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Evaluating the Hype

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Identify the Problem You are Trying to Solve

Land registry performance varies greatly around the world, as made clear by the World Bank ease of doing business rankings.1 Institutional capacity, laws and regulations, and the adoption of certain technologies and methods can all affect functionality. Each registry experiences different problems as a result, and blockchain is not the appropriate answer to every issue.

Engagement with senior land officials, IT professionals, and the broader real estate community can facilitate proper identification of any issues at a registry. Based on our conversations with government officials and blockchain companies, many past pilots appear rushed. Yet a “needs assessment” is critical before any land registry seriously considers the use of blockchain.

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

Stakeholders must work together to answer the question: what is limiting the everyday functionality of the registry? There are many possible answers, leading to the creation of two general categories based on blockchain’s ability to promptly address the issue.2

Blockchain Can Help With The Issue

Blockchain is sometimes derided as a “hammer looking for nails,”3 but the technology can help to alleviate the following problems:

  • Corruption: Government officials and other elites can tamper with records or engage in land grabbing to enrich themselves, often at the expense of marginalized communities. Fraud is especially easier within paper-based systems or those with poorly-built digital registries.4 Governments from Brazil5 to Ukraine6 to the country of Georgia7 have identified blockchain as a tool to fight corruption. A blockchain-based solution is not controlled by a single party, but cross-checked by many users. And while blockchain cannot completely prevent the initial entry of fraudulent data, anyone attempting to delete or change records leaves a visible trail.8

  • Lack of Trust: Opaque operating systems and bureaucratic red tape can contribute to distrust between a land registry and its constituents.9 Landowners may not be able to track decisions regarding their property or easily access their ownership information. Use of a distributed ledger can allow registries to publish certain data widely and securely. In addition, incorporation of digital signatures and time stamps can help customers better track any bureaucratic or legal processes regarding their property.10 A number of projects, from Wyoming11 to Sweden12 to Colombia,13 aim to enhance access to data and process tracking.

  • Inefficient Services: Property sales are notoriously sluggish, and usually involve a mass of paperwork, interaction with several intermediaries, and slow transaction times.14 Blockchain securely replicates data across numerous computers, allowing different stakeholders to concurrently view a record of documents being created, reviewed, and changed. Easier data access can help smooth workflows15 and reduce processing delays.16 The Swedish national land registry is exploring blockchain to track a sale across its stages, saving time and costs in the process.17 Elsewhere, the Smart Dubai Office plans to use blockchain to help residents sign a new apartment lease within minutes.18

  • Insecure Data: Centralized digital databases are susceptible to destruction. For example, the U.S. state of Maine likely deleted a huge number of emails and public documents from government servers due to use of inadequate technology and short-sighted policies.19 Transfer of a digital registry to a blockchain-based solution would replicate data across multiple computers or servers. Trusted institutions, such as other government agencies, NGOs, or intergovernmental organizations, can host a node if a registry is hesitant to widely share its data. And while a well-designed traditional database will have backup servers, the combined advantages of blockchain, as discussed below, make the technology an attractive option.

  • Vulnerability to Cyberattacks: A large and centralized database is vulnerable to hacks or data leaks.20 A recent security breach of Aadhaar, the Indian identity database, for example, left 1 billion individuals at risk of identity theft.21 An Australian family lost over AUD100,000 due to a 2018 hack of PEXA, the national e-conveyance platform.22 Blockchains are not absolutely invulnerable to hacks,23 but they are more difficult to attack than traditional databases;24 and it is almost impossible to retroactively manipulate data.25

Blockchain Is Not The First Answer

Blockchain cannot help to address every issue. Land administrators must explore other options for the following problems:

  • Inaccurate Records: Blockchain cannot automatically perfect records, compensate for incomplete data, or clean titles, as is sometimes claimed.26 Accuracy may increase over time, as transactions are clearly recorded on a blockchain, but this is not an immediate benefit. A network will accept incorrect data as input and add it to the blockchain-based solution as long as proper protocols are used.27 Put differently: garbage in, garbage out.

  • A Paper-Based Land Registry: Although my colleagues previously identified digital records as a prerequisite for a blockchain-based solution, it is necessary to emphasize that digitization is no simple task—bureaucratically or logistically.28 The real estate industry is “slow to adopt new technologies in any form.”29 Even in the United States, under half of all registries used e-recording in 2017.30 Sloppy record-keeping can severely limit reform. Sorting through stacks of dusty records, standardizing and verifying information, and finally entering data into a digital system is resource-intensive and time-consuming.31

  • Informal Land: Millions of individuals around the world lack land titles.32 Sometimes a large percentage of the population does not possess a formal title despite the existence of a functional registry.33 A blockchain-based system can be a secure and transparent location to store data, but it is of little use during the actual formalization process. Senior officials must hire surveyors to map parcels and direct bureaucrats to collect and process ownership information. Innovative techniques, such as community land mapping, are an option if a government and private surveyors lack the resources to efficiently complete a titling project.34

