How Bitcoin Functions As Property Law
43 Pages Posted: 9 Dec 2019
Date Written: November 22, 2019
Bitcoin replicates many of the formal aspects of real estate transactions. Bitcoin transactions have features that closely resemble grantor names, grantee names, legal descriptions, and signatures found in real property deeds. While these “Bitcoin deeds” may be interesting, they are not profound. Bitcoin goes beyond creating simple digital deeds, however, and replicates important institutional aspects of real estate transactions, in particular recordation and title assurance. Deeds to real property are recorded in a central repository (e.g., the public records office), which the parties (and the public) can search to determine title. When one grantor executes more than one deed covering the same property, recordation acts (race, notice, and race-notice) determine which grantee wins.
The Bitcoin blockchain replicates the public records office, giving anyone with a computer the ability to see any Bitcoin transaction. Bitcoin mining replicates the recording of deeds, a process by which formally valid transactions between two parties become essentially a public record. When one grantor executes more than one transaction covering the same Bitcoin, a miner determines which grantee wins simply by moving one transaction to the blockchain before the others.
Remarkably, Bitcoin replicates these aspects of real estate transfers without any governing authority to coordinate or supervise activities. It has no central database for the blockchain. Instead, users across the globe maintain the blockchain in identical form. Bitcoin has no recorder of deeds to time-stamp and process transactions. Instead, it relies on dispersed and competitive miners to, in effect, time-stamp transactions and add them to the blockchain. Ultimately, this Article will show that Bitcoin succeeds because it leads its community of users to a consensus about the blockchain.
Thus, this Article will conclude that Bitcoin replicates elemental pieces of property law, but it does so wholly outside of traditional legal structures. Ownership is based on computer protocols, computer records, community expectations, and nothing more. Bitcoin functions as law, even though it operates outside of the law.
Keywords: Bitcoin, cryptocurrencies
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