Blockchain for Real Estate - Peter Jonathan Wilcheck
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Blockchain for Real Estate

Blockchain technology is considered by many to be a new technological revolution. For the real estate industry, the applications of blockchain are immense. These applications include how the real estate industry communicates, shares information and monitors purchases and sales transactions. These revolutionary applications will be outlined in depth in this text. The use cases of blockchain in e-commerce businesses are enormous and are the reason the real estate sector is beginning to pay attention to this new technology.

Bitcoin: The Original Blockchain Use Case

Blockchain technology was originally created with the origin of Bitcoin. Bitcoin can be bought and sold today on open markets. An owner of the virtual currency can then transfer ownership to someone else within the blockchain, with thousands of records of this transaction generated throughout the world. In comparison to cash, verifying that such a transaction took place between two or more people wouldn’t be as easy.

For example, in our day to day lives, it would be very difficult to prove someone gives another person cash. Two people would need a third party to verify this transaction occurred. On the blockchain, no third party is needed as the transaction is recorded on the blockchain. It is a great way to transfer money without the need for the middleman, i.e., the bank or an accountant. When people purchase property or other real estates, they could buy it with Bitcoin. Bitcoin allows an exchange of value like cash. A real estate company that accepts Bitcoin could simply sell the Bitcoin for cash. Proving that the transaction took place would be no problem, as it’s on the blockchain. For real estate, this is the perfect technology to record all transactions, i.e., purchases and sales.

Blockchain: A Distributed Ledger with No Middleman

A blockchain consists of multiple computers, with each computer holding a record of all transactions that have taken place on a distributed ledger on a public network. All records within the blockchain are fully encrypted and may be handled by numerous nodes, so the ledger is safeguarded and un-hackable. Furthermore, since multiple computers hold a record of each transaction, and all computers on the network see the same data input, a blockchain offers a version of truth that a certain transaction is valid or not. By allowing multiple parties to store a copy of the ledger, blockchains are not governed by any central party.

Distributed Ledger Technology and Real Estate

Now that we’ve seen that a blockchain requires no middleman, there are many possible use cases this could be applied to. Every year, huge amounts of fees are claimed by intermediaries tasked with overseeing real estate transactions. These include banks, loan providers and credit card services. Costs can be drastically reduced by eliminating the trusted third party in these cases. High fees, as well as security costs, can be eliminated. Fraudulent deeds or land disputes can all be cross-checked against a blockchain, which would verify which party is acting in an honest way regarding their claims. No longer would a court or investigator need to wade through oceans of paperwork to find the “source of truth” when it comes to a real estate dispute.

Blockchain Applications in Real Estate:

Blockchain has huge potential when it comes to being a permanent source of truth. However, there are many other applications. Blockchain has numerous available applications for many different real estate related transactions. Thanks to Blockchain technology, the data stored is always encrypted and stored securely. Here are some of the top applications that could be implemented:

  • Property rights and management
  • Criminal record checks
  • Intellectual rights, including patents, trademarks, logos, etc.
  • Voting elections, e.g., councilors.
  • Data storage / management
  • Supply chain management
  • Event recording management
  • Transaction recording / management. Purchases/sales
  • Personal records of buyers/sellers, and their credit history
  • Encryption which safeguards all transactions
  • Smart contracts

Blockchain Innovations: How They Would Work in Practice

Real estate is one of the largest asset classes in the world. Blockchain has the potential to innovate this highly traditional industry in new ways. Some of these innovations include:

Real Estate Tokenization

Tokenizing real estate means representing physical assets such as land or houses as digital assets. These digital assets would be tokens which would live on the blockchain. This means that the value of the physical asset would be captured and secured digitally. Once these tokens are issued, people could then trade them. This brings many opportunities into real estate. For example, landlords might sell a share of their purchased property rather than the full property. Real estate purchases could easily be traded on the blockchain.

Real Estate Smart Contracts

Transactions using smart contracts will be between the buyer and seller alone and may need no human interaction whatsoever. This ensures the whole process is more time efficient and much less vulnerable to fraud involved in the trade. Sellers provide information about the property and buyers fill out all the details that are needed to complete the purchase. This data will be fully secure with 100% encryption on an extremely secure blockchain. Buyers, brokers, sellers, notaries, and agents can all collaborate together via a smart contract on the Blockchain to help facilitate all events, queries, and transactions.

Property Titles

On average, insuring property titles is a $15 billion revenue industry on a yearly basis. The current system ensures the property purchased is legitimate and clear of past debt. Through a blockchain, all of this information could be secured and accessed efficiently. Vast amounts of time and money can be saved by the buyer/seller because it may eliminate the need for title insurance and the sometimes-ridiculous costs involved in ensuring certain real estate. In the future, all information about the construction of the property will be stored on the blockchain. Any damages, repairs, and improvements to the property that need to be included in the title will be easily accessible. Consumers and businesses will then be able to know exactly what it is they are buying and what state the property is currently in at the point of purchase.

