Get the Right People Involved
Previous blockchain-for-land projects often excluded key stakeholders, leading to misunderstandings of both registry needs and the potential of blockchain. Moving forward, include the right people during the “needs assessment” phase to better understand the political, social, economic, and technical aspects of blockchain. This group encompasses senior land officials, IT professionals, and the broader real estate community.
Senior Land Officials
Involve C-Suite officials in the initial blockchain-for-land pilot instead of outsourcing decisions to technical staff. Senior decision-makers can offer perspectives on the political feasibility of a project, as well as on financial constraints. Executives can also provide long-term strategic vision, as blockchain “is a social technology, designed to govern the behavior of groups of people through social and financial incentives,”1 and may have unintended consequences.
A rise in peer-to-peer transactions on a blockchain without matching laws and regulations, for example, could result in unwanted foreign investment, investment of ill-gotten capital in properties, and the gentrification of neighborhoods.2 Corbin Page, co-founder of Meridio,3 believes that, “we’re still in the early days of understanding how blockchain technology will impact society and our communities.”4 Senior officials possess the experience and institutional knowledge to spot unintended consequences and risks.5
Project leaders must address low levels of blockchain education as early as possible. Knowledge of blockchain can vary widely, as with most new technologies. Do not assume that senior officials enjoy in-depth understanding of blockchain.
Several blockchain companies interviewed for this report cited education as the greatest obstacle encountered in 2018.6 Sam Tannian-Reynolds, chief operations officer of Ubitquity,7 said, “the biggest challenge will be educating the [land and real estate] industry as a whole. Blockchain technology is extremely complex and utilizes very esoteric terminology which will not be understood by most lay persons.”8 Another blockchain executive likened previous efforts to a science fair, during which officials gained only a cursory understanding of blockchain.
Better options are available. There are public resources, such as the Blockchain Trust Accelerator’s Blueprint for Blockchain and Social Innovation9 and guides from Microsoft,10 IBM,11 and various blockchain websites.12 And companies such as ConsenSys13 and ChromaWay14 provide opportunities for public institutions to learn about blockchain via formal training sessions.15
Information Technology Professionals
Blockchain, most basically, is a database. It is “a series of computers…that keep the same record of an event or transaction in a ledger that is open to the public.”16 Any blockchain-for-land project is therefore primarily technical and must involve IT professionals from the beginning.
The vice president of a prominent blockchain firm noted a widespread disconnect between decision-makers and technology companies during a recent conversation with our team. He said that executives often view blockchain through a high-level business or social impact framework. These are valuable perspectives, but C-Suites might have difficulty evaluating blockchain as back-end technology. For example, a senior registry official involved with a current project admitted to a lack of prior knowledge concerning blockchain and remained unsure about its specific purpose.
Advice from the IT team can help mitigate gaps in knowledge during the “needs assessment” phase. These professionals better understand nuances associated with blockchain, such as node hosts, certificate authorities, data standards, and encryption techniques. Specialists can also provide insight on the digital capabilities of a registry, as well as cost-benefit analyses from a technical point-of-view. Perhaps the team determines that integration of blockchain offers only marginal improvement at best;17 decision-makers can direct valuable resources elsewhere.
The Broader Real Estate Community
Describe any blockchain-based solution as a business tool to improve real estate operations, not a threat to livelihoods. Such constructive engagement with the broader real estate community can promote adoption of the technology. This group includes brokers, title companies, escrow agents, attorneys, inspectors, appraisers, and notaries;18 the individuals regularly interacting with a land registry, in other words.
Myriad articles and blog posts claim that blockchain will eliminate the need for real estate agents, make title companies obsolete,19 or even render the whole industry redundant.20 This talk is overblown, as experts argue that nothing can replace the human role of a real estate agent during a sale.21 Nor will blockchain leave title insurance workers jobless. Steve Day, president of the American Land Title Association, points out that, “there is more to title than just the effective recording of documents…and many rights that impact the title are recorded within documents several steps back in the chain, and are not always adequately reflected in current recorded documents.”22 Any digital ledger will not automatically detect fraud, title defects, or human error either.23
Advertise blockchain as another tool to cut costs and increase workplace efficiency. Secure sharing of data in real time can help reduce emails, phone calls, and paperwork associated with property transactions.24 Smart contracts could also automatically execute escrow functions, cutting waiting time during the final stages of a sale.25
Emphasize proactive exploration of blockchain and adaptation of business models to encourage industry adoption.26 Real estate companies can follow examples from institutions like the Barranquilla Chamber of Commerce in Colombia, a traditional manager of local business registries. The Chamber is exploring possible incorporation of blockchain within its operations instead of worrying that the technology will replace it.27 Blockchain can help improve processes when entrenched parties have an open attitude.
Much like registry officials, many in the broader real estate community do not adequately understand the technology. Yet these stakeholders must become comfortable with using blockchain-based solutions on a regular basis.28 Companies such as Propy emphasize the need for education and user-friendly solutions: “We have had our reality check with people that have much less exposure or desire to be exposed to frontier technology, [we are] trying to make our solutions friendly and easy-to-use by more tech-naive users.”29 Demos30 and existing applications can help familiarize the broader community with blockchain.
