MARKETS PROPERTY REPORT
A Vermont City Tests Blockchain Technology for Property Deals
South Burlington doing a small trial run to test to the technology on recording real estate sales
Will blockchain eventually find a home in Vermont?
Will blockchain eventually find a home in Vermont? PHOTO: ASSOCIATED PRESS
By Peter Grant
Jan. 30, 2018 5:26 p.m. ET
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The city of South Burlington, Vt., is embarking on a pilot project with a startup blockchain firm in a possible step toward using the technology to replace the city’s system for recording property transactions.
Officials with South Burlington and the firm, Propy Inc., said the project would only be a trial run of blockchain, which is best known as the record-keeping technology behind cryptocurrencies like Bitcoin.
“When they see that everything works great, they can just take their registry and throw it away,” said Alex Voloshyn, chief technology officer of Propy, which has offices in Palo Alto, Calif.; Bulgaria and Ukraine.
Blockchain proponents say the technology could greatly reduce the cost and complexity of recording real estate documents. Under the current system, “you have to drive all the way to South Burlington to do a title search,” said City Clerk Donna Kinville.
A blockchain is an expanding list of records, or blocks, that are secured using cryptography. A block usually has a hash pointer as a link to a previous block, a time stamp and transaction data. By design, a blockchain is resistant to modification of the data.
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But replacing the current system would take years, if not decades, and would require surmounting numerous technological and practical obstacles. Switching property records to the blockchain also would be highly disruptive to businesses like title insurance and the jobs of thousands of people who work for city clerks and other government agencies.
“One of our goals is to make the title transfer secure so it eliminates title insurance need,” said Natalia Karayaneva, chief executive of Propy.
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Vermont is one of the most aggressive states that’s supporting the development of blockchain technology as part of its effort to stoke its tech industry and create jobs. In 2016, the state enacted a law that said transactions recorded with blockchain technology have “the presumption of admissibility from an evidentiary perspective,” according to Michael Pieciak, the state’s commissioner of financial regulations.
The South Burlington pilot project will involve recording only a few property sales on the blockchain registry. The city clerk will also use the traditional method for recording the deals and new titles, which will include the “hash” reference of the blockchain record.
The buyer and sellers in the deals included in the project will have to agree to participate. The deals will be all cash so banks won’t be involved, Ms. Karayaneva said.
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The use of title insurance will not be part of the pilot, Ms. Karayaneva said. Propy will have a law firm do the necessary title search, she said.
Propy is working with the government of Ukraine to replace its property recording system with the blockchain registry entirely, Ms. Karayaneva said. The firm plans to conduct numerous pilot projects starting with Vermont, Arizona and Colorado to learn how to work with city and county-level databases in the U.S., she said.
Ms. Kinville, South Burlington’s city clerk, said the city is “taking this one level at a time” and it’s far too early to predict that South Burlington will adopt the blockchain. “It’s something we are investigating,” she said.
Ms. Kinville said that at this point there is no concern in her office about job reductions connected to the new technology. “Fortunately, this isn’t the only thing we do,” she said.
Still, she pointed out that new technology in the past has resulted in a decrease in staff. “What the future holds, I don’t know,” she said.
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