Blockchain is a public ledger or database that records digital bitcoin or other cryptocurrency transactions.
The ledger is linked to a peer-to-peer global network.
Every blockchain transaction is recorded on the public ledger, and is potentially accessible to anyone with an internet connection, thereby improving the transparency, accuracy and security of transactions.
Blockchain means people can make transactions without a third party, such as a bank, being involved, meaning traditional intermediaries can be avoided – potentially saving time, effort and cost.
The uses for blockchain are infinite; we take a look here at how blockchain is already disrupting the real estate industry.
Title records are currently quite fragmented, with many not even available online.
Blockchain could be a central title database making title transfers potentially much easier, potentially cheaper and quicker.
In the US, Cook County, Illinois, used blockchain for transferring and tracking property titles.
Property buyers were given a digital token as well as a traditional paper deed as proof of ownership.
Some say tokens could one day replace paper deeds altogether.
One US start up is revolutionising the way real estate contracts are written and exchanged – whether they be for buying, selling or renting – removing one of the most cumbersome aspects of real estate transactions.
SMARTRealty conducts the real estate transaction with cryptocurrency or traditional currencies, and contract terms can be agreed upon between the parties with ‘smart contracts’.
SMARTRealty is also in the process of obtaining listings from popular listing sites so entire real estate transactions can be conducted through its platform.
End-to-end real estate transactions in a global market
Propy is similar.
Propy can handle listings, auctions, settlement and transfer – and it was responsible for the first blockchain property sale in the world: in 2017, Michael Arrington, founder of TechCrunch, paid 202.5 ether (the equivalent of around AU$90,000 at the time) for an apartment in Kiev, Ukraine.
Propy currently has 10,000 properties listed for sale all around the world.
Real estate commissions
A US platform called Zap allows real estate cryptocurrency commissions to be divvied up.
Problems with blockchain
One of the main problems with blockchain is that the technology is currently largely unregulated, and governments are scrambling to keep pace with how the technology is evolving.
More widespread use of blockchain would need more education for the public about how the technology works, as well as legislative changes.
There’s no doubt that blockchain will disrupt the way real estate transactions are conducted – it’s happening already – but it’ll be a while before I’d trust one of the largest financial transaction of my life on such a new frontier.