How to Take Blockchain From Flaming Out to Scaling Up

Blockchain, the ubiquitous distributed database technology behind Bitcoin and other cryptocurrencies, is far from immune to the hype cycle: high expectations fail to deliver, leading to discouragement, then better understanding through trial and error, and, finally, some productivity.

This trend is especially noticeable for a commonly-accepted use case for blockchain: land administration. It’s become clear that blockchain-for-land has experienced fitful, even unimpressive, growth during the past year.

Some projects, notably those in Georgia and Dubai, do continue to grow.

Yet many other blockchain-for-land efforts, such as those in Vermont, Brazil, and Ukraine, have succumbed to “pilot-itis.” These projects worked on a small scale, and were even replicated, but so far haven’t been able to reach larger populations.

The Future of Property Rights Program has observed this stage of the hype cycle—disappointment—unfold firsthand.

In 2018, we presented an optimistic report on blockchain-for-land at the World Bank Conference on Land and Poverty. The buzz around the potential of blockchain for the public sector was substantial at the time, and it was exciting to share our thoughts on the popular use cases of land administration and the real estate sector. The report included several case studies of blockchain companies working with land registries globally.

We originally planned to provide an update of the firms’ progress at the 2019 Bank conference. But, as we began to conduct research for our 2019 report, we realized the updates were quite a mixed bag. As we dug in, patterns began to emerge.

Pilots that struggled to expand often ignored crucial stakeholders at the planning stage. Or, they tried to address problems for which blockchain was an ill-suited solution. There were repeatedly unrealistic expectations concerning outcomes, partially due to a lack of blockchain education. Projects are too often undertaken by governments that are enthusiastic about the technology, but fuzzy on how it actually works and what it can deliver. Sometimes, a project was implemented under the wrong bureaucratic or legal conditions.

Faced with these insights, our second blockchain-for-land report gradually evolved into a set of recommendations to assist land officials during the exploration and implementation of blockchain.

Here are our recommendations for how blockchain-for-land can move beyond disappointment and more productively contribute to innovation within land administration:

Get the Right People in the Room

At its most basic, blockchain is a database technology, while land administration is a public issue with political, social, and economic valence. So the stakeholders in the room must understand both technology and land. Those are usually different sets of people.

Any project should engage with political, technical, and socioeconomic stakeholders from the outset. For instance, senior land officials can provide long-term strategic vision, and also possess the experience to spot unintended consequences and risks related to blockchain. IT professionals understand technological nuances and can better evaluate blockchain as a back-end technology. Finally, outreach to the broader real estate community can help to promote a blockchain-based solution as a tool to improve business operations.

Identify the Problem You’re Trying to Solve—And Determine Whether Blockchain Can Actually Solve That Problem

Stakeholders must work together to answer the question: what is limiting the everyday functionality of the land registry?

There are many possible responses, ranging from unrecorded land rights to manipulation of records, poor service delivery, and sloppy paper-based storage. Blockchain can’t solve every issue, and identifying the specific problem to be solved will help determine whether blockchain is an appropriate answer.

Blockchain will not address problems related to inaccurate, outdated, or nonexistent records. Nor is the technology helpful in cases where records aren’t digitized. It can’t rewrite laws or improve institutional capacity, either.

On the other hand, blockchain is useful for solving issues concerning corruption, lack of trust, inefficient services, and insecure data:

• Blockchain replicates data across many computers, increasing the resiliency of a registry database.
• A blockchain-based system allows users to view the same data and track processes in real time, fostering greater transparency in land administration and real estate.
• It’s more difficult to attack a blockchain-based solution because, in part, it lacks a sensitive central point to target, leading to greater protection against hacks.
• Land records are more tamper-resistant in a blockchain because control is distributed, all users verify new data through consensus, and all data is paired with a unique fingerprint—or hash—to ensure integrity.
• Data sharing, combined with smart contracts and electronic signatures, can help to streamline workflows, remove non-value-add intermediaries, and decrease transaction times for registries, real estate firms, and customers.

Check If Blockchain Can Scale in Your Environment

Pilot projects are a good first step to test a solution, but many struggle to expand because the enabling environment—the legal, bureaucratic, financial, and political conditions—doesn’t facilitate scaling.

For example, it’s difficult to scale blockchain-for-land in a fragmented land administration system, such as the county-based system in the United States. It’s likely more efficient to deploy blockchain at a nation-wide registry, or in a system within which local offices are subject to the same rules.

Pertinent laws and regulations must also change. No project exists in a vacuum; it’s subject to the rules of a particular jurisdiction. Brazilian laws, for instance, didn’t allow a pilot to legally register a property transfer using blockchain. Governments may need to adapt or pass legislation permitting land administration and/or real estate transactions to take place digitally.

Last, buy-in from entrenched stakeholders profiting from the current system is usually critical if any reform project is to succeed. This process can be very difficult, but it’s sometimes possible through demonstrating the long-term benefits of the reforms.

As with most fixes to complex problems, technology alone is insufficient. Land registries must also consider the people and processes involved in reform efforts. After all, it’s individuals and institutions that are behind the ways in which technology is developed and deployed.

There’s currently a steady stream of press releases announcing new blockchain-for-land projects. Medici Land Governance, a subsidiary of Overstock.com, plans to implement blockchain at land registries in Rwanda and Zambia. Bitfury intends to apply the technology to the Bermudan land system. But the future growth of these projects remains to be seen. In order to better ensure innovation and reform, land registries must think more critically about their capabilities, needs, and ecosystems. Blockchain-for-land can positively affect populations around the world—if implemented correctly.