Land Registration (2/3) : The added value of Blockchain technology

In this second blog post, we will dive into issues related to the land registration and how blockchain technology can enhance and secure the process through decentralization.

Gwendal LD
Feb 3 · 5 min read

What is a blockchain?

To keep it very simple and concise, Blockchain is a continuously growing list of information stored together into blocks (registries of data), which are cryptographically secured, linked (in chronological order) and distributed across a network of computers.

Thanks to this decentralization mechanism, every computer in the network has an updated copy of the blockchain. So even if the major part of the network is disabled due to unfortunate events, the records will remain available and secure on other computers of the network.
All information written on a blockchain are therefore: secured, reliable, transparent, immutable and liable.

Blockchain Technology — Source : EGS

Blockchain land registries: what does it mean ?

Using blockchain technology serves the exact same functionalities as a “traditional” land registry system: it says who owns what at a given time, maintains single-ownership and records when a new transaction is implemented.
In comparison to a traditional paper registry, blockchain allows and enforce to make land documentation more secure, immutable and transparent.

At a glance, the blockchain will capture and permanently store (a hash of) each transaction of land titles, which allows a real-time traceability of ownership change as well as transparency in the status of a property, removing the possibility for manipulation or modification of the titles.

For example, if two citizens have agreed on the sale of a land parcel and want to register the transaction with their national land administration.
Like the registration process in a traditional land registry, the seller and the buyer go to the governmental relevant institutions with the sales contract signed by both parties and anchor it into a blockchain-powered land registry database in the form of a cryptographic hash (transaction). The public ledger will contain only a reduced set of data (metadata), including the fingerprint or hash of the full transaction. Once the transaction is approved by the network and anchored in the blockchain, the transfer of ownership is immutably and transparently recorded and spread on the distributed ledger which becomes a single-point-of truth, preventing document modification and forging land transfers.

If there are any doubts regarding the validity of a land title or ownership, the public ledger can be used for validation by all relevant stakeholders involved. Blockchain explorers are available for anyone with internet connection.

How Blockchain Technology Works — Source : Medium

In a more disruptive scenario, the property transfer could be implemented in the form of a smart contract.
This means to entirely digitize and legally authorize peer-to-peer sales and purchases of properties, thereby removing the need for intermediaries such as banks, notaries and public registry offices. Pushing this logic, this could even mean that a smart contract on a public ledger, digitally signed by the parties, would automatically transfer the land title upon payment in cryptocurrency.

This scenario however comes with a number of requirements that are unlikely to be met in the near future. Estonia, a pioneer country when it comes to digitization, has moved almost all government transactions online, except for the procedures of marriage registration and transfer of property.
This is due to the fact that these kinds of transactions require physical presence because of their sensitivity; exclusively relying on digital signatures appears to be insufficient at the moment.

Hence, trusted middlemen doing checks on identities and signatures, are likely to remain in place for the time being. Likewise, governments will most likely continue to act as a verifier of legal preconditions for the transfer of property, as the public ledger would rarely include data on whether the owner is adult and mentally sane, and otherwise legally able to sell a certain piece of land.

It is thus expected that smart contract-based land titles become legally binding only once these checks and safeguards of trusted middlemen are reliably provided in the form of so-called oracles. These oracles would be digitally representing the required preconditions for land transactions to be executed via smart contracts.

Blockchain Oracles — Source : IvanOnTech

Added value of decentralization

When comparing the benefits of a blockchain solution with traditional systems various benefits can be identified.

Efficiency gains of a blockchain-based land registry can be primarily attributed to processes being digitized as opposed to being paper-based. Digitazation in a land registry can save time, be remotely accessible, avoid some corruption scenarios, systematized format, improve data quality, secure access and reliability of storage. Furthermore, a decentralized land registry promises to create even greater efficiency gains in governmental mandates such as land taxation or cadastre.

Blockchain mainly adds value through its immutability and resilience. Most of frauds, bribes and corruption scenarios that rely on the forging signatures, fake documents, disappearing of elements or attempts to sell land twice, will be effectively discouraged by a timestamped hash anchored on-chain. Once it is written on the blockchain, it can’t be change, only a new valid transaction (validated by the owner and a buyer) can modify ownership.

In addition, even if current backup technologies can provide a sound level of reliability for data storage, the reliability of distributed ledgers, with several thousand copies worldwide, is unprecedented, and doesn’t require for qualified IT personnel on site.

The more disruptive approach, use smart contract-based land transfers provides an opportunity for a more key reform of institutions and their mandates.
Each intermediary along the process is assigned to its core functionality (the one all parts agreed in the smart contract), such as, for instance, verifying identities and signatures. This institutional restructuring based on a clear definition of roles can challenge existing inefficiencies and tackle corrupt structures and collusion.

Generally speaking, the increased transparency and reliability brought by blockchain-based land registries will contribute to increasing citizens’ and companies’ trust in public institutions.
This may translate into growing investments and use of land, bringing social and economic development at a larger scale.

Smart contract and land registry — Source : EGS

In the following articles, we will further investigate possibilities offered by the blockchain technologies, such as Cardano, to develop access to Land registration while making them more trusted and secured.

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