The Impact of Blockchain Technology on the Surveying Industry, Cadastre and Land Registry Systems

OUTLINE

I. Introduction to Blockchain Technology

II. Overview of the Surveying Industry

III. Surveying and Blockchain

IV. Types of Blockchains

V. The Case for Blockchain in the Real Estate Industry

VI. Blockchain, Surveying, Land Registry and Cadastre

VII. Blockchain Registry Integration Levels

VIII. The Future of Blockchain for Real Estate

IX. Conclusion

APPENDIX 

Glossary — Blockchain Terminology

I. INTRODUCTION TO BLOCKCHAIN TECHNOLOGY

In 2008, a research paper was released titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” [1] It described the creation and potential use of a new and revolutionary type of money called Bitcoin, the first of many types of cryptocurrencies. Cryptocurrency is a so-called internet-based money – not created by any corporate entity or government – which facilitates online transfers from one person to another (peer-to-peer) without the use of a third party, such as a bank (the so-called intermediaries).

The Blockchain

The technology by which Bitcoin or other cryptocurrencies can be transferred  to someone or used to make payments for a purchase is called blockchain (“the chain”), a sophisticated and powerful class of software. This revolutionary technology created the world’s first genuine decentralized, peer-to-peer monetary system.

A blockchain is a decentralized, distributed and public digital ledger  that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.  Besides allowing cryptocurrencies to be transferred, blockchain allows for a variety of types of digital information or data (“digital assets) to be shared or distributed. 

Essential characteristics associated with blockchain:  

•  Immutability: creation of data records that are permanent  (cannot be changed or deleted);
• Time-stamping: every entry created in the blockchain is securely tracked with a time-stamp (permanency makes backlogging impossible);
• Accessibility: all participants may have access to view the data on the chain or to add data (depending on granted permissions).
• Smart Contracts: program coding. As an electronic agreement, it defines the conditions to which all parties have agreed. When agreed upon conditions are met certain actions are executed (e.g. payments made from an escrow account or payments made to vendors for work completed).

Simply put, the structure of a blockchain is composed of three core parts:

1. Information is posted to the chain (each transaction is called a “block”) and each block is time-stamped,

2. A mathematical/algorithm hash, links subsequent blocks of information placed on the blockchain,

3. Blockchain management is conducted by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks of information.

A blockchain maintains a continuously growing list of transactions or uploaded digital data, time-stamped with the hash of the previous block connecting to the next block to preserve the chain integrity.

Blockchain as a Distributed Ledger

Blockchain is often referred to as Distributed Ledger Technology (DLT) where data is stored across a network of decentralized nodes or computers. It creates permanent records and histories of transactions potentially representing everything from cyrptocurrencies to other assets such as stocks or bonds, maps, a property deed, health care records and so on.

By allowing digital information to be distributed, blockchain created the backbone of a new type of internet. Far-ranging and creative uses are now being explored for adoption in a wide variety of industries and business sectors such as healthcare, insurance, music and entertainment, supply chain, energy management, law enforcement, real estate and many others.

II. THE SURVEYING INDUSTRY

Surveying and its techniques and science have been employed in construction and land development since ancient times.

Babylonians used surveying methods to build the pyramids. The Romans used them to mark the boundaries of their empire. Today, surveying has taken on specific functions. The main types are land, mining, engineering and hydrographic. Other spatial science fields include geodesy, topographic surveying, remote sensing, geospatial and Geographic Information Systems (GIS).

Surveyors are licensed professionals with academic and technical credentials. Surveying activities or tasks, like many other aspects of real estate, can benefit with blockchain adoption.

Surveying activities include but are not limited to:

• Measuring and establishing official public or private land, air and water boundaries (national or cross border) with the subsequent registration of results with the appropriate authorities or governmental bodies;
• Searches for historical evidence of previous boundaries;
• Researching land records and other sources of information affecting a property’s physical and legal status;
• Acquiring, analyzing and integrating spatial objects and phenomena in GIS (Geographic Information System), including the visualization and communication of such data in maps, models and mobile digital devices;
• Verifying data accuracy and recording the results of surveys;
• Collaborating with other real estate professionals;
• Preparing plots, maps and reports;
• Writing descriptions of land for deeds, leases, easements, and other legal documents;
• Providing expert testimony in court regarding their work or that of other surveyors;
• Presenting their findings to clients, government agencies and other interested or vested players.

