Over the last 13 years, applications built on Blockchain and Smart Contracts have gained and lost attention many times over. They are gaining spotlights when Bitcoin & NFT prices boom and losing it when coins & NFT prices go bust. Notwithstanding headlines, ebbs, and surges, the Blockchain and “Smart Contract” technologies are solid. In fact, reliable and stable, like a piece of land. They are not going anywhere, and their value will only increase with time.
For many countries, blockchain technology could hold the keys to increasing income generated from land and real estate properties. Since 2009, blockchain has revolutionized many industries because, for the first time in the history of humanity, we can electronically exchange things with value. Some known blockchain-enabled transactions transfer money from one person to another without a bank, all done electronically with a button press. Blockchain is the only technology that can streamline land transactions, especially for countries where land transactions are still afflicted with inefficiency, fraud, corruption, and lack of transparency.
A land system that uses blockchain in its technology mix can reform an entire real estate market. Imagine a world where the government offers instant land registration, and landowners trust (beyond a shadow of a doubt) the impossibility of tampering with or burning their ownership title without their consent. A universe where a buyer can validate the identity and ownership of the seller, and a seller can validate the availability of the buyer’s funds all in a few minutes. Imagine the entire transaction, including the government getting fees, the seller receiving payment, and the buyer (or bank) getting the title, all happening simultaneously and in less than a few minutes. This world is possible with blockchain. A reform indeed.
The implication of blockchain in land and real estate is nothing less than revolutionary. Nations can leverage this technology to increase their income. Governments can increase their capacity to process transactions without having to increase costs. If a country such as the Sultanate of Oman is limited to 20,000 transactions and capping at $160 million in government fees, with blockchain, it has the potential to increase its processing power to unlimited capacity. It could potentially process 200,000 transactions without additional costs yet generating $1.6 Billion in income. That is the level of opportunities a country would be missing without technological updates. Of course, this assumes the country has the market size to grow. Scholars note that a country cannot reach its fullest market potential without an efficient and trustworthy foundation.
Indeed, data show that property markets can triumph in some nations and fail in others. In one of the most influential books about properties, “The Mystery of Capital.” De Soto explains the importance of property rights and a formal property legal framework to the economy. He contends that secure property rights can unlock the potential of each individual and lead to increased investment, productivity, and wealth creation in a nation. The book contrasts convincingly how Western capitalism triumphed because of secure property rights, while it failed elsewhere for the lack of a trustable property system. De Soto does emphasize trust between a population and their governments and between people transacting.
Blockchain solves both efficiency and trust. The Swedish government estimates their blockchain implementation saves over $106 million dollars in speeding up transactions and reducing fraud, among other efficiency gains ( J.Wong (2017)). And when it comes to trust, The Economist called blockchain “The Trust Machine”. Blockchain allows strangers to transact because they know the technology cannot and will not cheat them. The market is much slower and smaller when trust has to be cultivated first. Only people that know one another (smaller circle) will transact. This makes the property market less equitable, where opportunities are made available to select people only.
In today’s world of deep fake Artificial Intelligence, it is easy to fake property deeds and identities and easy to hack centralized systems. Blockchain is the shield we need to trust that our rights are protected.