Blockchain has been of great impact on many businesses. Although, blockchain is over-hyped and unlikely to provide the promised benefits to numerous industries that are trying to revolutionize using the technology. Before we delve into how the use of blockchain can impact land registry, let us understand what blockchain is all about.
Blockchain is a form of distributed ledger technology (DLT) where data is distributed across a network of computers rather than being copied. Because it's distributed, rather than copied, the danger of copies being altered and differing across the network is removed. With Blockchain everyone who has access to the network automatically receives any changes made to the data.
By way of an analogy, if a digital document were emailed to multiple people, all of whom were making their own amends, Blockchain would be the mechanism synchronizing these documents. This would ensure that whenever the document was opened, and no matter who it was opened by, everyone would see the amends that had been made previously by the rest of the group.
The use of Blockchain in land registry is primarily being explored for its potential to enable the almost instant transfer of property securely.
With smart contracts enabling self-execution when certain conditions are met transactions could be completed faster. For example, a rule could be put in place to facilitate the title of a property being automatically transferred to the new owner when they deposit funds to the appropriate account
There is also the potential for the registration gap to be removed. The use of smart contracts would speed up the process by automatically updating the ledger, instead of buyers having to transfer ownership through an application form.
Understanding the impact of Blockchain in real estate
The impact of the research being undertaken by HM Land Registry regarding Blockchain and land registration will be interesting to observe.
Businesses in the real estate sector should continue to remain aware of how Blockchain could improve processes and speed up transactions.
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Putting land titles and registries on the blockchain will go a long way combating fraud, storing data that cannot be meddled by an authorized user and ease of access.
Blockchain can be used as a centralized, paper free, secure method of storing land registry information. The blockchain is virtually unbreakable, and it can be invaluable in preserving these records when disasters strike. Just take a look at Haiti. After the hurricane struck, their records were destroyed, and now you have people fighting over the rights to the land and no way to prove it.
Blockchain has the potential to reduce property fraud which has been a great concern for HM land registry. This way, each property would be uniquely coded and linked to a unique key which can be held by the owner.
Just the other day, the UK’s Land Registry announced it was looking into the use of blockchain technology for domestic land registration.
Sweden’s land authority also recently began using the blockchain for property transactions.
Most notably, the UN’s Development Program initiated a collaboration project to build a land registry using blockchain technology for the city
of Panchkula in India.
According to a recent survey conducted by IBM, nine in ten governments say they plan to invest in blockchain technology to manage financial transactions, assets and contracts by next year. With the great benefits on offer, it is hard to look past blockchain as the future of recording land transactions.
Let's take a look out the use case of blockchain in land registry and how it works.
The White Company currently provides the digital money solutions necessary for property transfer, having launched White Standard Stablecoins which are 100% backed by USD, GBP or EUR on deposit, and are third party verified and audited to provide trust and transparency.
The current proof of concept functions as follows:
1) An OpenLaw smart contract defines the terms of the property transfer, with standard property transfer conditions such as inspections, deadlines etc. When all of the conditions are met, they are recorded digitally in the contract. The contract also has its own Stellar Account which it controls programatically with its private key. This Stellar Account is set up to accept White Standard stablecoins in the buyer's and seller's currency of choice.
2) The Buyer would send in White Standard Stablecoin (for example WSD if settling in USD) into the Smart Contract. The process takes approximately 3 seconds, regardless of what country the buyer or seller is located, as White Standard is built on Stellar, a global worldwide settlement system. This is significant better than days or hours for traditional bank transfers. White Standard stablecoins also incorporate a foreign currency exchange mechanism, such that a Seller wishing to receive USD can easily work with a buyer paying in GBP or EUR in a seamless way, without having to worry about foreign exchange fees or going through a complex process to do so at a bank.
3) The OpenLaw smart contract receives the WSD payment, and uses the OpenLaw connection to the Property Deed Transfer system to digitally sign and execute the transfer from Party 2 (Seller) to Party 1. This is made possible by a property record system that accepts digitally secured certificates to effect transfers. The system is secure, and prevents errors ina transfer like mispellings, wrong dates, typos, or even forged signatures as it's self verifying and uses high level encryption and security.
4) Once the property transfer is complete and confirmed, the OpenLaw smart contract automatically and securely sends the WSD from its account to the account of the Seller, completing the transaction.
From start to finish, the entire transaction takes no more than 30 minutes and can be completed between a buy and seller who are thousands of miles apart, compared to what is typically a whole day of closing typical in property transactions requiring both parties to be present.