Data Management

Blockchain usage in real estate is helping property professionals to become increasingly aware of all the data concerning the sale of each property. Secured storage of data is expected to be a common occurrence in the real estate sector regarding purchases, sales, and transaction monitoring. Blockchain for real estate is forecasted to cause a huge boom in real estate organizations worldwide.

Blockchain: A Disruptive Technology in Real Estate

Blockchain will create new business models that will help to connect buyers to sellers. Private and commercial properties could be traded, liquified and tokenized making it a much easier task to buy and sell properties of any kind. Transactions will be decentralized, and it will help to lower the barrier of entry for estate agents and other property investors. These parties could be new buyers or landlords looking for a healthy return on their investments. The very fact that all processes involved in the purchase or sale of a property will be decentralized makes it a more user-friendly experience. This will be due to automation of documentation and absolute data security. Blockchain could help to cut inspection costs, loan fees, taxes and registration fees regarding real estate investment. All of this will be quantified and validated through smart contracts. All areas of the real estate industry could be improved by Blockchain implementation.

Blockchain: Revolutionizing Transactions

While blockchain can add clear value, it can also cut significant costs. Rental property payments could potentially be more cost-effective due to ease of transactions. Better decision making about property leasing transactions and how they are handled could easily be achieved because of a shared database. Tenants, owners, landlords, stakeholders, and service providers could interact at ease about any issue that may arise via the distributed ledger. This would avoid expensive mediators involved in resolving disputes. Such ease of information and the potential of low-cost, high-speed global transactions will streamline all processes within the real estate sector. Private institutions, investors and governmental bodies have already recognized the true potential that the Blockchain will bring when applied to the infrastructure systems of companies.

The Key Areas Blockchain will Improve:

Here are the key areas that the blockchain will improve.

  • Bim
  • Land Registry
  • Property / premises management
  • Real estate fundamentals
  • Post-occupancy service and micromanagement
  • Home automation services
  • Home sharing management and cadastral registry
  • The chain of property ownership
  • Digital asset recording
  • Decentralized transactions
  • Buyer/Seller identity
  • Guaranteed payments
  • Smarter homes
  • The internet of things
  • Authentication and integrity
  • Security against fraud
  • A safe network
  • Multi-party collaboration (including the buyer, seller, agent, and company)
  • Risk management
  • Financial assets lifecycle
  • Smart bonds map
  • Process automation
  • Dematerialization
  • Cost and efficiency
  • Reduction in all service fees
  • Listing and selling of properties

Blockchain: Adding Value to Blockchain

Blockchain will add significant value to the real estate sector. Effectiveness, security, and transparency are the true pillars that this value will be based. These will all be achieved through blockchain simplifying solutions to existing problems. Complicated procedures will be made easier, and all parties involved in the buying and selling of real estate will benefit from the blockchain.

The distributed ledger is a concept that offers a new way for real estate companies to do business. Although the blockchain is a public ledger, it is also very private. This privacy offers multiple benefits to big and small businesses. Combining all the benefits across the key areas listed above in the real estate sector is sure to result in exponential growth in all areas of buying and selling property. Naturally, the biggest global companies will have the greatest opportunity for growth due to size and scale. However, smaller firms and even the first-time buyer will experience some efficiency and operational benefits via using the blockchain.

The pace of evolution within the industry will surely accelerate due to widespread adoption. Banks and insurers will begin adopting blockchain as part of their transaction technology. Within a decade, adoption will positively affect real estate in powerful ways.

Blockchain Real Estate Mobile Apps that will be in much demand

One of most left out conversations or written articles is what online software applications are out there today, that can be used for development, or transactional use. The following online services use Blockchain extensively in Real Estate development, purchases or selling.

Oracle Blockchain Applications Cloud

Oracle has taken a huge step in launching a Blockchain Applications Cloud — a suite of out-of-the-box ready blockchain applications tailored for specific use cases. The initial batch of applications are focused on supply chain use cases. However, Oracle plans to roll out

Proppy: Propy allows the clients to search for properties in San Francisco, Dubai, Beijing, New York, Moscow, Los Angeles, Miami, and London in their native language. Each property has its own page where the buyers can find information about the features and location as well as get in touch with the owner. The clients can pay for the property in bitcoins.

Ubiquity: Ubitquity is a SaaS blockchain platform and API for real estate record keeping. The platform allows its clients to input property information and record documents through the blockchain. Ubitquity platform + API provide a system that enables parallel recording and tracking of a current legacy document and a new digitized one.

