Blockchain & Real Estate – Strengths, Weaknesses, Opportunities, and Threats
By, Petros Georgiou, Agent Not Needed
Blockchain: Defined simply:
Blockchain is a digital ledger which contains a record of transactions of value ordered chronologically and publically available.
Imagine yourself and three friends have a blank piece of paper each and you all want to collect names of people who can attend a party you are hosting but you want to ensure all of you have the same list of names. The four of you all head out to collect names. When a name is collected, all four people meet up at the exact time the new name is collected, and all four of you update your pieces of paper together. You each write the time and date the name was collected, and the name itself.This process is repeated which results in everyone having a copy of the data. If someone adds a name to the list, all of the other lists wouldn't match so it would be obvious that the name was added and that copy of the list manipulated so it would be rejected by everyone. The same is true if any sort of change happens such as time, date or a change to the data (name) itself.
This may sound like a long process but this happens digitally and instantly and the transactions can be anything of value such financial transactions.
This makes the transactions recorded secure and cannot be manipulated or backdated as any attempted changes would not be accepted by the other ledgers that do not match up. As this ledger is also public, it means transactions can be tracked all the way back to the first ever transaction.
What is an ICO?
ICO stands for Initial Coin Offering, which is the distribution of a crypto coin or token usually before a product has been developed for the purpose of raising funds to develop a product. An ICO is different from an IPO as the crypto coin or token is not representative of a share or ownership in the company, product or revenue the company generates. The investor does have complete ownership of the tokens they buy though. Whilst IPO's are regulated by the government, ICO's currently aren't regulated in the majority of the world. The coin or token that is distributed can be exchanged as a unit of value for other cryptocurrency or fiat currencies based on demand as the coin or token in most cases can be spent for the services on the product once it's built. An example is 'ANN token' (Agent Not Needed Token) which can be spent on the Agent Not Needed platform to purchase services required to transact property. Another example is 'File Coin' which can be used to purchase decentralised cloud storage once their main product has been released. Value is added to coins and tokens as it is speculated people will want to use that product or service and will require their native cryptocurrency to do so. Usually an ICO sells the coin/token at a discounted price resulting in early investors making a profit once the coin goes live on the exchanges or can result in early investors being able to use the product and services as a discounted price. An ICO can be compared to running a Kickstarter campaign though investors can make a profit from an ICO.
Good words to know…
BlockChain: A transparent non-centralised digital ledger of transactions ordered chronologically. The network is created by people and computers working together instead of a centralised network which is created by one person or company.
Wallet Address: Cryptocurrency has send and receive addresses which acts like a home address to receive mail, but instead you receive cryptocurrency to this address. Each address is unique and represents an individual's place on the network. A wallet address is usually a string of alphanumeric characters. Here's an example: 0x4b231e4E66373cbC209758Cd7174f3ceBcb8869E
AltCoin: Crypto coins that aren't Bitcoin are usually refered to as an Altcoins.
Smart Contract: An agreement stored on the blockchain that contains a set of rules/logic that must be met for the smart contract to execute a desired result. Once signed a smart contract cannot be altered. An example of a smart contract use is to bet between two people if it will snow tomorrow. Both send their bet
money to the smart contracts and the smart contract rules would be 'if tomorrow it snows, send person A all the money'. But 'if tomorrow it doesn't snow, send person B all the money'.
BTC: This is the symbol that represents Bitcoin. The same as GBP represents Great British Pounds and EUR represents the EURO.
Private Key: A private key is a secret part of data that allows you access to your stored value on the network. A private key is your rights to ownership of that value. It can be compared to a safe deposit box key to access whatever is being stored inside and only your key can gain you access. Whoever has the key has the access so private keys should never be shared with anyone.
