You may have heard the term blockchain in relation to Bitcoin, but this technology goes far beyond digital currencies. As a business owner, CEO or executive in a property-related business, you should have the blockchain phenomenon in your sights.
This year, interest in blockchain has picked up pace, with big industry names such as Microsoft, ANZ and Westpac for commercial property leasing, and Kodak, with its new image rights platform, KODAKOne and cryptocurrency, KODAKCoin, taking the lead.
The ‘Oracle of Omaha’, Warren Buffett, through his Berkshire Hathaway Group recently took a punt on blockchain. BNSF Railway, a major U.S. freight railroad network and a Buffet holding, joined the Blockchain in Transport Alliance (BiTA) in February 2018.
CoreLogic has research teams investigating new technologies that include blockchain and its future applications.
But what could blockchain mean to the real estate industry as a whole? Read on to learn more about how blockchain could help your business.
What is blockchain and why should you care?
First of all, the technologies associate with Blockchain aren’t new. What’s new is combining proven technologies such that the end result is greater than the sum of its parts.
Although blockchain technology has been around since 2009, there’s still some confusion in the market between blockchain and Bitcoin, the best-known of the cryptocurrencies.
Just as all terriers are dogs but not all dogs are terriers, so, too, Bitcoin is based on blockchain but all blockchain applications aren’t Bitcoin or cryptocurrencies.
In essence, blockchain is a secure digital ledger that can be used for tracking each and every transaction related to an asset – be it digital content or physical real estate. It’s a database that’s validated by a community, not managed by a central authority.
As each record is created, it’s confirmed by a distributed network of computers and paired with the previous entry – creating a chain of blocks, or a blockchain. Each transaction is a link in the chain.
Because the complete blockchain is held on the computer network and not on one single computer, no single person or entity can control its history. This is an important benefit; it means that the particular blockchain is a public ledger that can’t be altered easily (not without massive computing power). This type of security isn’t possible with a centralised database of transactions.
Is blockchain the future for the real estate industry?
Based in the US, PricewaterhouseCoopers’ Mike Quindazzi offers his check list for you to evaluate whether or not blockchain is for you:
1. Multiple parties share data
Multiple participants need to view common information
2. Multiple parties update data
Multiple parties take actions that need to be recorded and change the data
3. Verification required
Participants need to trust the validity of actions recorded
4. Intermediaries add complexity
Removing intermediaries can reduce cost and complexity
5. Actions are time sensitive
Reducing delay has business benefits
6. Transactions interact
Transactions created by different participants depend on each other
Mike notes that if you tick 4 out of 6 of the above, blockchain could help your business.
Think about your average real estate property transaction or real estate marketing, where you need a single source of truth. Usually, it’s the acting solicitors who hold the master set of documents and provide that single source of truth. This is an added layer of complexity that can also be a single fail point.
For real estate, blockchain could:
Improve the property search process through use of a blockchain-enabled multiple listing service, to create a shared, nationwide database for a real-time, holistic view.
Enable more efficient property title searches using blockchain for a central titles database.
Land titles offices with centralised databases can make mistakes; according to SmartCompany, in 2016 in NSW, 300 incorrect certificates were issued. Blockchain could provide every property with a more robust, unalterable unique identifier.
In addition, blockchain could:
- Enable better decision-making when all parties have access to real-time rich data
- Reduce the need for third-party verification
- Speed up execution of lease or sale agreements with smart contracts based on the blockchain
- Simplify property management with smart contracts and payment systems
- Speed up financing and payments through blockchain-enabled digital identity
- Reduce fraud potential with bank guarantees
- Keep websites more secure with more robust digital identity
- Provide better security for home purchase deposits. Trust account scams become a thing of the past with blockchain trusted identities
Who is using blockchain for real estate transactions?
In July last year, Sweden pioneered the use of blockchain to register land and properties. While they’re still in testing phase, the project team expect to roll out blockchain across the country as early as 2019.
In October 2017, a $60,000 property in Kiev, Ukraine, became the first property bought and sold using blockchain, albeit using crytocurrency.
In July 2017 ANZ and Westpac partnered with IBM and shopping centre operator Scentre Group to digitise the bank guarantee process for commercial property leasing.
Blockchain: Beyond real estate
Microsoft plans to use blockchain technology to manage digital identities for improved security access to sensitive information.
In New York, the group Blockchain for Change developed an app that’s preloaded on thousands of smartphones they’re distributing to homeless people.
The app, named Fummi, allows the homeless to manage their digital identity, get access to shelters and food and, most importantly, financial services.
“Blockchain will be as common as cloud computing.”
Healthcare is another industry being revolutionised with blockchain.
According to a recent Deloitte report, blockchain can increase the security, privacy, and interoperability of health data, increasing the efficiency of electronic medical records. All transactions can be time-stamped using a private encryption key, which results in less tampering and fewer errors.
Patients can use blockchain to take charge of their own health records, while administrative healthcare staff can build a patient-matching system that is more robust and accurate.
Reuters reports an initiative that could use blockchain to track cobalt from approved mines to the end manufacturer to ensure the cobalt being used wasn’t mined by child workers.
Why blockchain should be on your radar
Business leaders, CEOs, thought leaders and industry evangelists are looking for ways to streamline processes and secure their data. They understand that blockchain will revolutionise the world in ways we can’t yet imagine.
Can you remember life before your iPhone or Android phone? Now we couldn’t live without our smartphone. Same for cloud computing; what seemed complex is now commonplace.
“Blockchain will revolutionise the world in ways we can’t yet imagine.”
For real estate in particular, it’s time to recognise that any centralised database can be insecure and errors can occur.
Property Exchange Australia, while worthy of note and allowing near-paperless transactions, is still an intermediary – and a centralised system within which data can be accessed fraudulently, and records altered or even deleted. These latter events cannot occur with blockchain without great effort.
With ever-increasing demands for more transparency and efficiency in property transactions, health records and more, blockchain is likely to prove to be a solution.
Are you ready to board the blockchain train?