While all the eyes are cast on crypto’s payment opportunities, the utility behind it lacks the right heedance. Blockchain’s potential prostrate way beyond the financial sector.
The technological framework of decentralized networks is at least a key to fighting the bureaucracy and embracing security. The ground for real-world asset tokenisation has already been tested in many walks of life: from agriculture and corporate order to real estate registry.
The latter is being opened to Web3 with swift action, as a prototype for a Web3-based real estate registry was presented in Ukraine.
In this article, we’ll outline the concept of the technology, and find out whether it will replace the notaries.
Blockchain Estate Registry: What, Why, and How
The concept of Blockchain Estate Registry was first introduced by Oleksii Konashevych – Ph.D. in Law, Science, and Technology – at the University of Bologna as a part of an academic paper. The heart of the theory is Title Token – a digital record of ownership in the blockchain.
The Title Token is similar to the Soulbound – a concept by Vitalik Buterin, envisaging unalterable non-fungible tokens that can also be used for real-world asset tokenization. The technology has already been adopted by Binance, and is not new to Ukraine as well – WhiteBIT, a European crypto exchange, has utilized it to reflect user credentials (WB Soul). However, its implementation in the estate register is a new concept, so the crucial differences should be noted.
“When the land title and property rights are tokenized, there is no need to keep this kind of records elsewhere, for example, in a traditional land (cadaster) registry, because blockchain is a registry itself. The procedure of tokenization will require initial interaction with land authorities, but once the title is on the blockchain, there is no need to perform registration each time a transaction is completed – the blockchain serves as a secure repository, where no transaction can be revoked or altered,” as goes in Konashevych’s scientific work General Concept of Real Estate Tokenization on Blockchain.
The abolishment of excessive bureaucracy is not an all-new thing. For instance, in Slovenia, real estate transactions are not subject to mandatory notarization. In Australia, purchase and sale registration takes place online without intermediaries.
Konashevich’s idea is to automate the system by introducing smart contracts and decentralized applications.
Existing centralized property registries are not technically capable of allowing an unlimited number of users to conduct simultaneous internal transactions.
To avoid such loads, the centralized registry stands as a closed database, accessed only by administrators, technical specialists, and registrars. The task of the latter is to “translate” real-world transactions into paper form.
Konashevich bears an opposing idea. In his latest interview, he said:
“Blockchain will allow us to have an open-data registry and conduct transactions online. I propose to use a bunch of reliable public blockchains as one to ensure technology competition.”
The idea of multi-blockchain functionality is developed in Konashevich’s academic paper as Cross-Blockchain Protocol. This protocol stands for a framework of “smart laws” – concepts, designed to address issues of inheritance, dispute resolutions, and other possible issues with enforcement that involve third parties.
“Citizens gain the right to choose between the existing technologies. The government provides for procedures to transfer title records from paper-based or electronic databases to blockchains and vice versa” – explains Konashevich in the paper.
Konashevich also states that the work of a cross-blockchain database (registry) will be ensured by security standards, defined by the government.
Decentralized Estate Registry Is Leaving the Papers
The Blockchain Estate Registry project is led by the Virtual Assets of Ukraine (VAU) union. To seek funding for the development of the prototype, VUA submitted several grant applications to different crypto funds. The Swiss Dfinity Foundation was the first to respond.
The technical development was on the side of the Kitsoft IT company. The process took five months, from July to December 2023.
The project consists of two main parts: the Web3 registry platform itself and a decentralized P2P application where the buying and selling process takes place. The platform is built on Internet Computer (Motoko) and Polygon (Solidity) networks with the aid of Alchemy, Metamask, and IIT digital signature library.
Additionally, Web3-register will interact with external systems: Authorised Key Certification Centre for authorization through electronic digital signature and with the state register of real estate rights for obtaining the data.
The Present and The Future of Blockchain Estate Registry
As of reporting time, the prototype is limited to demonstration purposes and is aimed to introduce users to the real estate tokenization mechanism.
Still, the project team is to offer several types of transactions at its first stage. Among them are purchase and sale, rent, smart mortgage, and smart will.
Notably, the smart mortgage program will be able to monitor the arrival of loan payments and check on the repayment status. If the borrower stops paying, the mortgagee will have the opportunity to sell the title token of the estate object at an automated auction, Konashevich reported.
Apart from the technical underlay and facilities, the user roadmap has also been revealed:
- A user wishing to sell a property registers on the Web3-registry platform using an electronic digital signature.
- Then, a user is open to a list of his property from the state register of immovable property in his office.
- He/she can select the property to be tokenized and the decentralized platform he trusts to carry out the sale. Then, the tokenized property is set up for sale.
- A second user buys that property. At the same time, the ability of the P2P platform to manage the tokenized property is automatically canceled and ownership is transferred to the buyer.
While the Blockchain Estate Register seems prototypical, its implementation is only a matter of time.
The authors of the blockchain property registry have already entered into a strategic partnership with the construction holding KBD.estate. The Web3-registry is about to become a purchase mechanism of ownership rights for housing buyers in the “private town” Hlibivka just on the outskirts of the capital – Kyiv.
What is more, the blockchain property registry project has signed memoranda with the Ministry of Digitisation and the Ministry of Justice of Ukraine.
Regardless of the prominent potential of the blockchain estate registry, it still has obstacles to face. Amidst the most common: regulatory framework. If overcome, Web3 can push the bureaucracy not only out of real estate but the whole public service as well.
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