Thursday, August 18, 2022
Non-fungible tokens (popularly known as NFTs) and blockchains are frequently promoted as the solution to a multitude of property ownership problems. The promise of an immutable blockchain is often touted as a mechanism to resolve disputes over intangible rights, notably intellectual property rights, and even to facilitate quicker and easier real estate transactions.
In this Symposium Article, we question the use of distributed ledger technologies as a method of facilitating and verifying the transfer of physical assets. As our example of an existing transfer method, we use real property law, which is characterized by centuries-old common law rules regarding fractionalized ownership and local land records that still, in many jurisdictions, rely on paper. We explain the history of real property title protection and then identify the problems with the existing system. We then compare the extant system (and its problems) with what blockchain could offer, concluding that a blockchain system would provide few, if any, benefits.
That said, we concede that tracking and transferring ownership of certain rights—specifically, purely intangible rights—is a long-standing legal problem that begs for resolution. We focus on ownership signals, and contrast ownership of physical assets—which is broadcast in part by manual possession in addition to, in the real estate realm, recording—and ownership of intangible assets, which cannot be possessed in a way that easily gives a signal to the entire world that the possessor is the owner. Because of that difference, we conclude that the true use case for NFTs and distributed ledgers is in tracking and verifying ownership of intangibles.