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Happy new year! (A belated) welcome to 2019, the year where we will see end to end solutions come into being. The commercial deployments of blockchain, and specifically Corda, continue to increase at rapid pace. But where those commercial deployments, stakeholders, and networks begin to connect is where the full benefits of blockchain are captured. What I mean by “connect” is fitting together multiple solutions to discrete pieces of the lifecycle of a transaction or asset (many of which you can find today on the R3 Marketplace), thousands of which have been developed in PoCs. This connecting requires public and private sector solutions working together. Then, the next layer on top of that, is interoperability, which allows assets from one network to be used or spent in another.
Connecting solutions driven by the public sector with those driven by the private sector
In my last blog I wrote about blockchain being deployed in the public sector, which is something we see increasing around the world (albeit some regions are moving faster than others). What’s most interesting, however, is the intersection of the public sector and the private sector. What will happen when business interests and public sector deployments touch? The answer is simple: the efficiencies and advantages are multiplied. Said a different way, the sum is greater than the parts.
Let’s use real property as an example. The work that Her Majesty’s Land Registry has begun with its Digital Street Project is, as the name suggests, about the UK’s land registry (a public interest). However, the Digital Street Project is not just about recording the transfer. There are private sector elements as well because it is about using blockchain in the processes that lead up to updating the central database of property ownership. For example, there are banks involved for mortgages (and potentially other secured lenders against the property), lawyers for structuring the transfer and getting proper signatories, and realtors to put buyers and sellers together. HMLR customers range from private individuals to major financial institutions, large-scale developers, a wide variety of legal and conveyancing service providers, and third-party businesses that make use of the data to innovate and inform their own work.
Beyond the land registry
Take another piece of the real property example: mortgage reporting. Mortgages — their issuance, transfer, and closing — are reported to regulators. R3 embarked on a journey with member banks and the UK’s Financial Conduct Authority to show how Corda can not only facilitate the issuance and transfer of mortgages, but also enable the FCA to see those issuances and transfers. That project demonstrated that Corda can be used to save mortgagors the time and cost associated with regulatory reporting and provide regulators accurate and timely reports.
Now, taking these together, we have the negotiations and record access elements ahead of the property transfer, then the issuance of a mortgage token, property title token, and legally enforceable smart contract on the Corda network, and the requisite reporting. Then the question is who else can benefit from seeing those transactions? One answer is the tax and revenue authorities. When property changes hands, it must be reported to tax authorities and taxes come due, both for increase in the value of the property while the seller held it and also from the transfer itself, which is subject to a tax in most jurisdictions. The CorDapp trial of the Instant Property Network solution, which kicked off today, includes all of the stakeholders mentioned in this blog post and will be a live demonstration of how all of them come together for one real property solution.
I’ve just described the process for a real property transfer, largely as we know it today, but with the benefits of blockchain. A new twist that we’re seeing in real property on blockchain is fractional ownership (i.e. tokenizing real estate in pieces, not as a whole). With real property becoming more liquid and affordable, a higher number of people — including young people who currently cannot get on the property ladder — can now be owners. This is one of the reasons why UK housing associations have started to look at Corda.
As I mentioned at the beginning, connecting solutions is one thing. The other piece to the puzzle is how the nodes connect, meaning how you can take the money you just got from a real estate sale and turn around and invest it through another DLT solution. The answer is you can’t do that unless the network is interoperable as Corda is (meaning, all nodes can connect to all other nodes, and that assets from one CorDapp can be used in another).
So when choosing a blockchain solution two things to think about are: (1) what related solutions are on that platform already, which are indicators of the likelihood of getting an end to end solution in the near term, and (2) can those assets be used in other applications or will they be required to be taken off chain and put back on in another network?
What’s to come?
This post used real property as an example, but this same coming together of stakeholders and solutions is happening in other markets and is picking up speed. For example, healthcare and insurance are both developing and growing toward one another. The same is happening with trade finance and supply chain. Stay tuned for more developments in real property and beyond!
Putting it all together: combining public and private sectors to get the best out of blockchain was originally published in R3 Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.
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December 18, 2019
December 18, 2019
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