Dr Craig Wright. http://www.drcraigwright.net/about/

This week saw renewed discussion into the purported creator behind virtual currency technology Bitcoin, Dr Craig Wright, an Australian entrepreneur from Sydney.

While we should be sceptical about the claims, there is no doubt that the technology is disruptive to future financial systems, with CSIRO’s Data61 today announcing that it will undertake a review to fully examine the far-reaching potential and implications for both government and industry of Bitcoin’s underlying ‘blockchain’ technology.

This is something we should pay attention to as the technology can go far beyond digital purchases- all the way to something as material as land. Earlier this year, the founding editor of Position magazine Jon Fairall penned the below article discussing the blockchain’s viability for replacing traditional transactions, even to the point of replacing our traditional systems of land titling.

By Jon Fairall

The news must have caused some furrowed brows amongst the highest of land administration circles: Why were the Young Surveyors wasting valuable time at the FIG Working Week in May 2015 by debating bitcoins? That’s the electronic currency made famous by drug runners, arms merchants and paedophiles. What were they playing at?

It turns out that, far from a fit of madness, the Young Surveyors were trying to understand a technology that might be of enormous significance for the evolution of land administration.

To unpick possibly one of the most revolutionary new technologies in land administration it is necessary to unpick bitcoin technology. As it turns out, the Young Surveyors were not intrigued by the uses of electronic cash so much as the technology that underpins it: the blockchain.

Back in 2008, Satoshi Nakamoto published a paper on metzdowd.com describing a method of preventing the double-spend of digital currencies by using digital signatures, peer-to-peer networks and something called ‘Proof-of-Work’. This became known as the blockchain, and it resulted in the establishment of the world’s first crypto-currency, bitcoins, which are currently valued at around $20 billion. So far as is known, not one has been stolen.

Nakamoto envisaged a distributed database running on a peer-to-peer network. The database would be hardened against tampering, even by operators with knowledge of all the system’s protocols. It would be a trust-less point of truth. It is trust-less because it does not require trust from the user. It is designed to be practically incorruptible, by which the designers mean that corrupting the blockchain would require an impractical level of computing resources.

This is, of course, exactly the same claim made by any viable land administration system: just substitute parcels of land for bitcoins and you have an effective land registration system.

If such claims stack up, the implication is that one could create a viable land registry with just sufficient infrastructure to maintain a set of computers. All the messy business of creating a titling infrastructure and the bureaucracy to run it goes away.

Simplified diagram of how a blockchain works. Created by Natoshi Sakamoto (or Craig Wright)

In a country such as Australia, with a well developed and widely trusted land administration system, this is mostly an academic curiosity; in countries that are not so fortunate, blockchain technology has a compelling logic. Around the same time as FIG was holding its Working Week, Honduras began a pilot land registration program using blockchain, and in Ghana, an organisation called Bitland has begun registering land titles using the same techniques. Greek bureaucrats have also begun studying blockchain to see whether it can unplug its sclerotic land registry; the former Greek Treasurer, Yanis Varoufakis, was a proponent of a bitcoin-like solution to that nation’s financial woes.

In Honduras, the company appointed by the government, Factcom, is making use of the bitcoin blockchain. It inserts a reference to data stored in its own registry. This means it can piggy-back on the trust and security of the blockchain, but it also means that it does not attempt to validate the transaction, which must still be done using traditional methods.

In Ghana, Bitland has joined up a suite of existing technologies to create its own land titling system. Plots are delineated in the cadastral layer of Open Street Map using GPS or aerial imagery. These plots form the basic reference for title deeds. The deeds are signed using the land owner’s Public Key. Neighbour’s keys are used to indicate consensus. The existence of the title deeds is then time stamped and immortalised by inserting it into the bitcoin blockchain.

In the long run, it is difficult to see systems that use the bitcoin blockchain finding much favour with national land administrators. To be sure, the infrastructure has been established, but land administrators will want control of their own system. To the extent that bitcoin is controlled at all, it is at the whim of the five developers with access to its core protocol. Should disagreements occur within this group the entire system could become unstable.

The alternative would be to set up an entirely new protocol using the published methodology. Instead of coins, one would specify geographic entities. Normal validation built into the system would ensure that it would be impossible for two people to hold the same rights to the same piece of land simultaneously, although it would be perfectly possible to record different sorts of interest in a plot on the same platform.

One problem with this is that the reliability of the system depends on the existence of sufficient incentivised nodes. One of the guarantees of the bitcoin system is that it has more than 6,000 nodes world-wide. This makes it impossible for one corrupt node, or even several corrupt nodes, to corrupt the system. Land is a finite resource so it is not possible to grant land as an incentive. The system would have to rely on transaction fees, as the existing system does.

Nevertheless, it might be worth persevering: a blockchain-based land registry would have the same functions as a traditional land registry, but with one key difference, the cadastre would be decentralised.

Every node on the network would have a full copy, providing insurance against flood, fire and invading armies. It is pretty much immutable to traditional forms of corruption because the network is so open to scrutiny.

It would almost certainly be cheaper. One could do away with most conveyancing and all lawyers. Come to think of it, even in Australia, blockchain may be part of the future.

For further explanation of how the blockchain works, please read Jon Fairall’s article, “A Chain of Land Blocks” in Position #81, available online or in print.