How SIGN solves Ownership Rights in Real Estate

Christophe Verdot
Jul 21 · 9 min read

Case study in Vietnam: property purchased with full ownership certificates turned out to be a fraud.

1. Problematic Scenario:

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• An individual who has been impersonating the true owner with fake documents. Mr. Ut, the real owner of the house, has lost the property ownership certificate (assuming it could be lost or stolen by the unknown person), he only reports this to a regulator to get a new one without making a request to prevent all ownership transfer transactions related to the house => Traditional identity verification and current property management systems have critical vulnerabilities.

• Notary offices are the authenticator but do not detect the types of documents that have been falsified from the impersonator (falsifying the local police certificate of the impersonator’s ID card number and the number of Mr. Ut’s ID card shown on the property ownership certificate to that from the same person, it is possible that the person pretending to have changed for a new ID card to bypass the buyer and NOTARY OFFICE) caused Mr. Thien (home buyer) to lose trust in the NOTARY OFFICE => The trusted NOTARY OFFICE was proven not to be reliable.

• The court restored ownership of Mr. Ut because he was the real owner of the house and had all the valid proof. When Mr. Thien handed over the money to buy a house from the seller (the person impersonating Mr. Ut), he did not make a notarized delivery document to prove that the payment is valid for the dispute that happened later, so there was no way to claim compensation for the lost money at the NOTARY OFFICE.

2. Comprehensive Solution with Blockchain:

2.1 Why Blockchain?

According to the basic definition of blockchain cited from John Nguyen’s Blockchain Economy book:

“Blockchain is similar to a ledger, which records the history of valid transactions that occur in a system. However, blockchain is a digital ledger, jointly held by multiple parties (each with a copy). Once data has been validated and recorded on the blockchain thanks to the consensus of all computer nodes in the system, there is no way to change it.

The term ‘’blockchain’’ is made up of ‘’block’’ and ‘’chain’’, which is derived from how the system’s design, so that valid transactions occurring in the network will be arranged in the order of the timeline (time-stamp) and is put into a block, then this block is encoded into a hash to close when it meets the conditions set by the system. Then from the hash, it is taken as the basis for connecting to the next new block. Such a system continues to form a chain of blocks that extends to infinity.”

Note, because the blockchain can’t store Blob (big size files), in our solution that we’ll introduce in the next part, blockchain does not store data content directly, but rather records hash as unique encrypted representations for the data’s content into a digital ledger.

For example, a property ownership certificate file of any size (assuming 1 MB) will be hashed by the SHA-256 algorithm into a unique piece of code (hash) that always has a length of 64 alphanumeric characters and alternating numbers, a random fixed size of 256 bits. The hash from two different files will never be the same, any alteration will result in a new hash.

SHA-256 is a one-way cryptographic hashing algorithm that creates irreversible hash back to the original hashed content with whatever computer power we have today. So, there’s no way to directly decode it because the whole purpose of this SHA-256 hash is to be irreversible, making data extremely secure and impossible to be faked.

2.2 Process of the solution

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With such superior features, we can offer an effective solution when applying blockchain to data security, anti-tampering and ownership of the right for individuals thanks to certification directly on the blockchain by the competent authority. The process will take place as followed:

Step 1: First of all

• The Land Administrative Management Agency must register its ID address on the WAVES blockchain, this ID address is unique and acts as a digital signature which will be used to digitally sign and issue the property ownership certificate files. This ID address of the Land Administrative Management Agency must be publicly notified to the users to help them determine the validity of the property ownership certificate file(s) when checking licensing information on the blockchain.

• Users also need to create an ID address of their own on the WAVES blockchain. They’ll have to register personal information (KYC) which is associated with this ID address in order to use it to digitally sign a number to purchase and to transfer contracts to prove they’re the rightful owner. This personal ID address of the user will also be shown in the content of the property ownership certificate file issued by the Land Administrative Management Agency.

Step 2: Through a decentralized application, let’s call it the SIGN DApp, built on the WAVES blockchain Protocol, the Land Administrative Management Agency will log in to the SIGN DApp and use their ID address to sign for certificates / validity of the property ownership certificate files.

Step 3: On the SIGN DApp, the Land Administrative Management Agency will receive a “Proof of Certification” file containing the following information:

• Their (LAMA) ID (address) which was used to certify the property ownership certificate file.

• Property ownership certificate file name.

• The time-stamp at which the property ownership certificate file was validated on the WAVES blockchain.

• The hash representing the encryption for the property ownership certificate file(s) that has been recorded in the WAVES blockchain.

• A link so the user can immediately look up the validity of this information directly on the blockchain explorer of the WAVES blockchain.

• A link that allows users to download property ownership certificate files from a decentralized storage system (IPFS) whenever they need it.

