The Swedish Land Registry project takes the basic 'small house' purchase transaction and proposes placing it on the blockchain. The various parties - the buyer, the seller, the real estate agent, the respective banks and the Land Registry - continue to play the same roles they held in the conventional transactional pattern. No new party is introduced, nor are any parties eliminated. The obvious candidate for elimination in an eventual blockchain-based land conveyancing system would have been the Land Registry itself - which is the chief sponsor of this project. For an agency to contemplate its own demise reflects admirable public spirit. But worry not: the Land Registry will continue to authenticate Swedish land titles. The blockchain merely records (albeit in a permanent and tamper-proof way) the title determinations of the Land Registry. The Land Registry project is a thoughtful inquiry into the blockchain’s potential; it is also a case study of incrementalist innovation, where the general outlines of the familiar are retained.
The blockchain will realize its greatest potential when it hosts an entire system. But this shouldn’t discourage the exploration of transitional blockchain implementations. To move any large constellation of human activity - a payment system, a distribution chain, clinical trial data, voter registration - completely onto the blockchain will be a disruptive event. There may be huge gains realized, but the transition costs will be daunting.
ChromaWay's March 2017 report on the completion of Phase Two of the Swedish Land Registry project sets out the existing conveyancing workflow in thirty-four steps. The process involves multiple parties and an elaborate web of correspondence, checks and confirmations. The Land Registry becomes involved rather late in the process (at step 28). The workflow as reconfigured involves 'new solutions' for many of these thirty-four steps. The blockchain will be used to channel direct communication among the parties, displaying the completion of steps. The blockchain will also host various agreements, such as the listing agreement with the agent and the purchase agreement between the buyer and the seller. No longer will notices be exchanged through the mails. And contract execution - and confirming execution to others - will be much easier when the contract is hosted on the blockchain. Still there is little hint of smart contract in the Phase Two model. Parcels are identified but they are not digitized; there are no colored tokens that are directly exchanged on the blockchange effecting transfers of title. Rather, the Land Registry reviews the various agreements and payment confirmations as they post and then certifies in much the traditional way that title has settled. Notwithstanding some reduction in the number of steps, the overall pattern is comfortably familiar. And this is no accident: a more radical reconceptualization of the conveyancing transaction could well eliminate banks and agents, if not the Land Registry, from the mix. It might alter the current balance between buyers and sellers. It would unsettle expectations and increase anxiety among the principals. These are all reasons (if not good reasons) for sticking more closely to the familiar, even if reachable gains are left on the table. Stakeholder comfort cannot be ignored; incrementalism may not be a bad strategy in these early days of the blockchain.
ChromaWay’s background paper (by Alex Mizrahi) demonstrates an awareness of the realizable gains from a more complete implementation. But perhaps we are not yet ready to be as ‘smart’ as the blockchain requires us to be in order to rethink transactional roles and workflows. Sweden, for example, does not yet appear ready for truly digitized (“smart”) property, where conveyancing would be directly effected on the blockchain. The backgrounder admits the continuing need for an extra-blockchain override - a continuing role for the Swedish courts - in a complete system of land titles.
Sweden, it appears, is a wonderful laboratory for a land registry blockchain project. Radical transparency is familiar in Sweden; land ownership records (and personal tax returns) are visible to all. And, I am told, buyers and sellers of property in Sweden are quite reliable performers once they’ve given a ‘handshake’ accord. This cautious, incremental project will demonstrate some (though not all) of the blockchain’s potential without forsaking some of the comforts embedded in the conventional Swedish transaction pattern.
This is the second in a series of essays following my May 24 conversation with Henrik Hjelte and Ludvig Öberg of ChromaWay AB. Part 1 (on trust on the blockchain) can be found here.
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