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There are a lot of ideas about the use of blockchain technology in real estate. However, a frequently overlooked aspect is the land registry. The bold claim that real estate tokenization will disrupt the industry essentially boils down to securitization via security tokens. Although such ideas hold merit, I found them to be lacking in perspective and not as disruptive as proclaimed.
My PhD research was devoted to developing a next-generation land registry system. I introduced the concept of the “title token,” a new class of asset that, unlike security tokens, serves as an actual record of ownership. Blockchain technology, at its core, functions as a type of database. Therefore, instead of maintaining title records in a traditional land registry—whether on paper or electronically—blockchain can manage this more effectively, as I will explain further in this article.
To address why the next-generation property registry system should utilize blockchain technology, it is essential to clarify some misconceptions about this technology and then highlight its transformative features.
Firstly, the category of distributed ledger technologies, broadly labeled as “permissioned” and “private” ledgers, does not align with the original definition of blockchains as per rigorous academic standards. More importantly, beyond this terminological distinction, permissioned ledgers cannot guarantee data immutability. And immutability is a critical game-changing feature of the blockchain.
Not every chain of blocks is the blockchain
The method of creating timestamped blocks of data interconnected by hashes was introduced by Haber and Stornetta in 1991. This method does not aim to protect the data but to verify its authenticity, and there is no evidence it was ever referred to as “blockchain.” This term appears to have first emerged among the developers of Bitcoin and its mastermind, Satoshi Nakamoto. Nakamoto’s paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” proposed using Haber and Stornetta’s method as one of the components of his technology. By combining this with a decentralized consensus mechanism, he devised a method to operate it within a distributed network. This is what gained the term “blockchain.”
Today, with a variety of consensus mechanisms and approaches to distributed ledger creation, blockchain can be defined as a digital ledger with a native unit of account (cryptocurrency) and data storage capabilities. It operates in a distributed network with an open, competitive, decentralized consensus mechanism.
Permissioned cartel DLTs are not immutable
Permissioned distributed ledgers, including private ones as a subset, lack the feature of free open competition. In fact, they represent the opposite; these ledgers operate under the centralized authority of a controlling node or nodes. In collective governance scenarios (involving more than one node), they may employ a decentralized consensus mechanism to some extent, but this only applies within the closed group of member nodes. Effectively, they act as a centralized system for the outside world and resemble a cartel. Therefore, not every chain of blocks constitutes a blockchain, although every blockchain and distributed ledger utilizes the method of block chaining.
These terminological distinctions might seem pedantic and relevant only for theoretical discussions; however, they are crucial for understanding the broader implications. As permissioned ledgers lack the crucial feature of immutability, they cannot guarantee that data will not be altered. The controlling node or nodes, acting as a cartel, have all the privileges of a network administrator, controlling access and potentially altering data by rewriting or even deleting the chain if necessary. From this perspective, it…
Read More:Land registries should shift to blockchain technology | Opinion