Land titles on the blockchain as an appropriate use of Blockchain
There is a significant rise in blockchain projects being launched on a daily basis. However, a lot are either “scams” or inappropriate use of blockchain in an attempt to raise capital.
Recently I was called a “hater” for pointing out the total lack of any value proposition on a “gimmicky” marketing campaign that engaged a sports celebrity who has minimal or zero involvement in blockchain as a promoter/adviser/ and an ambassador. It was also very interesting that the only value proposition quoted was the businesses’s compliance with the financial regulators. I found it bizarre that a bare minimal “legal requirement” for a financial product, is quoted to me as a value proposition.
Hence my decision to write a series of articles to address a major issue in the industry — “Appropriate use case of Blockchain”.
Below is an assessment of Land titles being recorded on blockchain as an appropriate use case in a step by step systematised procedure. Please feel free to comment if you can see any areas to improve.
Question 1: Assess whether blockchain can help solve for a use case
1.1 Which use case are you analysing?
Copy use case name here: Distributed ledger — Land titles on the blockchain
1.2 Key criteria:
1. Is there a predictable, repeatable process that lends itself well to automation?
YES: Each time the land titles are exchanged between two parties, there is a buyer and a seller. There are also third parties such as banks, a land registry and lawyers involved making the process take too long and costly. This can be automated, and costs can be drastically reduced while number of parties involved reduced.
2. Is there an ongoing or long-running transaction or process, rather than a process that only occurs once?
YES: The process is long and tedious and repeats itself for each transaction. The transaction extends further in to the future for the asset with multiple asset transfers between different owners.
3. Are there multiple stakeholders in this process or value chain?
YES: The value chain contains multiple stakeholders in the process. Examples include government departments, financial institutions, lawyers, buyers and sellers etc. This can be minimised as some stakeholders are mainly 3rd parties that facilitate the process and charge a fee.
4. Is the role of reconciling disparate data usually played by one party or a limited number of parties?
YES: The role of reconciling disparate data is played by the land registry department of the country or state. However this is an extremely lengthy and inefficient process globally.
5. Is there an element of value transfer?
YES: The transfer of value here is the ownership of the land when transferred from the seller to the buyer. If the paper copy or the centrally stored record is destroyed in a natural disaster the landowner will find it difficult to prove their ownership, hence the use of a blockchain record.
6. Is there value in an immutable record? Or is an immutable record a requirement?
YES: The immutability of the transfer of land titles are a requirement. It proves the chain of ownership and its legitimacy and authenticity through time. There are examples of corrupt governments forcefully obtaining land and simply adjusting title records as they see fit. Blockchain will make the transfer process transparent and auditable.
Question 2: Investigate the most important factors for applying blockchain to the use case
● Is it possible to use public blockchains, or is there a defined need for a private implementation?
● What are the design expectations regarding speed, programmability, or payment functionality?
● Do you have developer resources available or is the protocol you’re using supported by a robust, sustainable open-source developer community with access to resources?
A public blockchain will enable the transactions to be transparent, auditable and visible to the public. This will reduce disputes in ownership and/or the fraudulent activities such as corrupt governments forcefully claiming private land.
Sweden and Georgia are currently implementing a distributed ledger for land titles. The Georgian blockchain application however is said to use a private blockchain to register the titles and a public bitcoin blockchain to verify the transactions. This highlights a need for some functionalities such as reverting transactions and modifying balances for land title ledgers. Such an example would be an entity calming ownership of some land that does not belong to any individual.
The speed of most public blockchains should be sufficient for a land titles ledger. Due to the quantity of data and maintenance issues a certain degree of programming capability might be required to create a new layer of data encoding if the transactions extend beyond limits. A tokenisation strategy is required to enable transactions. There is the difficult task of associating the digital token with the asset creating a security token.
The developer resources available for the product may not be an issue as this is very likely to be a government supported project with significant capital available to build new resources if required. If, however, the protocol layer needs to be supported by a sustainable open-source developer community then the use of bitcoin or the Etherium blockchains are more appropriate.
● Who needs to run a node? Who has read access? Who has write access?
● What are the technology integration requirements?
● What are the data storage requirements regarding archiving and regulation?
If a public blockchain such as Bitcoin or Etherium is used, there are many thousands of nodes already available and established scattered around the globe. Every node on this network will have access to read and write transactions. However, if a private blockchain is used then read and write access are restricted to permissioned parties only. The nodes in the network for the private blockchain will be assigned by a regulator and will likely to be localised, and the regulator will run several nodes to allow for consensus.
In the case of the Georgian land title blockchain, the private blockchain will entail a network of nodes assigned by the government and the public blockchain that verifies the transactions will run via the bitcoin network’s current nodes. In this case the write access will be restricted to government owned and controlled nodes and the read access will be permission-less and visible to public.
The data storage on the networking layer is arranged via a hash mechanism. A third party cannot derive any meaningful information from the data without a specific key that enables them to decrypt the data. However, each territory may have different applicable laws. This will create an issue with the use of public blockchains given each node could be in a different geography subject to different laws and enforcement. For the purpose of complying with regulations the geographical positioning of the nodes will need to be considered.
● Who is going to use the application? What are the implications for user experience and design?
● What is the existing organisational structure, and what behavioural patterns do users have today? How does this product or service fit into their existing workflow?
● Are there any behavioural or organisational changes that will be necessary to implement this use case?
The users of this application will include buyers and sellers in the case of transactions, or other stakeholders such as the government land registry department who will need to verify, confirm and recognize the ownership claims.
For buyers and sellers of a land title this will streamline their transaction. It will eliminate the time consuming and costly efforts of securing titles and proving ownership. Sellers can use the application to show an authentic proof of ownership and a buyer can use the application to locate, secure and validate the titles. Both parties can lodge a notice of the transaction through the application and complete the transfer instantaneously. The land registry can also view and approve the transaction and ownership as there is an immutable record of the title stored on the blockchain ledger. The design of the application will need to consider functionalities to fulfil the above objectives of all parties.
The current structures of the title registries create communication complexities between multiple departments when validating title ownerships. The application must streamline the current workflow with efficient and instantaneous access to the title data and integrate into the current operating software.
The main behavioural changes required will be the overhaul of the need for a physical signature and implement the acceptance of the security and validity of the blockchain transaction with no physical signatures. On the application layer this may include multiple security keys and private keys for each user to authenticate their transactions as valid.
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