Australia's leading independent law firm, Corrs Chambers Westgarth, has teamed up with ConsenSys start up, OpenLaw, to achieve a breakthrough that aims to unlock the potential of the Ethereum blockchain and smart contracts in the settlement of real estate and property transactions.
In what is believed to be an Australian first, Corrs and OpenLaw have successfully developed and simulated an end-to-end real estate transaction on the Ethereum blockchain. Ethereum is an emerging, decentralised ledger and computing platform, which is popularly used to experiment with, and deploy, smart contracts.
The special project provides a window into the future of real estate deals and showcases how smart contracts (developed and executed via OpenLaw's protocol) might be used to manage, automate and streamline the sale of land, reducing commercial friction and transaction costs.
With the success of the initial phase of this project, Corrs and OpenLaw have demonstrated that it is possible to transfer a house or plot of land based on Ethereum's new ERC721 non-fungible token standard (a token that can be embedded with additional information to represent, for instance, a unique physical asset). While only the first iteration, it lays the foundation for international, tamper-resistant land registries that may provide an improved way of tracking the chain of custody in real property, where an accurate record of who owns what is critical.
A blockchain-based system that automatically and indelibly tracks the transfer of title may significantly reduce record keeping costs, curtail fraud and avoid many of the risks inherent in traditional land registries and deeds-based systems. This is particularly true in developing jurisdictions where corruption, the risk of destroyed records or human error may be high.
“It’s an exciting and very promising first step,” Lead Corrs' partner on the project, Robert Franklyn, said.
“There are still many practical challenges to overcome to enable the implementation of this sort of technology in Australia and elsewhere, including the introduction of necessary enabling legislation. We also need to develop the smart contract to accommodate and keep track of the other sorts of information that we would normally see associated with a property like mortgagee rights, caveats, easements, restrictive covenants and so on."
OpenLaw and Corrs will continue to develop the project as those practical limitations are solved, including through improvements to Ethereum and OpenLaw's platform.
The project’s findings were presented at the recent industry-leading blockchain technology summit in New York. The Consensus 2018 conference featured more than 250 speakers and over 4,000 attendees from all over the world, including fortune 500 companies, start-ups, investors, financial institutions and academic and policy groups.
Robert said the success of the initial phase of the project would not have been possible without OpenLaw's software and the efforts of the OpenLaw team, which included its two founders, Aaron Wright and David Roon.
From a Corrs' perspective, the project is being led by partner Robert Franklyn, and lawyer Michael Kingsbury. Robert and Michael specialise in emerging technologies, with a focus on blockchain technology and machine learning.
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