Disclaimer: The opinions expressed in this article are solely those of the author and do not reflect the views of the editorial team at crypto.news.
The potential of blockchain technology in real estate is a topic that has been widely discussed. However, one aspect that is often overlooked is the role of land registries. The idea that real estate tokenization will revolutionize the industry ultimately comes down to securitization through security tokens. While these ideas have their merits, I have found them to lack a comprehensive perspective and may not be as disruptive as they are claimed to be.
My research for a Ph.D. program focused on developing a new land registry system. I introduced the concept of “title tokens,” a unique asset class that serves as a genuine record of ownership, unlike security tokens. Blockchain technology, at its core, functions as a database. Instead of relying on traditional land registries, whether in paper or electronic form, blockchain can efficiently manage title records, as I will elaborate on further in this article.
Why not opt for a “permissioned” system?
To understand why the next-generation property registry system should leverage blockchain technology, we need to address some misconceptions about the technology and highlight its transformative features.
Distributed ledger technologies, categorized as “permissioned” and “private” ledgers, do not align with the original definition of blockchains according to academic standards. More importantly, permissioned ledgers lack the crucial feature of data immutability. The ability to ensure data immutability is a game-changing aspect of blockchain technology.
The concept of timestamped blocks of data interconnected by hashes was introduced by Haber and Stornetta in 1991. While this method aimed to verify the authenticity of data, it was the developers of Bitcoin, led by Satoshi Nakamoto, who coined the term “blockchain.” By combining this method with a decentralized consensus mechanism, Nakamoto created a system that could operate within a distributed network, leading to the birth of blockchain technology.
Today, blockchain is defined as a digital ledger with a native cryptocurrency and data storage capabilities, operating in a decentralized network with an open, competitive consensus mechanism. In contrast, permissioned ledgers operate under centralized control, lacking the immutability that blockchain offers.
The key advantage of blockchain lies in its ability to ensure data immutability, preventing any alterations to past transactions. This feature sets blockchain apart from other technologies in terms of data security.
The role of the land registry:
The primary function of a land authority is to serve as an impartial source of truth for property ownership. Before blockchain, land registries relied on physical infrastructure or vulnerable databases to store records. Blockchain provides a secure, electronic alternative that allows for unlimited user access without compromising data integrity. This level of security is unique to blockchain and not found in permissioned DLTs.
How blockchain will transform real estate transactions:
Blockchain technology enables a seamless integration of agreement and registration processes, eliminating the need for separate acts. By utilizing smart contracts and blockchain transactions, parties can create a definitive registry record without the oversight of a registry authority. While some functions may still require third-party verification, blockchain streamlines the registration process and reduces reliance on intermediaries.
In conclusion, blockchain technology offers a secure, decentralized solution for property registries, paving the way for automated processes in real estate transactions. The concept of the Blockchain Estate Registry exemplifies this shift towards digital innovation. While blockchain does not guarantee immutability by default, larger networks are more resilient to attacks. A multi-chain system through a cross-blockchain protocol may offer a viable solution for public property registries, addressing concerns related to scalability and transaction speed.
About the Author:
Oleksii Konashevych holds a Ph.D. in Law, Science, & Technology and has been researching blockchain technology since 2016. His work on tokenizing real estate on the blockchain led to recommendations by the Australian Senate for a blockchain pilot project with the land registry. He advocates for the adoption of blockchain technology to revolutionize property registries and unlock the potential of the digital economy.