III. SURVEYING AND THE BLOCKCHAIN

The traditional image of a surveyor’s activities seems far removed from crypto, coding, hash algorithms and network nodes. But there are enormous benefits for surveying professionals to utilize blockchain technology.

Surveying work is becoming increasingly global and cross-border with surveyors and others often working in a fragmented way. Blockchain’s primary benefit then, is connecting technology and its data with the people who work in the surveying industry — where trust and accountability is essential.

Blockchain will…

1) connect different parties associated with a project allowing for increased collaboration and trust,

2) provide a shared, tamper-proof digital ledger or journal of transactional information,

3) allow smart contracts to pay subcontractors (or others) automatically as soon as work has been completed and checked, reducing the payment delays,

4) facilitate and streamline workflow processes,

5) provide efficiencies in the way different pieces of information or data [2] (the “blocks”) are stored, collated, and referenced and shared,

6) allow all participants involved in the transaction to monitor project progress – every step of the way.

Blockchain will not…

1) affect surveying standards or methodologies,

2) replace surveyors or their work,

3) fix mistakes or errors made during the course of project work,

4) improve your golf game.

Data Storage on the Chain

• * Final field notes and data can be uploaded to the chain in a sequential format for authentication, safekeeping and reference;
• Legally accepted descriptions and definitions of property can be recorded on the chain and accessible to others via permissioned access;
• Older recorded documents can be digitized and uploaded;
• Previous surveys can be posted with subsequent access to others;
• Current satellite images and GIS (Geographic Information Systems) data (including parcel, building and utility information) can be stored without danger of tampering;
• Building Information Model (BIM) digital files can be safely stored, exchanged or networked to support decision-making enabling a virtual information model.

* “All field notes, field data, soil boring logs, reports, deeds and title reports, calculations, working drawings, estimates and other documents acquired or prepared by Surveyor as instruments of service shall remain the property of Surveyor. Attorneys have advised us that these “instruments of service” rightfully belong to us and are ours to use in appropriate circumstances, such as future    recognized in a litigated dispute, but the prudent step is for the surveyor to make it a matter of agreement in her signed contract with her client.”       (Robert W. Foster, PE, PLS, “On the level: Who owns the surveyor’s information? “April 1, 2009)

In the case of proprietary data or records, a blockchain may not be the optimal storage solution. An internal ledger or cloud-based solution may suffice – stating or proving where the data originated from without publicly sharing. However, if blockchain is the preferred ledger of choice, one might consider a permissioned-private blockchain platform. (See “Types of Blockchains” below).

IV. TYPES OF BLOCKCHAINS

There are mainly three types of platforms that have emerged after Satoshi Nakamoto introduced Bitcoin and blockchain to the world:

1) Public (decentralized)

2) Private (centralized)

3) Consortium (a hybrid type that operates under the leadership of a group of member companies instead of a single entity)

There is no universal blockchain format. 

Hybrid blockchains (partially centralized and partially decentralized) have been developed from the three core types.

A hybrid seeks to find the needed balance of audit-ability, security, scalability and data storage for applications build on top of them. The ability to control who has access for viewing and to regulate who is allowed to upload data without sacrificing autonomy and running the risk of exposing sensitive data to the public internet is a perfect example.

Surveyors and collaborators such as civil engineers, architects, cartographers, construction managers and urban planners who adapt blockchain technology into their work processes will benefit most from a hybrid type.

