Is it Feasible to Move Land Titles to Blockchain?
Blockchain’s distributed ledger system is a more secure method of transferring property ownership. Implementing the blockchain to transfer real estate ownership is another matter. Obstacles stand in the way of moving from the current paper-based process to a digital system. What are some roadblocks and how could they be overcome?
1) Government Legislation
Jurisdictions, local to federal, may need to overhaul their regulations. These include changing existing legislation concerning the acceptance of digital signatures to new regulations on data protection and access. Governments implementing data-based archives of property ownership may still require paper copies and their accompanying processes, continuing to encumber the title transfer process.
Moving from legacy systems can be a challenging and lengthy process. Instituting a land registry blockchain will need a thorough review of existing legislation to see which laws need revision or repeal, and what new provisions will be drafting.
Changing the existing legal codes requires education of the public, legislators, and government employees. Not everyone understands the blockchain and how it verifies data. Some political officeholders may raise concerns about blockchain’s security or the cost of moving to a distributed ledger system.
Luckily, other countries are leading the way in creating blockchain land registries for property transactions that educate our government institutions. Cook County published its report of a blockchain pilot program used in its Recorders of Deeds office for further reference on how blockchain could be applied to real estate transactions.
After numerous public, private, and government institutions announced data breaches, the general public has a legitimate fear of cybercrime. Could a hacker attack a government blockchain storing digitized records? Other parties might be concerned about data manipulation when moving sensitive documents to a digital system. Even MIT acknowledges no system, including blockchains, are completely free from human manipulation.
Part of the solution lies in understanding how blockchain works and why it’s more secure than existing systems. Again, multiple parties will need education on how blockchains process information and verify data across the network. Simply saying “data is distributed across a digitized ledger” initially makes the system sound vulnerable to cyber attacks, but the blockchain really reduces the risk of data loss and manipulation. Since all the sources have to agree to change information, it’s actually less at risk from cyber crime. The entire transaction history is recorded and transparent, decreasing potential real estate fraud.
3) Disparate systems
Even inside states, separate government offices record and secure vital information differently. Government systems must standardize the data for accurate communication. When it comes to a land registry, creating a standardized digital property address system like that being implemented in Ghana will be an essential step. Given how governments work, this could be a complicated process.
There will need to be an overseeing agency to decide how a digitized land title registry will work. A unified process secures the database, prevents title transfer confusion, and builds confidence in the process. REIDAO is one tech firm working towards assigning physical properties digital addresses on the blockchain.
4) Change the System
Moving to a blockchain-based property transaction would significantly disrupt the current titling process. People will lose jobs because the blockchain removes the need for middlemen like title insurance providers. Naturally, the real estate servicing industries will push back.
A shift to the digital land title system will not be an overnight process. Passing the right legislation alone could take years. There will be time to prepare for the new land transfer process. The tasks blockchain eliminates in the escrow process likely will slowly wane away, much as witnessed in other industries that shifted from manual to automated labor.
Could property ownership move to a blockchain?
With tech firms actively exploring blockchain’s real estate applications, brilliant minds are currently working on overcoming the blockchain road blocks. Creating a blockchain-based ownership record could be feasible, given the right resources and education. The United States can look to other governments piloting or shifting to a blockchain land registry and titling process to learn how it can be achieved.