Blockchain and Bitcoin applied to the Land Administration
At an information technology congress I was approached by the editor of a magazine, who asked me about the application of this type of technology in the area of Property Registration, Cadastre and Property Administration in general. The conversation was more than interesting, although I was somewhat surprised that he asked me, considering that a couple of months in his magazine they had published about a country in the American tropics that was implementing it. I assumed it was just a press release, in which the opportunity to request more details from the original source had been missed.
The truth is that the viral capacity of the acronyms #blockchain and #bitcoin is nothing short of surprising, not only because they have great promoters in different strata of social networks, but because it is also irreversible to unlink the philosophy of these technologies in the future close to transactions between third parties. I summarize in this article the main aspects that pleasant companies heated up that night of Amaretos in a restaurant with live music that navigates along a river.
What is Blockchain
Blockchain is a technology for storing data in a securitized cloud. Chains and nodes store the operations associated with the initially created object, almost impossible to violate.
The application of this technology in Land Administration matters allows the encryption of the transactional process by means of blocks concatenated in a cloud. In the case of a Property Registry and Notary Public, the chain is not only constituted by the successive tract, but all the sensitive data of the operation on the property (appraisal, improvements, sales, mortgages, measurements, encumbrances, georeference, etc.) in an encrypted cloud of storage.
What is Bitcoin
Bitcoin is a technology for the management of electronic money between third parties. The technology converts money values from the formal market into cryptographic money that can be used for purchases between third parties with rates lower than the formal market. Coin Units are a type of electronic exchange that uses BlockChain chains for the guarantee of veracity.
The application of this technology in Land Administration implies the conversion of a property title to Coin units, in order to convert it into a security. Under these conditions, once the title is registered, it is encrypted using BlockChain and once it is converted into a security through Bitcoin, it can be transferred between third parties without the need for so many intermediaries.
Space smoking or reality?
There are many confusions on this issue, because the extremes have been sold more than the gradual processes that could be reached in a time gap that not only depends on technological aspects but rather on policies and legal regulations. So, after the second Amareto, the first step was to open our minds and imagine what would happen if we think about today 25 years from now, while the girls who accompanied us barely reached the middle of their first margarita and saw us again. with an interested face so as not to demonstrate his total ignorance of clichés that we obsessive geofumados are used to.
The easiest topic to apply is Blockchain as a technology, considering the ability it gives to a transactional system to increase information security. It is what everyone wants, that instead of having a tabular database that can be violated, they are inside a cloud where it is impossible to build a chain from links contained in a fragmented sequence that cannot be broken and hardly even understand. This could apply both to the Property Registry, where the current conditions of the Property are included in the chain: the parties interested in the transaction (owner, notary, surveyor, bank, etc.), the relationship with the property (right, restrictions, responsibilities), the object of law that can be material or immaterial (such as intellectual property or commercial property in shares), its geometric reference and above all the center of the LADM model, the source ... everything, in a sequence of non-continuous blocks in a strand similar to the DNA strand.
That is not smoking, that technology already exists and is documented applying in other fields.
Of course, Blockchain is just a technology, they are not tools ready to be used; a system must always be developed or applied to an existing one, with the simple condition in the technical specifications of the contract that indicate that the company must apply Blockchain technologies and of course, the capacity of the human resource that will perform QA and appropriate -At least to understand half of how it was done-.
The problem is that part of the sale of this technology is to believe that once Blockchain is applied, a professional is no longer necessary to carry out a transaction. But let's apply an open mind, and think about this:
What happens if we walk with a ticket in the local currency of my country, equivalent to 10 dollars?
-It's mine, I can get in a taxi and pay with the ticket, I can go to a store and buy a minute card for my mobile phone. Depending on which city I am in, I could buy a PayPal credit card or send money by mobile without it being necessary to verify its authenticity.
If it were 100 dollars could buy a mobile phone and by the way in the store would verify that it is valid, with a machine made to validate authenticity.
5,000 years ago this was not possible to think, since the exchange was of goods, so when exchanging a horse for a plot it was necessary to have a professional who knew about horses to ensure not only that it was healthy, but a professional to see the plot and guarantee that he knew that his grandparents were the owners, and perhaps another professional to write that operation in a book.
Buying and selling today can be done very easily, because physical or electronic money is a means of transaction between third parties whose authenticity can be verified and is an accepted practice.
This is then when Bitcoin comes in, since a property becomes units of value, just as a security is. Today I can sell a share certificate to my friend in a bar for $ 2,000. If he wants to validate the authenticity he can do it, or he can accept it in good faith if he knows me and knows where to find me if the document has a problem. Thus, a property title, once registered in such an encrypted, securitized and commonly used system, to be transferred between third parties would not occupy an intermediary, if the owner knows that once in his hands it is his and can transfer it to another more or go to the issuing bank to deposit it in your name. Of course, it sounds like a smoke, but that's what they might think who sold the Cave of Macpela to Abraham on the banks of a meander in the Jordan River.
So, Blockchain by itself is nothing more than an applicable technology already, with all the advantages that we hope to get out of it. Aware that the operation between third parties cannot go beyond what the legislation allows; The intermediary for transactions will continue to exist, because nothing changes except the security guarantee that the existing system has. The Blockchain increases legal security, but does not decrease transaction times if the legal conditions to change a notarial system based on deeds hinder it; Nor does it reduce transaction costs if the technological tool has limitations to incorporate a Front Office within the user's reach in an agile way or if the Internet penetration gap in rural areas is still very wide, much less if the power of lawyers over the innovations is veneered with typewriter protocol and description of directions / distances under the expertise of a lawyer.
However, Blockchain is a big step. It will surely be the technology that will allow the dream of one of my mentors, who hopes that the buyer and seller at the bank will put their finger on the fingerprint reader and make the sale. Technologically that is feasible, but having the legal norms, the trust of the users in the data and the conditions to change the mentality of the people… will occupy a miracle from heaven or a government with tyrant practices in at least 25 continuous years.
Bitcoin is the next step, for the securitization and application of cryptographic currency. This will be what will allow to reduce the number of intermediaries. But for that, there is a long way to go; especially because it is a subject more than technological, it is economical, it requires local legislation and time, which is what will allow users to understand and accept it. Reducing intermediaries is something that can be done without Bitcoin, just as this Central American country is not only doing by delegating to the Bank the possibility of registering a mortgage, expanding it or releasing it; action that a notary used to do in the old fashioned way, with papers in a yellowish folder; of course, with a delegation similar to that granted to a notary and limitation of responsibilities between the good faith of the client, the notarial faith and the registry public faith. From this to transforming a real estate, movable, mercantile or intellectual property into values… much is missing.
But it will happen. As Factom and Epigraph achieve visible projects, preferably not from the third world.
To be honest, I am being too simplistic because the boundary between Blockchain and Bitcoin is not so tacit; It is possible to do only with Blockchain much more without having to resort to Bitcoin.
In the case of this Central American country referred to in the magazine article, what it now has is a pilot project, in which it is testing Blockchain technology. With all certainty in 4 years it will be a proven fact about the new version of the Unified Registry System, which in its technical specifications say in the non-functional characteristics that the system must apply encryption technologies through chains and also securitization. Bitcoin is in the sights of those of us who think that 25 years is a short time.
At this point in the talk, which I have only summarized, the girls were rolling their eyes with their second margarita. They ended up getting up to see the fireworks that were reflected in the waters of the Thames, allowing a glimpse of the silhouette of their crotches ... just when we began to talk about how the Blockchain can be applied for the management of the cadastre that would definitely simplify the most complex challenges of the massive cadastral survey and the appraisal based on market conditions.