With blockchains most prevalent and well known application being bitcoin, it is often initially associated with rocking the finance industry. But it is underestimated exactly how many other markets are being disrupted by this encrypted ledger and Real estate is one on the high end of this disruption with agencies and systems already taking place to support its integration. Ubiquity and The International Block Chain Real Estate Association are the first players in the property market to leverage blockchain to bring benefits to the industry. So where exactly does it all fit in?
Think of the copious amounts of paper record and book keeping that occurs every time a transaction takes place. Sometimes the property is flipped and sold before the record has even become permanent then it’s on to the next data entry on the books and online. Efficiency is brought about by the implementation of blockchain, bringing the transaction time down from months or weeks down to minutes or even seconds. Less time searching and less time documenting, the property will have closed in the deal in record time.
Intermediaries also slow down the process, in doing so charging highly for their time. Without the middleman (e.g. for this industry Escrow) there is no need to seek confirmation and approval from numerous parties because this system determines legitimate transactions. It can therefore verify them independently, rapidly reducing the time it takes to close on an estate or property and enabling the proof to be available almost immediately. It is understandable that these escrow companies are some sort of security to ensure each party holds up their end of the bargain, attempting to reduce fraud, but in removing the middleman and replacing it with one straight road to legitimate transactions a whole load of time is saved.
That leads us to our second point, proof. It is estimated that Real estate fraud is around hundreds of million dollars yearly. The system in place allowed for manipulation of documents, forged signatures and deeds being trusted to alternate parties other than those purchasing the place, even photo-shopped images of documents. A big economic view that also plays a key point in advocating block chain is the financial crisis which effectively was caused due to the housing bubble and ‘high rated credit’ loans/mortgages being sold on to the next deceived client. Block chain comes in as this safe, transparent ledger that enables every transaction to be seen and researched with all its information in one, un-manipulated place. Transparency is something which can only be beneficial when dealing with industries, with this disruption causing more symmetrical information leading to better choices for consumers and higher efficiency from vendors, an economic picture of bliss.
The use of bitcoin as digital currency in these transactions creates ‘‘smart property/contracts’.’ One article mentions Bitcoins can be used as secure digital tokens for any asset, and this is what we call smart property,”. “That’s where you take a physical piece of property, such as a car or house, and you associate it with a digital token; that’s called tokenization.” Essentially this token can then be traded as a bearer asset. This still requires some real life interaction in person to work, but none the less the technology will be at the forefront. It ties with the original idea of blockchain and its famous bitcoin currency using its ledger in financial systems, but this financial disruption can change not only regular everyday transactions and the financial industry, but now large hefty sums of money and the property being invested in and this property market.
What really is one of the major benefits with this implementation is the effect it has on developing countries and their emerging real estate markets. Better property records and effectively cheaper transactions from cutting out intermediaries can lead to the markets of these countries expanding at a great speed and connecting them in a way that makes international trade and investment much easier. Transparency plays a big part in blockchain in developing countries, especially ones where corruption is rife. An example by one article demonstrated ‘In Honduras, people were looking at using property titling with blockchain because if you have a padded envelope with the right amount of cash, you just slip it to the right politician, he goes in [and] changes a computer entry in a property database at the government that says, ‘Okay. You’re now the owner of this property,’”. It will level the ‘playing field’ so to speak for those with lower income and education to be able to access records the same as everyone else, but this decentralized system must be recognized by the state/government otherwise further problems of corruption that already existed will still take place.
The video above shows how Bitcoin itself and its ledger blockchain are already helping LEDC’S such as Ghana and their real estate markets flourish.
The mix between using the existing blockchain system and its famous bitcoin and the use of a new system will provide a great economic and social benefit. The problems lie with the corporations themselves, similar to banks, will they really want to cut out the middleman? The amount of money lost to such escrow companies and those in high positions with their secretive and lucrative deals could mean that this will be very slow to come into effect and if it does it will be controlled in some shape or form.