Written By: Aanchal Anand, Matthew McKibbin, and Frank Pichel
Paper prepared for presentation at the “2017 WORLD BANK CONFERENCE ON LAND AND POVERTY” The World Bank – Washington DC, March 20-24, 2017
In May of 2015, news broke that the Government of Honduras was working with Factom and Epigraph to build a land registry system using the blockchain technology that powers the controversial cryptocurrency Bitcoin according to press releases This sparked considerable interest regarding how blockchain technology might be applied to land administration, with claims that it might revolutionize land information management. Over the course of 2015 however, little additional, detail regarding the venture in Honduras was progressing, culminating in a press release in December 2015 stating that the project was not as far along, nor at the scale, that was originally stated. Regardless, the question of applicability of blockchain for land had entered the public domain, and numerous organizations have begun to look seriously at how they might apply the technology This paper delves into: (a) the blockchain technology; (b) its advantages, disadvantages, and upcoming trends; (c) its relevance to land administration, and (d) a proposed roadmap to test this technology in the context of donor-funded land administration projects.
Blockchain technology is a distributed database maintaining an immutable public ledger of all transactions. This technology is disruptive because it allows for the time stamped accounting of transactions between any party that chooses to use this as a method of recording information. Governments, businesses, and individuals can know for certain the information recorded has not been altered without a record of the change occurring. Decentralized storage of information is done by every node on the network, each maintaining and continuously verifying a complete copy of all transactions. To create a record on the blockchain users submit unique mathematical signatures with privately held computer keys which further helps to minimizes fraud by ensuring authentication of the user. Multi-signature governance accounts allow for increased security by distributing transaction approval over key decision makers involved with the records.
In the context of land administration, blockchain technology has the following applications: (a) title deed registration; (b) time-stamped transactions; c) multi-party transparent governance tools; (d) tamper proof recording system; (e) disaster recovery system; and (f) restitution and compensation in post-conflict zones.
Simply put, the blockchain is an economic layer for the internet. It provides a protocol for tokens of value to be transferred on a peer-to-peer (P2P) basis without central actors being necessary. Not only can these tokens be used as a form of currency and a payment system but tokens can represent other forms of value such as stocks, bonds, votes, and even property. The Transmission Control Protocol (TCP)/ Internet Protocol (IP) layer of the internet was designed to transfer packets of information from one computing device on a network to another. The Hypertext Transfer Protocol (HTTP) layer was designed to allow the information to be organized and many layers and applications were built on top spawning the internet as it exists today. The blockchain can be then thought of as the value transfer protocol or the financial internet. The same type of enormous innovation and growth is occurring today to create the new applications and companies one sees at the nascent stages of the internet. The basics of this protocol are described below.
A blockchain is a distributed tamper proof public database which stores its transaction data in containers called “blocks” Each block created is linked to the parent block through digital fingerprints called “hashes.” These hashes are publically timestamped in a header at the top of each block of information. This history of transactions stored on the blocks can be linked back to the initial or “genesis” block. The information stored in blocks is resilient against tampering and corruption even by those who store and process the information. This is made possible by independent nodes that come to a decentralized consensus for all transactions which have occurred. (Antonopoulos, A. (2010))
The recording of land rights into digital systemsis not yet ubiquitous throughout most of the world. Even in Western countries storing digital files and insuring the data has not been corrupted or is a large problem. One feature the blockchain provides is a timestamped fingerprint of its data called a hash. To fight corruption and track changes as they occur to the documents, hashing can show the chain of custody and help determine whether or not information on the historic documents has been altered.
Decentralized storage systems combine hashing of documents and redundancy of storing encrypted records in more than one place. These features solve some of the problems typically found when storing records on a centralized server. Land administration records if stored or backed up on a decentralized storage system are protected against fraud, and allow for disaster recovery.
Non-Profit and for profit companies are aggressively working to develop land specific software solutions on top of the blockchain. Open source protocols, such as those integral for the cryptocurrency and blockchain applications, are usually developed under the guidance of non-profit foundations for governance and fund management purposes. Many of these foundations then spawn for profit companies to take on enterprise customers. Land administration is traditionally a responsibility of governments, many companies interested in the land sector are actively engaging the government land agencies and land professionals for guidance on how to better create products which have a better chance of adoption. Ultimately government buy in is crucial for these systems to be implemented, particularly in emerging economies.
Even though bitcoin continues to be a highly volatile currency, its underlying technology—the blockchain—may prove to be a game changer. The blockchain’s key feature of being a time-stamped public ledger has earned it the name “trust machine.” What this essentially means is that blockchain technology can help increase transparency and conduct transactions more securely.
For this reason, the blockchain has several applications for land administration. Some of the applications discussed in the paper include smart property (colored coins), title deed registration, virtual notary, multiparty transactions, and disaster preparedness. The paper also notes that some of the applications might be more relevant for mature economies as compared to emerging economies. Furthermore, the paper notes that many of the potential benefits of utilizing the blockchain assume that a base layer of land information (titles, deeds, survey plans) exist and that the data is accurate – an assumption that is not valid in most emerging economies.
The paper also gives an overview of the various players involved in developing land administration applications of the blockchain. Given that blockchain is a relatively new technology, there is a fair amount of excitement in the field as various applications and business models are tried. Three major constraints that have been identified. First, while the proof of concept has been established it exists on a small stage. The major challenge will be to see whether or not blockchain based land transactions are in fact scaleable and if yes, does a viable business model exist to support such a venture. Second, part of the scale problem lies in getting government buy-in. Even Factom, which has been leading this space, has acknowledged that it is not easy to get governments excited about new technology which has not been tested widely. Third, funding constraints exist around the development of blockchain for land administration. As of now there seem to be two major options. One is for developers and companies to turn to crowdfunding. The second is for donors to take a greater interest in this technology and see if it could help tackle several developing world challenges linked to property rights and corruption. It appears that the blockchain could be the silver bullet that tackles both these issues. But much remains to be seen.