V. THE CASE FOR BLOCKCHAIN IN THE REAL ESTATE INDUSTRY

Disrupting the Real Estate Industry

Blockchain offers an immutable, open-source, universal protocol to disrupt and improve many sectors of the real estate industry:

• Buying-selling-renting real estate
• Transfer and registration of ownership or titles
• Recording of transaction documents or whole transactions
• Escrow services
• Virtual notarization
• Crowdfunding/capital raising
• Asset tokenization / fractionalization of assets
• Construction industry/real estate development
• Surveying/appraising
• Mortgage financing
• And more

CENTRALIZATION AND FRAGMENTATION VS. DECENTRALIZATION AND UNIFICATION

Centralization and Fragmentation

The real estate industry, across the spectrum, is well known to be a highly centralized and fragmented creating friction or pain points.

Some of the friction inherent in real estate processes is

• Government bureaucracy
• Non-interoperable/proprietary software
• Human error
• Incomplete and insecure property data
• Unnecessary third parties
• Expensive due diligence & high transaction costs
• Processing inefficiencies
• Fraud/Collusion

Decentralization and Unification 

• Increases financial inclusion and privacy
• Internationalizes markets
• Increases liquidity of assets
• Allows ownership/title disputes to be handled fairly/transparently
• Serves as a backup if the original documents are lost, moved or destroyed  

Decentralization and unification will help promote…

• Property rights formalization
• Registry modernization
• Improved land governance
• Data aggregation/analysis/availability

VI. BLOCKCHAIN, SURVEYING, LAND REGISTRY AND CADASTRE

Land registration, cadastre and land governance play an important role in a society, as long as they function legally and transparently and meet the goals set by society.

Land registries/land registration is where documents, manifesting legal rights from a property transaction, are recorded. Cadastre is the process of mapping those rights and subsequent storage of the mapping data.

Physical boundary vs. legal boundary? The cadastral agency will validate these boundaries. These two systems however, critical to modern land governance, are not connected in many countries. But blockchain technology can connect these two land governance fragments.

Land surveying is an essential and crucial method of mapping land boundaries, distances, slopes and features to legitimize parcel boundaries. It enables land development, from the planning and design of subdivisions to the final construction of roads, utilities and landscaping. A surveyor’s work also facilitates and supports accurate land registration and cadastral systems.

In essence, land surveying is an important and integral component of modern society and provides a legal framework for its economic development.

Land Registration is a process of officially and legally recording land or built property rights through deeds or title certification. It publicly shows that there is an official record of ownership with inherent rights through that ownership.

The land registry office in virtually all countries is typically where:

• Matters concerning ownership, possession or other rights of real property are recorded and preserved;
• Records are maintained regarding land and other real estate to properly assess its value and to collect property taxes;
•  Internal confidence between its people, commercial enterprises and its government are manifested and promoted (However, this is not always the case. It’s too easy to pick a country which does not have the trust of its people);
• The documents and data that are recorded is usually the information that shows legal ownership and provides individual and enterprise protection.Land Registration Benefits

  The benefits of legal ownership are many. It provides us with a bundle of rights indispensable to economic development and our social wellbeing.

  We can build on our land, make improvements, mortgage it, lease it, exclude others from it, sell or give away or even abandon it among other ownership rights.

Informal Settlement Surveying

Key to economic development, social wellbeing and effective land governance is the role surveyors play in mapping and measuring informal settlements and land that may not be registered at all. The majority of the developing world’s poor do not have access to a legal system where property documents are created and standardized according to law. Secure land rights, within a legal property system is paramount to reducing poverty and boosting shared prosperity at the country, community, and family levels.

“Every developed nation in the world at one time went through the transformation from predominantly extralegal property arrangements, such as squatting on large estates, to a formal, unified legal property system. In the West we’ve forgotten that creating this system is what allowed people everywhere to leverage property into wealth.”    (Hernando de Soto, The Mystery of Capital, 2000)

According to the World Bank, only 30% of the world’s population has a legally registered title to their land. With surveyors establishing initial and official boundaries of unregistered land, the blockchain could support legitimized claims and subsequent personal and commercial use of the land.

The first block on the chain (i.e. the surveyor’s legitimate land measurement), the so-called Genesis Block, would become the basis for indisputable ownership with future ownership rights based on this initial recording.

