Exporting blockchain registries could be worth billions
A while ago, there was a publication in The Royal Gazette and a discussion below about the plans of the Government of Bermuda to ditch the early announced collaboration with Bitfury on implementing blockchain to the land registration sector.
After 11 years, many people still have a lot of fallacies about this technology. First of all, Bitfury has never developed "a blockchain land registry" in Georgia, as many folks repeat this on social media. They developed a distributed ledger technology network upon the existing land registry to store cryptographic hashes (checksums) from the registry records. Both the land registry and DLT are centralised solutions.
On one of the recent public online discussion panels, Mariam Turashvili, a high-ranking public servant at the Public Registry in Georgia, explained that the project's purpose was to protect the registry from hackers. Hashes help to verify records in the database. It is important to understand that blockchain and permissioned (private) DLT are not the same technologies.
The first one is an open and decentralised technology (Bitcoin, Ethereum, etc.); the second is created and controlled by an authority, be it a single actor or a group. Immutability of records in private DLT is not their feature, as it is immutable only upon the will of a limited group of actors. Many experts doubt if private DLTs are a good choice for public governance. There are reasonable questions if this system is really protective.
Any IT expert knows that hashes will help detect a forgery, but it will not help detect what has been altered in the original record. Second, even more important, it does not protect the original database from forgery. Hash is a mere indicator if the database has been changed or not. And if hashes are also stored in not a much protected environment, then all this construction makes no sense.
The real concern, though, arises from another perspective. Merchants of such technologies and supportive politicians use the buzzword "blockchain" instead of "private DLT", as it creates a perception of decentralisation. The general public have heard about blockchain technology merits, so they attribute features to the private DLT, which this technology does not have — ie, to be immutable and decentralised. Such a substitution creates alarming precedents.
The second, more high-level concern about such a project is that none of the scenarios leads to tokenisation of assets and digitisation of the economy. It does not imply the use of the full power of blockchains and smart contracts.
Therefore, the decision of the Government of Bermuda, at least in this part, was absolutely correct; without conclusions of recognised experts and a public discussion, such a project would look like another promo action of one rich fintech company.
However, I would not agree with the idea that having a traditional cadastral (land registry) system solves all problems. Bermuda decided to have a land registry system in 2011. As with any government in any country, politicians always decide whether they are on the safe side, opt into a proven choice, or innovate. There is no right or wrong decision here. It is a matter of a public policy with all its pros and cons that must be widely understood and accepted in the society.
One way is to purchase reliable technology. One of the significant drawbacks of the modern cadastral systems across countries is that it is highly bureaucratised. If not properly managed, the red tape may hurt the economy. Nevertheless, many countries struggle to find a reason to change it, as they found that delicate balance between the value of centralised property registration and the bureaucracy around it.
On the other side, as history shows, all leading countries had to innovate in order to become leaders. This means to be the first in something. Although it is risky, this is the only way to progress.
The option of a blockchain land registry, of course, is an innovation. I have been exploring this topic in academia for the past five years, and my major conclusion is that blockchain registry is possible from all perspectives — ie, legal, organisational and technological. A series of academic publications in ranked international journals prove this and propose a viable concept of a new generation of public property registry with title tokens, smart laws and smart contracts, and digital authorities to govern it. However, there is a long journey from theory to practice.
Undoubtedly, the country that will succeed in this first, among others, will have a lot of two advantages: the tokenisation of the economy and automation through smart contracts bring benefits to real estate transactions. It makes possible bold ideas in the so-called PropTech industry. It may bring a lot of investments from all over the world to the national economy. And second, such a project may become the major GovTech export product. If they succeed in one country, it can work in others, and exporting such a technology would be worth billions.
• Oleksii Konashevych, PhD is a researcher of blockchain, e-governance and land registration based in Melbourne, Australia. In the past four years, he has received a prestigious scholarship from the European Union authorities, and has enrolled in the international doctoral programme of six European universities, co-ordinated by the University of Bologna. Dr Konashevych is an expert writer on Cointelegraph