The Land Administrative Management Agency then only needs to send the property ownership certificate file and the “Proof of Certification” file to the rightful owner to keep it.

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Proof of Certification file of a property ownership certificate issued by the Land Administrative Management Agency.

Step 4: When a buyer wants to verify the validity of a property ownership certificate, confirming who the real owner of a real estate is, he only needs to know the exact ID address of the Land Administrative Management Agency (this information is publicly disclosed by the government) for collation. This requires the owner to provide 1 of the 4 following details to be easily checked on the WAVES blockchain explorer or authentication lookup (verification explorer) of the SIGN DApp:

• The file of property ownership certificate issued by the Land Administrative Management Agency

• “Proof of Certification” file

• The TxID (the code of the property ownership certificate file authentication transaction on the WAVES blockchain)

• The Hash of the property ownership certificate file

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When users use the TxID of a Proof of Certification file to check the WAVES blockchain explorer, they will see the authentication information as shown above.

To determine whether a person is the rightful owner of a real estate property, the buyer only needs to do two things:

• Ask the owner to provide 1 of the 4 details listed above to check the authenticity of the property ownership certificate file on the WAVES blockchain explorer or verification explorer of SIGN DApp. Check whether or not the ID address of the current owner is being shown in the content of the property ownership certificate file.

• The buyer uses their ID address to log in and upload the file of the real estate sale and purchase agreement between the two parties onto the WAVES blockchain through the Mutual Agreement feature (a multi-party contract function) on the SIGN DApp (is an application built on the WAVES blockchain Protocol). Next, the buyer enters his ID address, owner’s ID address and ID address of the Land Administrative Management Agency, then signs the sale of contract electronically. The system will then automatically send a request to the ID address of the Land Administrative Management Agency and the ID address of the seller for both parties to sign a confirmation agreement of their purchase agreement.

* Note: only the real owner of the real estate can have the private key of the ID address recorded in the content of the property ownership certificate. They can use their private key to log into the blockchain system and use their ID address to digitally sign real estate sales contracts that they own. So, it is impossible for crooks to impersonate the owner to sell a house and the buyer cannot be deceived by forging papers as the case mentioned at the top of this article.

2.3 Transfer of ownership

When the Land Administrative Management Agency, as a witness, participates in the signing of a real estate sale contract, they also record the transfer in ownership of that real estate. From this facility they will issue new property ownership certificate files and Proof of Certification files to the new owners (the buyers).

In order to prevent the former owner of the property from using the expired property ownership certificate and the invalidated Proof of Certification files to deceive other buyers; avoid the situation of a single property being sold to different buyers at the same time, the Land Administrative Management Agency must:

• Use the revoke function for invalidated Proof of Verification they have issued.

• Add a “revoked” tag to these invalidated Proof of Verification files and a “revoked” tag will be displayed when the user checks them in the WAVES blockchain explorer or verification explorer of the SIGN DApp.

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After the certificate has been revoked, a REVOKED tag will have been attached to the Proof of Certification file, when users look it up on the verification explorer of the SIGN DApp they can click directly on the card to check the certificate on the WAVES blockchain explorer as shown below.

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In the Call field displayed on blockchain explorer B, the user can see the revoked certification. This proves that the WAVES blockchain has recorded the REVOKED command into the system and the previous Proof of Certification file TxID: 5cXQg8xhDW6Qjm7rWqPWKRYgjhMTnZdunkxZZUfCzaKE is no longer valid.

How can a buyer search for the list of previous eligible owners of the property? Or how can a buyer search for the Proof of Certification files related to a real estate in the past? — This requires the Land Administrative Management Agency when issuing new property ownership certificate files and new Proof of Certification files to be able to attach the information (hash, TxID) of the previous version to the newest version.

3. Summary

How to verify the identity of who the owner of a real estate is:

• The buyer will require the seller to provide the property ownership certificate file and a Proof of Certification file.

How to know if the seller is the owner of the real estate:

• The buyer has to create a three-party contract and uploads the sale contract to the SIGN DApp through the Mutual Agreement feature.

• The buyer first signs digitally, then asks the digital signature (ID address) of the Land Administrative Management Agency in the contract and requires the seller to use the exact ID address recorded in the property ownership certificate file to sign the contract digitally.

To prevent the ex-owner of the property from using previous property ownership certificates and Proof of Certifications which are expired to conduct a fraud transaction:

• The Land Administrative Management Agency must use the revoke functions for invalidated Proof of Verification files they have issued.

• The Land Administrative Management Agency issues new property ownership certificate files and new Proof of Verification files to the new owner.

• The newest Proof of Verification version of a property must refer to its most previous Proof of Verification file.

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