Land Governance

Land governance or administration involves procedures, policies, processes and institutions by which land, property and other natural resources are managed. This includes decisions on access to land, land rights, land use and land development.

Modern day land governance requires effective policies, processes, and institutions that can determine, record, and disseminate information about the tenure, value, and use of land. It is guided by policy and enforcement. Sound policy is built on interpreting quality information. Sound policy provides transparency, strengthens accountability and creates a clearer path to enforce regulations.

“The production, availability and accessibility of reliable data and statistics are of fundamental importance in monitoring and in taking evidence-based decisions for good land governance. The demand for data as evidence is increasingly focused to monitor global and national developmental status and targets. Data has a potentially revolutionary effect on economic analysis and policy making.”

(Source: Choudhury, Behera, Sharma, Haque; “Combining Administrative and Open Source Data for Monitoring Land Governance”, Centre for Land Governance, India, March 2018)

The problem –  or better said – the challenge, is that in many areas of the world developing sound policy is hampered by the lack of aggregation and access to quality data. The current legacy methods, solutions and techniques are fragmented. They don’t perform well in creating and mining data.[2] A starting point towards institutionalization of proactive data integration into the land policy and governance space is blockchain.

The use of blockchain, as we’ve learned, creates permanent records and histories of transactions from property and land transactions and the people who live there – supplying us with an abundance of reliable and secure data. [2] Stakeholders and policy makers using this technology will be able to  leverage this data by aggregating and analyzing it to improve land governance policy and enforcement.

VII. BLOCKCHAIN PROPERTY REGISTRY INTEGRATION LEVELS

The framework of integration levels, as shown in the table below, helps real estate industry operators, decision-makers and policymakers understand different entry points for blockchain use.

The eight levels of adoption represent increasing sophistication or complexity. Level 0 represents no usage at all, which currently is most of the world. Level 8 is a somewhat utopian, futuristic level where, for example, the cadastral offices in all the countries of the European Union are connected or merged. Beyond that, imagine a world where the world’s land registries – from country to country – are completely integrated and connected.

From the simple to the radical, disruptive future… 

(Source: New America, Future of Property Rights, 2017)

VIII. THE FUTURE OF BLOCKCHAIN FOR REAL ESTATE

Challenges – Obstacles – Adoption

Legal and Regulatory Issues Wholesale adoption of blockchain-based real estate solutions may face resistance until legal clarity is achieved.

Here are a few important legal and regulatory questions on cadastral and recording of property – which may be approached and resolved differently per each country’s legal system and review process:

In the event of disputes regarding a blockchain-based property ownership record, what unique limitations, if any, might a court face in exercising its authority?

• Will data on blockchains satisfy legal evidentiary burdens (e.g., such as the U.S. statute of frauds)?
• If localities opt to record real estate ownership both in the traditional manner and on a blockchain (or in some combination) and there are inconsistencies between the resulting records, which will govern in a court of law?
• To what extent real estate recording acts need to be amended to specifically contemplate recordation on a blockchain system as valid for purposes of federal, state or municipality/jurisdiction law?
• How will the accuracy of information be ensured/verified at the point of entry onto the blockchain?

(Source: Proskauer Rose Law Firm, “Modernizing Real Estate Records With Blockchain”, June 30, 2018)

Obstacles to Overcome

Transaction Speeds With increased usage of blockchain and escalation of data uploads, transaction speeds must increase without compromising data security.

Identity Solutions Development of legal and accepted digital identity solutions are needed as one of the first steps for individuals to participate in blockchain-based transactions.

Interoperability Blockchains, software programs and related technologies do not interconnect or communicate. Interoperability needs to be built into systems to avoid siloed operations and to increase system efficiencies.

Education The lack of global education and outreach to government institutions impedes blockchain understanding and potential adoption

Establish Official Registries and Cadastres In developing countries especially, an acceptable, official cadastre and land registry needs to be established – whether it’s paper, digital or blockchain. [3]

Competition for Land Registry Contracts There are numerous established and startup blockchain companies competing for land registry contracts without a uniform product or approach.

