not­ary will have that as well). Rather, a roll of deeds con­tains the ori­gin­al not­ari­al instru­ment itself. When you go to a not­ary to have some­thing not­ar­ised, he will give you an engross­ment of the deed. But the ori­gin­al is not for you. The not­ary will hold on to it.

A not­ari­al instru­ment is a leg­al instru­ment which the rel­ev­ant parties sign before the not­ary. The not­ary signs too, every­body does, all at the same time. A leg­al instru­ment is a writ­ten doc­u­ment that can be form­ally attrib­uted to its author and that records and form­ally expresses a leg­ally enforce­able act, pro­cess, or con­trac­tu­al duty, oblig­a­tion or right, thus evid­en­cing that act, pro­cess, or agreement.

Sign­ing a leg­al instru­ment before a not­ary has the fol­low­ing leg­al effects. Law—

1. Decrees that the date of a not­ari­al instru­ment is fixed and unalterable;

2. Pre­sumes that the con­tent of a not­ari­al instru­ment is of integrity;

3. Gives a not­ari­al instru­ment self-authen­tic­at­ing and pro­bat­ive value. This means a not­ari­al instru­ment estab­lishes proof in court (even though it may be admiss­ible to prove that the trans­ac­tion con­tained in it has been recor­ded improperly).

Our ancest­ors could have referred to a not­ari­al instru­ment as a ‘block’ and to the con­sec­ut­ive order of these blocks as a ‘chain’. But they haven’t. They’ve chosen to call them ‘deed’ and ‘roll of deeds’ instead.

Blockchain, the Cyber Roll of Deeds

Caitlin described block­chain as a dis­trib­uted ledger or register of digit­ally recor­ded and encryp­ted data in the form of blocks. Indeed this ledger aspect is one of the prom­in­ent fea­tures of block­chain and thus men­tioned fre­quently. But we could also refer to block­chain as one big-ass, world­wide roll of deeds. Without that one not­ary, mind.

Seen from this angle, ye olde not­ar­ies’ rolls of deeds seem like a pre­curs­or striv­ing to come close to what block­chain can do for pri­vacy and authen­ti­city today by using the best pos­sible means at the time: law. This tra­di­tion­al way suffered from short­com­ings. Some of which had to do with pre­serving deeds made of paper, drawstring and wax, with ensur­ing con­stant access to these doc­u­ments, and with the issue of pro­claim­ing that some kind of leg­al sanc­tity was inher­ent in them.

Assum­ing that block­chain con­tin­ues to be hack-res­ist­ant, we can over­come these short­com­ings. In par­tic­u­lar, law need not decree with all its might that the date of a block in the block­chain is deemed fixed and unal­ter­able. Because it is. And law need not estab­lish the assump­tion that the con­tent of a block in the block­chain is of integ­rity. Because again, it just is.

Code is law.

That cov­ers num­bers 1 and 2 above, but how about num­ber 3? Indeed to date law does not assign self-authen­tic­at­ing and pro­bat­ive value to blocks in the block­chain. At least I haven’t heard of that yet. It may hap­pen down the road, how­ever, as states – these polit­ies of the phys­ic­al world – adopt the tech­no­logy (see Caitlin’s ref­er­ence to Sweden con­sid­er­ing the block­chain-isa­tion of its land registry). The ques­tion is to which extent law­makers will deem it neces­sary after all to grant this leg­al priv­ilege to data which is authen­t­ic and of integ­rity in fact.

What about the (Cyber) Notary?

Block­chain tech­no­logy opens up new pos­sib­il­it­ies which can’t be pur­sued using old-school Urkun­den­rol­len or con­ven­tion­al ledgers or registers. But repla­cing tra­di­tion­al ways of record­ing trans­ac­tions doesn’t mean one should do away with the not­ary as well. Just as one shouldn’t throw the baby out with the bath water.

This is not a call for every block­chain trans­ac­tion to be recor­ded by a human not­ary, of course. It’s a call for smart con­tract and oth­er block­chain thought lead­ers to be aware of the pur­poses of tra­di­tion­al leg­al form require­ments and, where applic­able, to put them into effect on block­chains too.

The not­ari­al record­ing of a leg­al trans­ac­tion is the strict­est leg­al form require­ment. Law pre­scribes it in spe­cial cases which, in the eyes of the law­maker, neces­sit­ate high levels of pre­cau­tion. For example trans­fers of real estate. In those cases, the need to involve a not­ary serves a num­ber of pur­poses. Among oth­ers it’s the notary’s duty to warn and advise, thereby pro­tect­ing the parties against mak­ing hasty decisions and oth­er mis­takes on the way. A roll of deeds alone, wheth­er phys­ic­al or cyber, can’t do that.