How blockchain is the new kid on the block in Real Estate
Written by Cleo Folkes, Property Overview for Future:Proptech
The property industry is not exactly known for being an early adopter, welcoming change with open arms. Change happens regardless, albeit at a slower pace than might happen elsewhere. It has a habit of creeping up on you. Change can be a force for the better.
Property can reap the benefits from this revolutionary technology also known as Blockchain. Its use isn't a 'no-brainer' as in property very little is straight forward. Try to find one definition of 'core' for example. Companies all have their own definitions and do things their own way. This makes it harder for something that needs a standardised process to take place to prosper. Streamlined processes are created to enable Blockchain, thus making the world a more orderly, efficient place.The elephant in the room is how environmentally friendly Blockchain is. It requires enormous computing power, and many severs across the world are eating electricity like a ravenous dog. I am confident that over time this conundrum will be solved, or at least lessened.
Disruptors in the market are already attacking the slow, inefficient ways, slowly chipping away on the edges of the status quo. Over time the benefit from more efficient, streamlined processes will win over more and more companies. Blockchain can help with speeding up processes. It can help save time, money, and provide enhanced security and clarity. That makes companies sit up and pay attention!
First things first, however. What is Blockchain? It is an indelible record that gets recorded as part of a chain, and whereby there isn't a central authority in control of registration but where responsibility is shared across a wide network. As the odd one out is ignored and it's virtually impossible to control most, Blockchain is seen as very secure.
The indelible information can be changed later in a bolted-on form, and those changes can be tracked. The technology is very secure. To add a new data block to the chain, a special identifying number has to be generated. It cannot be predicted where that will happen (where it will be 'mined'), so that is the first security layer. As many servers around the world verify the information and check with each other constantly, it is impossible to manipulate all at the same time. A third security feature is that computers would automatically work on the longest chain, so any other ones would be abandoned.
All together it means that Blockchain is far more secure than your chip and pin card or your on-line banking set-up. People always refuse to believe in how secure Blockchain is, yet at the same time they are happy to get cash out of a machine using a 4-digit pin code. People need to stop doubting how secure it is and embrace it as a superior and more secure way to transact whilst keeping an eye out for any possible threats – as anyone ought to do at all times anyway.
Blockchain is a technology which started off driving Bitcoin, and the same technical principles behind it can be applied in many ways within the property industry. A few are rather obvious. Blockchain records information ultra-securely, so putting things like title deeds or shares on Blockchain can help cut fraud. Various countries are experimenting with putting land registry onto Blockchain.
Another big area where Blockchain can change the world of real estate is through so-called Smart Contracts. Whilst the commercial real estate world is still to archaic to see its application here soon, Deloitte in the Netherlands are working on putting residential leases onto Blockchain using Smart Contracts. These digital contracts contain lots of information, and can be automatically enacted. You can for example arrange for automatic rental payments. With contracts as a secure record and with is automatic execution, I feel this is a real growth area.Property is considered 'lumpy' as you cannot sell it in small chunks. Blockchain can help change this. If a share could easily be bought via Blockchain and ownership acknowledged, trading a unit becomes a lot simpler. Basically it is as if crowdfunding is used for a larger property. This will serve to make the market more liquid and more transparent.
That's a great thing, right?
Useful Links kindly shared by Cleo: