Will Blockchain Uplevel the Real Estate Market?
August 30, 2018
Sarah Kirsch Richardson
Love it or hate it, blockchain is starting to affect nearly every industry. And while most associate blockchain with bitcoin or cryptocurrency, it really refers to cryptocurrency’s underlying technology –– and that technology holds a tremendous amount of promise for 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. Blockchain follows a format similar to that of Wikipedia, in which many people can write and contribute to records of information rather than a single publisher. Because of its distributed nature and its use of cryptography, blockchain is considered one of the most secure technologies for digital asset transfer.
So, 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 to streamline a sector that’s growing tremendously: cross-border transactions. In fact, between 2009 and 2016, the demand for cross-border real estate transactions increased 334 percent. Until now, however, there hasn’t been a set of standards for international transactions, which historically required a time-intensive process that often involved multiple international trips.
International buyers also had to transfer their money through a lengthy international exchange process and get heavily taxed before they could make their 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 data. The Ethereum-based blockchain technology works by enabling “smart contracts,” or programs stored in the blockchain, which allow sophisticated transactions to be executed. Smart contracts also allow processes like paying taxes and performing the role of escrow to be automated.
Blockchain is currently considered one of the most secure technologies for digital asset transfer 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.
At my brokerage, we saw blockchain as an opportunity to open Arizona residents to the international real estate market, so we made the decision earlier this year to start using a blockchain technology–based real estate platform called Propy. Implementing this platform gives clients an extensive global presence and the ability to conduct transactions around the world, potentially in as little as a single day.
Naturally, there’s a lot of awareness and education that needs to be communicated before blockchain hits mass adoption, but it is starting to gain real traction. More successful transactions are being recorded on blockchain around the world every day, and the first in the U.S. was just completed earlier this year in Vermont. Once buyers and sellers start to see more blockchain transactions occurring and get a better understanding of how the technology works, demand will skyrocket.