Legal Transformation on Blockchain

Blockchain is not only the technology that made possible the creation of cryptocurrencies or the one that will radically transform the operations related to any digitizable value, including not only the registry but also the automatic execution of obligations derived from contracts, property titles, trusts, compensation and settlement of stock transactions, corporate bylaws, corporate governance rules, electronic voting, clinical history for personalized medicine by means of sensors connected to the Internet, to aircraft flight plans or drone itineraries or self-driven vehicles. Although this would seem yet enough, Blockchain is even more, it is one of the most powerful tools currently available to society to organize politically without centralized authorities, especially given the convergence with other technologies related to Big Data and Artificial Intelligence.

Countless sources explain in detail the operation of Blockchain for those who want to delve into its technical aspects.  However, to understand the implications of this article, it is enough to remember that, in essence, it is a distributed data record–which prevents from altering a record without doing so simultaneously in all the digital, scattered, anonymous and innumerable files—which are structured in blocks of sequentially linked or chained mathematical operations, in order to trace and verify the history of a value to its very origin.  Complex algorithms of encryption also ensure all of this.

However, for the purposes of these notes, the greatest beauty of this invention is that its structural architecture imposes the absence, even the impossibility, of management, control or any other form of direction, by either a private manager or by a public authority, turning the spontaneous exchange of society immune to any form of supervision, intervention or manipulation—the irresistible temptation of regulators, authorities and governments.

It will be said that authority—I mean the hypothetical authority in Alice in Wonderland—provides some guarantee. How is it explained then that US$ 84 trillion is the sum of total money circulating in the world, including bank deposits, if the total of bills and coins officially issued is, however, US$ 31 trillion? That means that 63% of the total money, corresponding to currencies “issued” by central banks or reserve of the countries, magically appeared in the electronic records of the banks without its counterpart.

Let’s go back to the currency, one of the most appreciated expressions of state sovereignty that, however, today circulates with liberating power through multiple cryptocurrencies that emerged without intervention, regulation, permission or validation from any political authority. Regardless of the growth of the circulation of cryptocurrencies, perceived as a threat by both, public regulators who see how spheres of action of the private initiative in which they were so accustomed to stick their noses and nails evaporate, and by traditional banking that loses a space of intermediation, we are already faced to the proof of a concept:  people can organize themselves to give life to legal goods that previously depended on a public arbiter, and can even incorporate algorithms to cause legal effects automatically—a payment, the transfer of a record, the liquidation of a value, etc. –effects whose realization, in case of infringement of one of the parties, today is in the hands of judges, arbitrators or, in the best cases, of trustees.

The day will come when in the Republic of Absurdistan—in this name I include 95% of universal citizenship, since only 5% of the world population, according to The Economist study, lives in full democracies, understood as much by their political organization how much for the extent of the exercise of civil liberties—will replace paper records of real estate, with their signatures and seals, everything so susceptible to adulteration, deterioration or the will of the duty officer, by digital records on Blockchain platforms, and then there will be no need for a certificate from the property registrar to prove the domain chain or register the transfer, or for the intervention of a notary public to solemnize a sale.  Then Juan will be able to click on an iPad, while sunbathing on the shores of the Caribbean Sea, and transfer the ownership of an apartment in Absurdistan to Jorge, who had been able to verify the authenticity of the registry on his computer.

A process that takes several weeks or months and consumes a lot of money from taxpayers to finance the operation of property registries, municipal cadasters, tax collection offices and its court of auxiliary servers and processors will have been replaced by one that concludes in seconds without any intermediation of the public authority or its notaries.

Even in the electronic transfer act, self-executing instructions could be included for the necessary payments, including the transfer of the price and the value of the taxes, so that with one click several operations that conclude with one click would have been consented, perfected and executed. Simultaneous transfer of real estate and money. The process of acquiring a property will be as expedite as the purchase of an electronic book on Amazon.com.

Mayors and aspirants to Mayors, do it, propose it! It will happen anyway. In Moscow, the original home of the creator of Ethereum, a program to load all real estate titles into Blockchain registers is already underway.

Another example of Blockchain application, among many, with the variations of each jurisdiction, is the institution of the government license, whether in the form of prior permission, registration, cadaster, ex-post authorization, audits and renewals, which condition an infinity of acts, from the registration of a vehicle, the validity of a contract, the approval of plans for a civil construction, the registration of a commercial product, the foundation of a legal entity or commercial company through the obtaining or transfer of a mining concession.

Regardless of the fact that many of these licenses should not exist insofar as these submit to bureaucratic approvals the exercise of freedoms that should be exercised without any restriction, for acts that require compliance with some norm or criterion to satisfy the legitimate interest of other members of the community—not the whim of the regulator on duty—, technology could do all the work.   A plan could be digitized and loaded online in a server configured with the constructive parameters and automatically detect deviations or inconsistencies. But if there are not, the electronic validation of the plan, the construction license or any other necessary permission would be executed with the delivery of a token to the constructor, verifiable in its Blockchain file by any developer, investor or buyer of the future building.   Needless to mention that in such a system, bureaucratic bottlenecks and consequent corruption would disappear.

The examples go as far as imagination allows, since Blockchain is a technology that allows converting the Internet into a virtual vault of any valuable object that can be digitized.   It transforms a network of information exchange in one of generation, storage and circulation of value. But, above all, it is a technology that makes possible the recovery of personal autonomy, hijacked today by multiple forms of intermediation and state supervision, although for us to reach this state of emancipation of a citizenship in a state of minority, because it is subject to increasingly unlikely aspects of public tutoring; we will have to face a challenge that is more cultural than technological.