Blockchain has been part of the public tech conversation for the better part of the last decade. Much of this discussion has been centred around finance and its potential impacts on the global economy. For the most part, the reception has been positive. Blockchain and its offshoots; cryptocurrency, smart contracts and the like are growing in popularity and usage.
However, blockchain’s utility should and was not meant to be restricted to finance and currency alone. The underlying technology behind crypto has the potential to revolutionize or at least impact virtually every industry. This is what all the buzz about Web3 is all about, a new internet built on top of blockchain technologies.
Already, blockchain is enhancing cybersecurity across business and institutional platforms that leverage the technology’s unique record-keeping and chain-encryption techniques to protect users’ data from third-party snoopers.
With its ability to create more transparency and openness, the potential applications for blockchain could be limitless.
In this piece, I delve a little into the impact the technology could and is already having on real estate.
But first, a little about the basics of blockchain technology.
Understanding Blockchain Transactions
Also called distributed ledger technology (DLT), blockchain can be likened to Google docs where the document can be shared with another individual or group, all of whom have the ability to edit but only with the permission of the whole group. The result is a decentralized platform where everyone on the network has equal powers to share and edit the document. Contrast this with centralized platforms where the whole group has to defer to a single individual (maybe an editor) who has the sole power to edit and then share the final document with the whole group.
Of course, the example above is a little too simplified but it does highlight the key characteristics of blockchain technology;
With blockchain, all parties are able to see the status of transaction, at all times, such that there is no room for error or fraud. This particular characteristic makes blockchain invaluable for real estate. Anyone in the industry knows all too well how important it is to make transactions more secure, transparent and efficient.
How blockchain could affect real estate
The use of blockchain technology for real estate transactions is becoming more apparent as the advantages of the system become more widely understood. Blockchain’s unique capacity to democratize records and transactions could potentially revolutionize the real estate industry.
It could, for instance, expedite the process of buying and selling property. The transparency and security provided within a blockchain transaction ensure that many of the tasks involved in the transaction could potentially be automated; from title searches to escrow services. These can all be executed remotely using smart contracts.
Moreover, blockchain also offers an almost tamper-proof way to store information. Apply this to the traditional form of land registration and you have the potential to significantly reduce instances of fraud and property scams.
The entire process can be done online without the need for physical document authentication or paper contracts. For buyers, the immutability of every transaction makes it so no one is able to tamper with any previous transaction involving the property. This means all the transactions are available to be viewed by anyone while still remaining secure. Both buyers and sellers have peace of mind, knowing that their transaction is safe and secure.
Data is becoming ever more valuable in today’s connected world. Some would say it is synonymous with gold these days. This is truer in real estate where companies have been collecting data about properties, transactions and their owners for years. And now with the advent of blockchain technology, this information is available to any interested party.
Question is, who really owns this data? And who controls it? Well, that’s the beauty of blockchain, no single entity owns the data, it essentially belongs to the collective internet while at the same time keeping the identities of involved parties and the property itself anonymous.
Moreover, blockchain technologies allow buyers and sellers to conduct business without having to go through intermediaries. This could further reduce the costs of buying and selling property and make the process even more efficient.
Tokenization is the process by which an asset is converted into a digital token that can be traded on a blockchain platform. This could have a major impact on the blockchain network. This can allow for fractional ownership of assets and so open up the industry to more modest investors and help democratize the real estate market.
Overall, blockchain has the potential to completely transform the real estate industry and make it accessible to a wider range of participants.