BitRent: BitRent is the first blockchain real estate platform that connects property developers with investors all over the world and attracts investments at early stages of construction. It is possible to invest small amounts and protect them by recording them in the decentralized registry. BitRent also allows real estate transactions via smart contracts and has their own coin, an RNTB token.

Averspace: Averspace is a Singapore’s first C2C (consumer to consumer) blockchain real estate startup. It is a platform that connects landlords/property owners directly with buyers or tenants for buying/selling or rental deals in the real estate sector, without any agents involved.

BrikBit: BrikBit is the blockchain powered ecosystem that develops and manages entire operations for the real estate industry. Within this ecosystem, all shareholders can benefit from blockchain technology. Each real estate object will be able to have its own blockchain with custom rules and features, depending on the country and effective legislation.

CryptoProperties: CPROP is a blockchain based real estate transaction management system that allows the buyer, seller, and their respective service providers to close the real estate deals in a transparent and secure way. The platform promises to clearly display each step of the entire transaction process accompanied with information about all documents that are required to complete the transaction. Everything is intended to be visible and editable, including the details of people who are involved in the transaction. The platform will incorporate smart contract plugins to manage required escrows. The finalized documents will be converted to PDF and hashed to the blockchain.

Blockchain Use Case: Private and Commercial Real Estate Investment

Private residential and commercial real estate investment is an extremely lucrative way to invest your hard-earned money. However, it has been classed as a difficult industry to break into. With blockchain applications in the future, these barriers will be broken down. No longer will a certain level of capital be required to participate in these markets. The trading obstacles will erode to a point where real estate will become a virtual market, similar to the cryptocurrency market. Buying and selling rights to real-world assets will be able to be completed by tokenizing these onto the blockchain. Proof of each asset held will be fully recorded in a public decentralized ledger, which will also make the buying, selling and moving of assets much more convenient and faster. All concerns about legal agreements will be significantly reduced. The need for paper money purchases could become a procedure of the past. The new application of crypto-purchased property investments via the blockchain will quickly replace the old way of dealing with property management and its associated transactions. Buying and selling real estate by crypto methods will create the opportunity for diversification, as people who never had access to this asset class will now gain access to a new portfolio to invest in.

Blockchain Use Case: Cross Border Buying and Selling

Buying and selling across borders will be simplified through blockchain technology. In our current system, investing in real estate across geographies is difficult without knowledge of the market and legal requirements. Through a blockchain based system in the future, it can provide a payment gateway to help buyers to purchase property online and from any country in the world using cryptocurrencies as their favored payment method. There could be no need to visit the bank. And all paperwork associated with buying and selling property can be done online via the blockchain. Making offers on property, seeing disclosures, signing purchase agreements, settlement documents and all other documentation will be in one place on the blockchain.

Blockchain Use Case: Standardized Property Markets

Blockchain technology can standardize and unify all property listings and purchases in many different global cities. The U.S. Russia, China, the Middle East and the rest of Europe will be able to improve their ability to provide immediate purchase deposits in an escrow account. All payments can be managed through the blockchain itself. Persistence, intelligence, execution, and innovation will be key pillars to this new system of regulated property markets. Cryptography and smart contracts within the private and commercial markets will power the new and innovative blockchain applications. Beyond the finance sector, real estate is the place where the implementation of Blockchain technology will thrive.

How Will These Changes Impact Real Estate Markets?

Blockchain technology will have a big impact on the property market and consumer behavior. Firstly, there will be an increase in liquidity in the property market through physical assets being tokenized. This will enable buyers to possibly trade in crypto-units in an online real estate marketplace. The friction in which these assets are traded will also be extremely minimal. The liquidity factor alone could revolutionize the real estate industry as liquidity makes the market more desirable for investors. The ability to take hard-to-trade assets like property and private equity and converting them into tokenized securities whilst adhering to a set of trading regulations are fundamental features that the blockchain offers. Having the ability to resell such tokenized securities/assets via the blockchain for profit will improve trading productivity.

A marketplace for tokenized real estate can take place on decentralized exchanges. Complex algorithms can create secure exchanges through vendors that are able to buy and sell tokens related to residential and/or commercial properties. Blockchain enables the buyer as well as the seller of such properties to communicate and do business in a way that will benefit all parties through verifiable information. Blockchain will facilitate easy trading as the risk associated with exchanging assets between parties becomes minimized. Issues with human error in administration and property management, bureaucracy concerns and non-transparent transactions will be counteracted by blockchain technology.

All transactions made via the Blockchain will be recorded and presented in a way that makes ownership and property rights easy to understand. Ownership of property and title deeds will be featured for all parties on the decentralized ledger to view and amend. Blockchain for real estate will fully digitalized all procedures included in the purchase and sale of a property. It’s clear that these developments will have a big impact on the future state of the real estate industry.

Peter Jonathan Wilcheck – December 2018

#Blockchain #Blockchain for Real Estate #Blockchain development

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