Blockchain technology has found a potent use case in land registration and management processes because of transparency and security features it provides. The immutable and non-hackable features of Blockchain are appealing to land management institutions that want to tackle numerous cases of fraud bedevilling the industry.
One such firm is Land LayBy(LLB)—an ISO 9001:2015 Certified start-up—that is currently implementing smart contracts based on Ethereum Blockchain for Land Registry processes and management in Kenya and Ghana.
Conventional land registries
To place the potential of a smart contract into perspective, it is vital that you first understand how land changes hands. When a buyer seeks out to buy land today, he/she must locate the land in question. He/she will then be required to secure the title and have the lawful owner sign it over to complete the transfer of property.
This process may seem straightforward on the surface. However, the devil will always be in the details. Land registries in most countries (Kenya and Ghana included) are not available to the public. Land information, which is supposed to be shared across generations is hardly upheld, and in most cases, it is often lost.
Consequently, users are forced to trust the government institutions to uphold the land records intact. However, in an environment that is still centralised, efforts to store and maintain land records in a trustful manner is diffused by institutionalised information asymmetry.
The result of centralised management of land registry is flawed paperwork, fraudulent signatures, and defects in foreclosures and land documents. This has marred correct documentation of land ownership and transfer. Essentially, land ownership and transfer problems exist because there is a lack of a trusted platform that can efficiently store and manage records.
Smart contracts can help create a trustless platform that addresses the following pain points in traditional land registries:
- Lack of land records that can be trusted by all the stakeholders;
- Numerous cases of corruption where buyers and sellers have to pay extra fees to expedite paperwork; and
- Lack of a credible platform that can act as a global source of truth about land transactions.
What is a smart contract?
A smart contract can solve all kinds of trust related challenges such as the ones mentioned earlier. A smart contract is a pre-coded program or logic which is stored on a distributed ledger of a Blockchain system and can result in shared updates. You can think of a smart contract as a unique type of account—which is not controlled by humans—in the system that appears on the Blockchain as though it is a regular account.
A smart contract can be coded to execute all types of land-related transactions like checking the status of land transfers, maintaining states and, receiving payments (in the form of Ether). To put smart contracts into perspective consider the following illustration:
Alice wants to buy land worth 1000 ETH from Bob. In this case, Alice will hard-code the conditions and requirements (smart contract) for the piece of land she wants to buy (acreage, price, and other details) on the Blockchain. Here, Blockchain will act as an assessor (if Bob has land which he wants to transfer to Alice, he will bid on the Blockchain).
Because Alice has already coded her requirements, the Blockchain can only release the payment of 1000 ETH to Bob if all the requirements about the land have been met. Here is a summary of the land transactions:
- Alice writes the smart contract and places it on the Blockchain for evaluation;
- Bob reviews the requirements. If they have been met, the contract “self-executes” the payment to Bob and land is transferred to Alice.
Note that Bob has no authority to stop the payment provided the smart contract conditions have been met. The advantage that smart contracts bring in land-related transactions is that once the transactions have been finalised, they cannot be altered or hacked. As such, smart contracts can:
- Minimise the risks of registering incorrect information in land registries;
- Help in getting a title deed and the verification from the land registry of the true ownership of the land; and
- Utilize unique digital signature (“fingerprint”) to control and regulate the workflow, accuracy of the document, and the rules of authorisation.
How LLB Smart Contracts work
LLB Blockchain has two fundamental components when it comes to smart contracts execution:
- Ethereum smart contracts;
- Shared Ledger;
#1: Ethereum smart contracts
LLB smart contracts are based on Ethereum Blockchain under ERC 223 standards. The smart contract forms the business logic and necessary conditions and requirements for any land-related transaction on the Platform. If a buyer wants to purchase a block of land, he/she will be required to enter into a contract with a seller concerning the settlement amount and completion date.
Since it is a smart contract being entered into between the buyer and seller, there is no requirement for a third-party, broker, or middleman. The buyer will automatically be refunded in case the seller fails to honour the contract. In case the conditions are satisfied, the contract is automatically enforced.
Being a decentralised platform, the platform requires volunteer nodes that validate land transactions on the Blockchain. Such volunteers are incentivised in the form of Harambee (HRBE) Tokens. HRBE Tokens will be the engine that fuels all the land-related transactions on the platform.
To access certain privileges like priority listing, sellers will be expected to purchase an appropriate membership on the platform. The platform will allow such sellers to upgrade their memberships so long as they send the required HRBE tokens to the LLL wallet. Once the land sale transaction is initiated, stakeholders involved will transact off-chain via traditional channels of conveyance that will be mediated by lawyers of their choice on the platform.
#2: Shared Ledger
A shared ledger is a record of log transactions in a business network which is identical to all stakeholders in the network. You can think of a shared ledger as an electronic land registry. A land purchase or sale transaction can involve all of the following:
- A buyer/seller;
- Real estate agency;
- Surveyors; and
- Notary and government agencies.
All the above entities will take an individual role of facilitating the efficient execution of land transactions. Each entity will be expected to maintain a separate, secure, and central database of their roles in land-related transactions. Although the central database will be inaccessible to other entities without their consent, LLB will facilitate posting of these records to the public Blockchain.
Whereas other jurisdictions may be hesitant to give up current land registries, LLB is optimistic about Blockchain’s potentials in this sector and is busy building the infrastructure required for massive adoption of blockchain by educating and recruiting the community into an epic calling to save their own world. LLB continues to conduct Blockchain masterclases in Kenya and Ghana and believes that Blockchain is not a just a panacea, but the best tool that can fight corruption and inefficiency in land registries.
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Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.
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