  • Lack of Institutional Capacity: Blockchain is software. The technology cannot solve many of the political or bureaucratic problems that occur at a land registry. Blockchain will not compensate for poor data collection or other inadequate techniques. It does not change unsuitable laws hindering operations or broader socioeconomic development. Nor can it offset a widespread lack of employee training. Despite the recent hype surrounding blockchain, it is not a panacea.
Citations
  1. See “Rankings & Ease of Doing Business Score,” World Bank, accessed February 20, 2019, source.
  2. The two lists below are not exhaustive. Instead, we included major problems that are frequently discussed in reports, articles, blog posts, and during our conversations with stakeholders throughout the property rights space.
  3. For example, see Chris Herd, “Why Blockchain is a Hammer Looking for a Nail and Where it Might Find it,” Blockchain (blog), Medium, January 14, 2019, source.
  4. An inadequate digital registry may fail to ensure unalterable data and/or not track changes. A poorly-built registry may also allow hackers or corrupt insiders to erase audit trail logs (Ananya Bhattacharya, “Blockchain is helping build a new Indian city, but it’s no cure for corruption,” Quartz India, July 7, 2018, source).
  5. For example, see “Can blockchain save the Amazon in corruption-mired Brazil?,” The Economic Times.
  6. For example, see Linda Kinstler, “‘Bitcoin and Guns, That’s the Only Way to Save This Country,’” Bloomberg Businessweek, last updated October 10, 2018, source.
  7. For example, see Shang and Price, “A Blockchain-Based Land Titling Project in the Republic of Georgia.”
  8. “Can blockchain save the Amazon in corruption-mired Brazil?,” The Economic Times.
  9. Shang and Price, “A Blockchain-Based Land Titling Project in the Republic of Georgia,” 74.
  10. Brian Forde, “Using Blockchain to Keep Public Data Public,” Harvard Business Review, March 31, 2017, source.
  11. Overstock.com, Inc., “Overstock.com Subsidiary Medici Land Governance to Develop Blockchain-Based Property and Land Information Platform with Teton County, Wyoming,” GlobeNewswire, December 20, 2018, source.
  12. “Sweden’s most talked about blockchain project,” Evry, accessed February 14, 2019, source.
  13. Olivier Acuña, “Colombia launches time-saving blockchain land registry pilot project,” Coin Rivet, August 2, 2018, source.
  14. Lauren deLisa Coleman, “Two Tech Trends To Watch As They Boldly Intersect With The Real Estate Industry,” Forbes, September 27, 2018, source; and Industry Insights, “Blockchain Is Disrupting Real Estate Investing–Here’s the No. 1 Thing You Need to Know,” Commercial Observer, January 11, 2019, source, accessed January 18, 2019.
  15. For example, smart contracts could automate costly escrow functions (Olga Kharif, “Blockchain Could Speed Homebuying — Once the Hurdles Are Cleared,” Bloomberg, October 30, 2018, source).
  16. Overstock.com, Inc., “Medici Land Governance, an Overstock Subsidiary, Signs MOU With Government of Rwanda to Implement Paperless Blockchain Land Governance and Property Rights Management,” AP News, November 1, 2018, source.
  17. Timothy Taylor, “Blockchain: New Frontiers,” BBN Times, January 13, 2019, source.
  18. Sadaqat, “Blockchain addresses key issues related to efficiency, trust.”
  19. Colin Woodard, “Huge number of Maine public records have likely been destroyed,” Portland Press Herald, last updated December 30, 2018, source.
  20. Shang and Price, “A Blockchain-Based Land Titling Project in the Republic of Georgia,” 74.
  21. Vidhi Doshi, “A security breach in India has left a billion people at risk of identity theft,” The Washington Post, January 4, 2018, source.
  22. Simon Johanson, “MasterChef finalist conveyancer hack prompts PEXA backlash,” The Sydney Morning Herald, June 26, 2018, source.
  23. See Mike Orcutt, “How secure is blockchain really?,” MIT Technology Review, April 25, 2018, source.
  24. Of note, many solutions will not likely store actual registry documents on a blockchain due to restrictions on the amount of data that can fit in a “block.” The security and privacy of these digital documents will depend on where and how they are stored.
  25. For more on the near immutability of blockchain, see Anthony Lewis, “A gentle introduction to immutability of blockchains,” Bits on Blocks (blog), February 29, 2016, source.
  26. For example, see Forbes Real Estate Council, “Nine Things To Keep In Mind About Blockchain In Real Estate,” Forbes, April 12, 2018, source.
  27. Frederick Reese, “Land Registry: A Big Blockchain Use Case Explored,” CoinDesk, last updated May 16, 2017, source.
  28. Graglia and Mellon, “Blockchain and Property in 2018,” Innovations, 94-95.
  29. Kelsi Maree Borland, “Why Hasn’t the Industry Embraced Blockchain Technology?,” GlobeSt.com, August 21, 2018, source.
  30. “Indecomm Document Management Group Hits 1,000 Counties for eRecording,” National Mortgage Professional Magazine, September 12, 2017, source.
  31. See Michael Graglia, Tim Robustelli, and Matthew Marcus, The Punjab Example: Systemic Land Reform in Rural Pakistan, Washington, D.C.: Future of Property Rights Program, New America, 2018, source.
  32. For example, see Prindex Comparative Report, London: Prindex, October 2018, accessed March 1, 2019, source.
  33. For example, see Sebastien Malo, “Puerto Rico land ownership system hampering rebuilding: leaders,” Reuters, June 20, 2018, source.
  34. For example, see Christopher Mellon and Michael Graglia, Accuracy For All, Washington, D.C.: Future of Property Rights Program, New America, 2018, source.

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Evaluating the Hype