Blockmedia 2024-09-16
[Original Article] https://www.blockmedia.co.kr/archives/693923#google_vignette
[Reporter Oh Suhwan, Block Media] As Jeonse fraud cases continue to emerge as a social issue, blockchain technology is gaining attention as a preventive measure.
According to the industry on the 16th, the National Police Agency recently announced the results of an investigation into 2,689 suspected cases of Jeonse fraud over the past two years. A total of 16,314 victims were confirmed, with damages amounting to 2.4963 trillion KRW. Among the types of fraud, the most common was impersonation of fake landlords or tenants, involving 3,141 suspects (37.7%). This was followed by 2,081 real estate agents and assistants (25.0%), 1,454 actual landlords or property owners (17.5%), and 1,122 brokers such as real estate consultants (13.5%).
Number of Arrests by Type of Involvement. Source: National Police Agency
"Blockchain can prevent 'Time-Lag' attacks"
As Jeonse fraud schemes diversify and it becomes increasingly difficult to prevent the falsification of information using existing systems, blockchain technology, which allows anyone to view records in real-time, is emerging as a new solution. In March last year, the Court Administration Office received a report from blockchain company Zkrypto titled "A Study on the Introduction of Blockchain and Other New Systems for the Protection and Enhancement of Registration and Record Information." The report outlined ways to introduce public blockchain to overcome the limitations of existing document forgery prevention systems and to prevent real estate fraud.
Oh Hyun-ok, CEO of Zkrypto, explained, "There are several methods used in Jeonse fraud, one of which is a ‘time-lag’ attack. In the case of lease contracts, the legal effect does not take place on the day the contract is signed but only comes into effect after midnight." He pointed out the current problem by stating, "During this time lag, a landlord could take out a loan or enter into another contract, leaving the tenant without legal protection."
In fact, since the enactment of the Housing Lease Protection Act in 1981, the legal effect of housing lease priority rights only takes effect at midnight the following day. Thus, even if a tenant verifies that there is no mortgage on the property at the time of signing the contract, if the landlord takes out a loan or creates a mortgage later that day, the tenant’s Jeonse rights may be pushed to a lower priority. If the property is eventually auctioned off, the tenant may not be able to recover the Jeonse deposit, as the priority would be transferred to the bank due to the mortgage set by the landlord.
Naturally, tenants should check the real estate registry to confirm whether there is an existing mortgage to ensure priority repayment rights when signing a Jeonse contract. However, even if there is no mortgage at the time of signing, it is often found later that a mortgage has been placed. This happens because landlords take advantage of the time gap between when the tenant checks the real estate registry and when the Jeonse contract is officially signed to establish a mortgage.
CEO Oh said, "By using blockchain, important information such as the setting of Jeonse rights can be recorded on the blockchain, allowing financial institutions or third parties to instantly verify the property’s legal status from the moment the contract is signed. This can help prevent fraud involving loans."
Park Yong-beom, a professor at Dankook University, added, "By linking blockchain with banks and government agencies and utilizing smart contracts, contract execution can be automated. This could significantly reduce risks such as non-return of deposits."
Zero-Knowledge Proof Minimizes the Risk of Personal Information Exposure
Regarding the potential privacy issues that could arise when using public blockchains, CEO Oh explained that personal information is not directly stored on the blockchain but encrypted and stored as hash values, ensuring that the personal data itself is not uploaded onto the blockchain. He stated, "Storing all data directly on the blockchain is not suitable due to privacy concerns. By using a method where only the hash value is stored on the blockchain, the original data is not exposed externally, while the blockchain network can still verify that the data has not been altered."
Blockchain Data Linkage and Sharing Method. Source: Ministry of Land, Infrastructure and Transport
A hash function outputs an encrypted value of fixed length regardless of the size of the input data. The key characteristic is that it is impossible to predict the output based on the input. The authenticity of the encrypted information can be verified using methods like Zero-Knowledge Proof (ZKP). Zero-Knowledge Proof refers to a method of mathematically proving to a verifier that a piece of information is accurate without revealing the data itself.
For example, there are situations where one needs to verify their age to purchase alcohol at a convenience store. When presenting an ID card, there is a risk of exposing unnecessary information such as the address and name, in addition to the age. However, by using Zero-Knowledge Proof, one can prove they are of legal age without disclosing any other personal information.
CEO Oh Hyun-ok added, "The necessary information between the parties involved in the contract is sufficiently exchanged, and the relevant details are encrypted and recorded on the blockchain at the time of contract signing. Later, the authenticity of this information can be verified through Zero-Knowledge Proof."
Reporter Oh Suhwan
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