The tech world is always on the lookout for the next big thing — that game-changing technology that will revolutionize the way we live and work and disrupt entire industries. While many of these paradigm-shifting technologies never quite live up to the hype, one has managed to make its way into everything from payments and investments to supply chain systems and real estate: the blockchain. In this post, we look at the basics of blockchain and explore a few ways its revolutionizing real estate.
What exactly is the blockchain?
The blockchain is a simple technology that supports complicated use cases. At its core, a blockchain is a list of transactions stored in a digital ledger.
Two things set blockchains apart from traditional digital ledgers and databases. First, blockchains are distributed across multiple copies. Distributed systems ensure there can be no single point of failure, such as a database becoming corrupted or disruption to a cloud-based storage system.
Second, many of the most popular blockchains, including Bitcoin and Ethereum, are public. Anyone can access the blockchain and review its records. More importantly, anyone can download a copy and set up a live version of it. Creating a new instance of a blockchain (also known as a node) adds to the strength of the blockchain. The new node is updated along with the thousands of other copies across the internet.
While blockchain technology is seemingly everywhere today, its origins date back only a few years, to a mysterious 2008 whitepaper written by an anonymous developer known as Satoshi Nakamoto. From there, Bitcoin and its blockchain were released as open-source software in 2009, and the rest is history. No one is quite sure if Nakamoto is an actual person or a group of developers. Either way, the blockchain and cryptocurrencies are as common now as that jar of loose change we all keep on the counter.
Blockchain in action today
Blockchain is synonymous with cryptocurrencies — especially Bitcoin. It’s one of the best-known cryptocurrencies, used for everything from digital goods such as in-game add-ons to real-world products like cars and houses (more on that later). You’ll soon be able to buy movie tickets and popcorn for the latest summer blockbuster at AMC cinemas.
Manufacturers — especially in industries like automotive and aerospace — are using blockchains to improve the visibility into supply chains that involve multiple vendors and points of manufacturing. Walmart has tested a private blockchain from Hyperledger to track products from supplier to store to alert consumers about product recalls. A recent PwC survey of manufacturers showed that 62% of respondents said they had a blockchain-related project underway.
Blockchain and real estate
Blockchain is changing more than payments and supply chains. We’re seeing new ways of using blockchain across commercial, industrial, and residential real estate every day. In some cases, you can buy a house with Bitcoin, although Bitcoin still has to be converted into a traditional currency to complete the transaction.
Here are a few examples of how blockchain is used in real estate today to improve security and transparency and speed up transactions.
- Speeding up transactions with smart contracts
Smart contracts are one of the most widely used applications of blockchain technology. With a smart contract, the terms of an agreement are written directly into the ledger within the blockchain. Smart contracts are automatically executed — so once all parties agree, the contract comes into effect. All the terms and signatures are kept in a single database that anyone can access. New transactions and contracts are copied to all the nodes across the internet to ensure no records are lost. Smart contracts can replace traditional contracts in commercial real estate transactions such as purchase, sale, financing, leasing, and management.
- Property management
Owners of multiple residential, commercial, or industrial properties often struggle with managing rent collection and keeping track of repair and maintenance issues. Blockchain technology can create time and cost savings for property owners by streamlining these tasks across their portfolios.
- Tokenization for fractional ownership
Blockchain allows properties to be tokenized — which means that deeds or titles are created digitally on the blockchain. Tokenization of a property enables multiple people to work together to purchase a property, all while ensuring the transactions are secure and visible to all parties involved.
- Property marketplaces
The potential for new property marketplaces is one of the most exciting advances blockchain technology can bring to real estate. The use of marketplaces built on blockchain for art purchases is already making headlines across the art world. Earlier this year, Christie’s Auction & Private Sales announced they sold a token of a digital piece by the artist Beeple for US $69 million. The tokens used for art are similar to those used to represent properties in real estate blockchain transactions. Real estate tokens can have a variable value based on the property’s price instead of a one-to-one value like cryptocurrencies, where one Bitcoin is always the same value as another Bitcoin. Once a property is listed, marketplaces are used to connect buyers and sellers securely.
As a leading provider of real estate data, technological solutions and electronic land registries, we’re constantly looking for ways to improve speed, security, and transparency for all real estate transactions. Learn more about our solutions today.