Love it or hate it, blockchain is disrupting nearly every industry. And while most associate blockchain with Bitcoin or cryptocurrency, it really refers to its underlying technology — and that technology holds a tremendous amount of promise to a range of industries and uses, including real estate.
What exactly is blockchain? In a nutshell, it’s a decentralized, distributed and public ledger used to record transactions. The format is similar to Wikipedia, in which many people can write and contribute to the records of information rather than there being a single publisher. Currently, blockchain is considered one of the most secure technologies for digital asset transfer. This is because every transaction is cryptographically linked to the next one, making it nearly impossible to change the existing data. Like Wikipedia, decentralizing the information keeps a system of checks and balances in place.
How does blockchain apply to real estate? At a high level, it’s starting to be used to make buying and selling more secure, and streamline cross-border transactions — a sector that’s growing tremendously. In fact, between 2009 and 2016, the demand for cross-border real estate transactions increased 334 percent. Until now, however, there’s not been a set of standards for international transactions. It is a time-intensive process that often involves multiple international trips.
International buyers also had to transfer their money through a lengthy international exchange process and get heavily taxed on the money before they could make the purchase. Now, with blockchain technology, those buyers can view and express interest in a listing anywhere in the world, finalize all documentation, and complete the transaction using traditional fiat currency or cryptocurrency, like Bitcoin or Ethereum.
Additionally, all parties involved in the contract can verify and exchange records digitally, allowing greater transparency through the decentralization of the data. The Ethereum-based blockchain technology works by enabling “smart contracts” or programs stored in the blockchain, which enable sophisticated transactions to be executed, and processes like paying taxes and performing the role of escrow to be automated.
At my brokerage, we saw blockchain as an opportunity to open Arizona residents to the international real estate market and made the decision earlier this year to start using a platform called Propy, a blockchain-based technology real estate platform. Implementing this platform gives clients an extensive global presence and the ability to conduct transactions around the world, potentially in as short of time as a single day.
Naturally, blockchain still has a long way to go in terms of adoption. There’s a lot of awareness and education that needs to be communicated before it hits mass adoption, but it is starting to gain real traction. There are more successful transactions being recorded on blockchain around the world every day, and the first in the U.S. was just completed earlier this year in Vermont. As buyers and sellers start to see more blockchain transactions occurring, and understand how the technology works, demand will skyrocket.
Sarah Richardson is founder and principal of Tru Realty.
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