Citations
- Ibid., 90.
- Stuart Miller, “A Blockchain Building in Bushwick,” The New York Times, May 25, 2018, source.
- Meridio is a blockchain-based “…platform that allows participants to easily create and trade digital real estate shares with full transparency.” It is a component of ConsenSys and based in New York, NY (“About Us,” Meridio, accessed February 21, 2019, source).
- Corbin Page, email message to Tim Robustelli, February 1, 2019.
- Ibid.
- Inclusion of companies within this report does not imply an endorsement. The majority of these companies were originally selected for the 2018 paper, “Blockchain and Property in 2018: At the End of the Beginning,” due in part to access to their leadership (Graglia and Mellon, “Blockchain and Property in 2018: At the end of the Beginning,” paper presented at the 2018 World Bank Conference on Land and Poverty).
- Ubitquity is a company based in Wilmington, Delaware that describes itself as “pioneers in blockchain real estate” (“About,” Ubitquity, accessed February 21, 2019, source).
- Nathan Wosnack and Sam Tannian-Reynolds, email message to Tim Robustelli, February 12, 2019.
- See Tillemann, Price, Tillemann-Dick, and Knight, The Blueprint for Blockchain and Social Innovation, source.
- For example, see “Blockchain Technology and Applications,” Microsoft Azure, accessed March 11, 2019, source.
- For example, see Kathryn Harrison, Eileen Lowry, John Widdifield, and Matthew Hamilton, The Founder’s Handbook: Your guide to getting started with blockchain (Edition 2.0); Armonk, New York: IBM Blockchain, April 2018, source.
- For example, see Ameer Rosic, “What is Blockchain Technology? A Step-by-Step Guide For Beginners,” Blockgeeks, last updated March 1, 2019, source; “How Blockchain Technology Works. Guide for Beginners,” Cointelegraph, accessed March 11, 2019, source; and “A Beginner’s Guide to Blockchain Technology,” CoinDesk, accessed March 11, 2019, source.
- ConsenSys describes itself as “a market leading blockchain technology company” and is headquartered in Brooklyn, New York. It lists its other global office locations as Washington, D.C., San Francisco, Toronto, London, Paris, Dublin, and Sydney (“About,” ConsenSys, accessed February 21, 2019, source; “Global Office Locations,” ConsenSys, accessed February 21, 2019, source).
- ChromaWay defines itself as a “pioneer within using blockchain technology” and is headquartered in Stockholm, Sweden (“About Us,” ChromaWay, accessed February 21, 2019, source).
- For example, see “ConsenSys Academy,” ConsenSys, accessed March 11, 2019, source.
- Mark Zilbert, “The Blockchain For Real Estate, Explained,” Forbes, April 23, 2018, source.
- Peter Rabley, Twitter Post, February 13, 2019, 6:40 AM, source (Disclosure: Peter Rabley is a venture partner at Omidyar Network. Omidyar Network is a funder of the Future of Property Rights Program at New America, and provided financial support for this report).
- Graglia and Mellon, “Blockchain and Property in 2018,” Innovations, 93.
- For example, an article on the blockchain news website Cointelegraph asserts that “blockchain real estate platforms eliminate the need for intermediaries like lawyers and agents by providing a means of property verification and payment to buyers” (Hazel Agoni, “Blockchain Set to Change the Face of Commercial Real Estate As We Know It,” Cointelegraph, November 11, 2018, source). A blog post on Medium conveys a similar message with the title “How Blockchain can eliminate the need for Real Estate Agents, Brokers, Title & Escrow” (Paul Bryzek, “How Blockchain can eliminate the need for Real Estate Agents, Brokers, Title & Escrow,” Medium, January 24, 2018, source).
- Ryan, “Beyond the Buzz.”
- Ibid.
- Benny L. Kass, “Does the future of real estate include Blockchain technology?,” The Washington Post, July 13, 2018, source.
- Ibid.
- Ibid.
- David Hamilton, “Blockchain Land Registry: The New Kid on the Block,” CoinCentral, January 11, 2019, source, accessed February 14, 2019; Ryan, “Beyond the Buzz.”
- Zilbert, “The Blockchain for Real Estate, Explained.”
- See Tim Robustelli, “High-Tech Solutions in Colombia,” FPR Blog (blog), Future of Property Rights Program, New America, September 6, 2018, source.
- Of note, the broader real estate community does not need to understand the intricacies of blockchain technology any more than the average person needs to fully understand the back-end workings of Facebook, Google, or their Amazon Prime account.
- Vasilios Vutsadakis, email message to Tim Robustelli, February 11, 2019.
- For example, see Exonum, “Test-Drive Blockchain-Based Land Titling on Bitfury’s Exonum Platform,” Meet Bitfury (blog), Medium, January 17, 2019, source.