IX. CONCLUSION

Blockchain technology and land surveying may seem unlikely partners at first.  

However, this new and exciting technology creates a cooperative and synergistic environment in which all information, data and images from a surveying project can be gathered in a reliable, confident and immutable way.

With the changing landscape of surveying tools and instruments[3] becoming increasingly high-tech and widespread in use; openness to collaboration and new ideas will increase across the industry. This momentum could be leveraged to bring the use of blockchain technology to the forefront.

Blockchain-based land registries will provide a vast improvement over today’s paper-laden and sometimes cumbersome digital processes. [4] Ultimately, it will support and strengthen land governance policies and systems worldwide.

The adoption of this revolutionary technology is a trustworthy giant leap for surveying industry practices, practitioners and other industry participants. But first, they will need to be trained in the fundamental concepts, capabilities, and vocabulary of this new technology. (See APPENDIX Glossary)

Assuming the industry can adapt, blockchain will provide significant value to the surveyors of the future and the transformation and legitimization of cadastres, land governance and land registries around the world.

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[1] Nakamoto, Satoshi (October 2008). “Bitcoin: A Peer-to-Peer Electronic Cash System” (PDF).

[2] Data such as raw land, built property and ownership data, geospatial, population statistics, demographic trends, gender identification, status of mortgages, sales history, etc.

[3] Drones, 3-D laser scanners, total station theodolite, ultrasonic, etc.

[4] Digitized documents/a digital system must be in place before blockchain can be utilized.

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About the author:  John Dean Markunas is a real estate blockchain industry advisor and business development consultant with a focus on global land registries, casdastres and land governance. He is a member of FIBREE (The Foundation for International Blockchain and Real Estate Expertise) and the Co-Chair of the New York City FIBREE Chapter. John is also a member of the Government Blockchain Association (GBA) and is the Leader of GBA’s Land Titling Working Group. He can be contacted at: jmarkunas@PowerOfChain.com

APPENDIX

Glossary — Blockchain Terminology

The vocabulary used in the context of blockchain is quite specific, and at the same time, ambiguous. It can be difficult to grasp. Here are some of the essential terms and concepts one should be familiar with in order to navigate this breakthrough technology:  

Bitcoin (BTC) The most well known cryptocurrency.

Block Blocks are packages of data that carry permanently recorded data on the blockchain network.

Blockchain A shared ledger where transactions are permanently recorded by appending blocks. It serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain.

Cadastre (also spelled cadaster) A comprehensive land recording of the real estate or real property’s metes-and-bounds of a country. Used to define the dimensions and location of land parcels described in legal documentation. The cadastre is a fundamental source of data in disputes and lawsuits between landowners.

Confirmation The successful act of hashing a transaction and adding it to the blockchain.

Consensus Consensus is achieved when all participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other.

Consensus Algorithm Consensus algorithms ensure convergence towards a single, immutable version of the ledger. They allow actors on the network to agree on the content recorded on the blockchain, taking into consideration the fact that some actors can be faulty or malicious. The most famous consensus algorithms include Proof- of-Work, Proof-of-Stake and Proof-of-Authority.

Cryptocurrency Also known as tokens, cryptocurrencies are representations of money or digital assets.

Cryptography A method for securing communication using code. The main example of cryptography in cryptocurrency is the symmetric-key cryptography used in the Bitcoin network.

Cryptographic Hash Function Crypographic hashes produce a fixed-size and unique hash value from variable-size transaction input. The SHA-256 computational algorithm is an example of a cryptographic hash.

Dapp A decentralized application (Dapp) is an application that is open source, operates autonomously, has its data stored on a blockchain, incentivized in the form of cryptographic tokens and operates on a protocol that shows proof of value.

DAO Decentralized Autonomous Organizations (DAO) can be thought of as corporations that run without any human intervention and surrender all forms of control to an incorruptible set of business rules.