Trends in real estate blockchains
Blockchain being more secure, faster and with the ability to utilise smart contracts is being experimented with due to the opportunity it provides to revolutionise the property industry. The UK's HM Land Registry is looking to use blockchain technology to improve the way it conducts land registry with the aim “to becomes the world leading land registry for speed, simplicity and an open approach to data”. They have released a business strategy document outlining their 'digital street' project to have this implemented by 2022. Agent Not Needed, a UK PropTech company is also looking to use blockchain technology and smart contracts to solve many of the issues the property industry currently has such as the high costs, slow transaction process, mistakes due to human error and property fraud. According to Saurabh Saxena, the founder of a company called Housen, “Some experiments are currently being run by the Swedish land registry Lantmäteriet, which recently concluded phase two of a 'smart contracts' pilot [involving a start-up and two banks] to test the technology and its execution risks”. It's exciting to think how blockchain will change the real estate industry and how property may be transacted in the future.
Opportunites in real estate blockchain
Blockchain can provide many opportunities to the real estate industry. The security of blockchain and the fact transactions on the blockchain cannot be manipulated may prove to be the solution to property and mortgage fraud. As the Blockchain is also public, it means that it can be checked to determine whether a property is in fact owned by the person selling it. Another opportunity is to remove the possibility of human error when transacting property such as land registry mistakes as all of the properties information can be contained on the blockchain which is transferable yet no one can manipulate it, so there would be no need for land registry forms to be completed, the property asset would just be transferred to the new owner and this can also be done electronically with the use of smart contracts. Smart contracts are a set of rules/logic that are preset and cannot be changed once set, with the instruction to carry out an action once all of the rules have been met. So for example, a smart contract can be instructed to only transfer a property to a property buyer once the money has been received, once the property ownership has been checked and verified, and once both parties have electronically signed the contracts. This would also remove the need for third parties to be involved in the property transaction process which provides the opportunity to also speed up the process of transacting property and reduce the costs.
Threats to real estate via blockchain
Blockchain and smart contracts could be a threat to individuals and companies within the real estate industry who benefit from their involvement in the property transaction process. Such people could include solicitors and conveyors. Solicitors are usually paid to carry out all the legal work when transacting property which can be both costly and time consuming. Smart contracts can be created to complete this legal work much faster and at a much cheaper cost. This benefits the buyers and sellers in the transaction process and if implemented in an easy to use way, it is very easy to imagine buyers and sellers favouring this method rather than using the traditional method of solicitors. The same can be said for the conveyance process as smart contracts can complete the title transfer process along with all the required legal checks.
Blockchain is going to change the world. Many industries are going to be revolutionised worldwide. Systems will be fairer, individuals will have more control over their data, processes will be more secure and many transaction processes will be faster and cheaper. Blockchain technology will modernise many of the industries that haven't changed much if at all for many years, and improve many of the ones that have. The property industry is one of those industries and Agent Not Needed is going to lead that revolution with our peer to peer property platform built on the blockchain. New blockchain features such as smart contracts open up a whole new world of possibility and blockchain development is happening worldwide with new network solutions and improvements being created, which is very exciting. Who knows what new features will be released in the future and how they will revolutionise a concept and technology that is already so revolutionary.
The UK market vs the rest of the World
Due to HM Land Registry's plans to move land registry to the blockchain, the move could prove to successfully speed up the land registry process and make it much more secure than the current method of filling forms to a centralised system. This move also opens up opportunities for a new breed of proptech companies who can utilise this new system to speed up the whole property transaction process and reduce costs. I believe that once the UK proves this new system works and that it is far more efficient and in line with the current technological times we live, it will be echoed by the rest of the world who will begin to implement the system worldwide. The UK is not alone in looking to use Blockchain technology to improve the current system, countries such as; Sweden and Ukraine have already begun experimenting with blockchain to implement the new system for land registry and the Republic of Georgia have already implemented a blockchain land registry system which was introduced in February 2017.
Ethereum Explained (By the Founder of Ethereum Vitalik Buterin):https://www.youtube.com/watch?v=TDGq4aeevgY
Simple BlockChain explanation video: https://www.youtube.com/watch?v=SSo_EIwHSd4
Details About Agent Not Needed & ANN Token Sale: https://tokensale.agentnotneeded.com/threepager.pdf