The purpose of blockchains is to establish unchangeable records of digital assets without any trusted party. "Unchangeable" sounds good to prevent fraud, so some county recorders who seem to understand nothing about the law or technology, like Cook County's Karen Yarbrough, who thought blockchain made sense for government deed records, try to force blockchains onto physical property. But even on its face, this application of blockchains makes zero sense and only exists to appeal to the unwitting who mistake the idiocy for innovation.
Nothing inherently ties the digital record to the physical control. Even if physical property ownership were legally controlled by a blockchain, you still would have to trust somebody to enforce that ownership, namely the government. Whether the government control a freely-accessible database or nobody controls a distributed blockchain, you are trusting the government to control who owns it just the same. There's not even a theoretical increase in trust from adding a blockchain. What moving physical goods onto the blockchain would do is just needless complicate things and enable fraud. Currently people in most of the country just prepare a deed, send it to the recorder with $60, and they're done. Admittedly, the Cook County Recorder makes things ten times harder needed, but instead of trying to improve the user-hostile experience of its government services, the Cook County Recorder's Officer has seemingly been focusing all of its effort on trying to add the requirement of someone registering the transaction on a blockchain instead of writing it on paper, which would only do the (admittedly impressive) feat of making Chicago's property transfer process even worse.
Blockchain could theoretically record deeds similarly to how they are now and make those records unchangeable. However, if you have a competent, non-corrupt government, they already should be. That might be asking for a bit much in Chicago, but again, you have to trust the government to control your property ownership either way.
On the topic of fraud, this admittedly does happen with houses. People purport to sell property they don't own or claim bogus liens on people's property. While states' recording acts require all real property interests to be filed with the county as public record to prevent fraud, people don't typically do title random title searches on their houses for no reason. Typically such issues don't come up until they are ready to sell when they must then get the bogus transactions removed. Actually losing your house due to title fraud is extremely rare however.
A blockchain would theoretically prevent any random Joe from recording a deed claiming to be you without your key. However, I can't imagine how recording liens against property would even be possible, let alone mitigated. In addition, people are bad at computers. Stealing someone's private key from their computer is wayyy easier than stealing a house through deed fraud. So, using blockchains would cause a massive uptick in fraud which would then be anonymous and indistinguishable from legitimate transfers. Let's say you somehow prove that wasn't you and you throw out the legal validity of the blockchain. Then the immutable blockchain would be permanently wrong. The blockchain would forever say the thief owns it and it would be impossible to get it back or record a sale to someone else ever again.
There are then two responses to a permanently wrong blockchain:
- The techno-anarchist approach of "code is law", where you essentially say, "Sucks to be you. I guess you shouldn't have clicked that suspicious link if you didn't want scammers to legally own your house." With this approach, whoever owns the keys owns the house, no questions asked. If you hacked it, you earned it. I imagine Russian script kiddies would own half of Chicago in 30 years' time with this method, so I'm guessing this is not what recorders intend to implement to reduce fraud. At best, this would result in some crypto-title-company holding all realty keys in cold storage for a hefty fee, essentially centralizing all property control in a private company instead of the government. Although obviously that crypto-title-company would still get hacked eventually, probably resulting in the whole city going to some random couple in New York.
- The approach to ignore the blockchain and just force a hard fork, changing the "unchangeable" blockchain to whatever the government declares correct. This approach is far more logical and fairer. However, you may notice that this ends up as the exact same as it is now. Blockchain wouldn't have prevented any fraud, it wouldn't have decentralized things at all, and it wouldn't even have made an unchangeable record. The theft would be totally wiped from the chain. All it would do is keep the current system but add one more hoop to jump for home-sellers to jump through.
Sadly, the second option is the best result for blockchain deeds. They can add no value, security, or trust. All they can do is make government services worse and make ineffectual public servants seem like they are improving things when they are doing the opposite.
The above is my understanding of the law. I am a lawyer, but I am not your lawyer. This post does not constitute legal advice. I make no warranty as to its accuracy or applicability to you. If you need a lawyer, get a lawyer. If you want me specifically, hire me.