Digital Identity A digital identity is an online or networked identity adopted or claimed in cyberspace by an individual, organization, or electronic device.

Distributed Ledger Distributed ledgers are a type of database that are spread across multiple sites, countries or institutions. Records are stored one after the other in a continuous ledger. Distributed ledger data can be either “permissioned” or “permissionless” to control who can view it.

Digital Signature A digital code generated by public key encryption that is attached to an electronically transmitted document to verify its contents and the sender’s identity.

Ethereum A blockchain-based decentralized platform for apps that run smart contracts, and is aimed at solving issues associated with censorship, fraud and third party interference.

Exchange A place to buy and sell cryptocurrency. The exchange charges fees in many cases for transactions, withdrawals, or deposits. Exchanges are a way to link your fiat funds to a location where you can purchase cryptocurrency.

Fiat Government-issued currency. Ex: USD, EUR, CNY, JPY.

Genesis Block The first or first few blocks of a blockchain.

Geospatial Data that has a geographic component to it. Records in a dataset have locational information tied to them in the form of coordinates, address, city, ZIP code.

Hash The act of performing a hash function on the output data. This is used for confirming coin transactions.

Immutable An inability to be altered or changed over time. This refers to a ledger’s inability to be changed by a single administrator, all data once written onto a blockchain cannot be altered.

Initial Coin Offering (ICO) An event in which a new cryptocurrency sells advance tokens from its overall coinbase, in exchange for upfront capital. ICOs are frequently used for developers of a new cryptocurrency to raise capital.

Land Registration Generally describes systems by which matters concerning ownership, possession or other rights in land can be recorded (usually with a government agency or department) to provide evidence of title, facilitate transactions and to prevent unlawful disposal.

Land Registry The governmental office (also know as recorders office) where property documents are stored and protected.

Multi-Signature Multi-signature addresses provide an added layer of security by requiring more than one key to authorize a transaction.

Node A node is a computer running specific software which allows that computer to process and communicate pieces of information to other nodes. In blockchains, each node stores a copy of the ledger and information is relayed from peer node to peer node until transmitted to all nodes in the network.

Oracles Work as a bridge between the real world and the blockchain by providing data to the smart contracts.

Participant An actor who can access the ledger: read records or add records to.

Peer An actor that shares responsibility for maintaining the identity and integrity of the ledger.

Peer-to-Peer (P2P) Refers to the decentralized interactions between two parties or more in a highly-interconnected network. Participants of a P2P network deal directly with each other through a single mediation point.

Permissionless Ledger Such as Bitcoin have no single owner. The purpose of an unpermissioned ledger is to allow anyone to contribute data to the ledger and for everyone in possession of the ledger to have identical copies. This creates censorship resistance, which means that no actor can prevent a transaction from being added to the ledger.

Permissioned Ledger A ledger where actors must have permission to access the ledger. Permissioned ledgers may have one or many owners. Permissioned block chains provide highly-verifiable data sets because the consensus process creates a digital signature, which can be seen by all parties.

Public Address A public address is the cryptographic hash of a public key. They act as email addresses that can be published anywhere, unlike private keys.

Private Key A private key is a string of data that allows you to access the tokens in a specific wallet. They act as passwords that are kept hidden from anyone but the owner of the address.

Smart Contracts Smart contracts encode business rules in a programmable language onto the blockchain and are enforced by the participants of the network.

Token Tokens are a type of digital asset that can be tracked or transferred on a blockchain. They are often used as a digital representation of assets like commodities, stocks and even physical products. Tokens are also used to incentivize actors in maintaining and securing blockchain networks.

Transaction Transactions are the most granular piece of information that can be shared among a blockchain network. They are generated by users and include information such as the value of the transfer, address of the receiver and data payload.

Transaction Block A collection of transactions gathered into a block that can then be hashed and added to the blockchain.

Transaction Fee All cryptocurrency transactions involve a small transaction fee. These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block.

Wallet An electronic file that houses private keys or passcodes. It usually contains a software client which allows access to view and create transactions on a specific blockchain that the wallet is designed for.