You’ve no doubt heard of blockchain, the much-hyped technology platform that cryptocurrencies like bitcoin are built on. What’s especially intriguing about blockchain from a real estate perspective, however, goes well beyond cryptocurrencies. Three blockchain benefits in particular – security, transparency and speed – are game changers that are only just now being explored by the industry.
While industries like financial services, tech and manufacturing/supply chain have already started implementing blockchain applications into their business models, real estate has, until now, been a laggard. As an experienced business technology professional who has always kept an eye on new real estate technology developments, I thought this was surprising – and also an incredible opportunity to change the industry for the better.
Real estate is all about transactions full of personal and financial information that typically move at a snail’s pace and involve reams of paperwork. If you’ve ever bought, sold or rented property, you know this experience all too well. So I decided to start a company with my partner, Allen Alishahi, who shared the same vision.
Joining forces with Allen, we pushed our chips into the middle of the table and went all-in on blockchain (Ethereum, to be specific) as the basis for our company: ShelterZoom.
Here’s what convinced us that the opportunity was too important to pass up.
- Blockchain could bring an extraordinary level of security, transparency, and speed to every end of the real estate industry
- Distributed ledger technology allows blockchain to record and store each transaction on thousands of different computers globally, making hacking exponentially more difficult
- Completed blockchain transactions cannot be altered, updated, or deleted, making fraud virtually impossible
- Real estate transactions on a blockchain would take a fraction of the time, skipping weeks or months of tedious logistics
Distributed Ledger Technology (DLT) Is the Name of the (Security) Game
One of blockchain’s most compelling advantages is security. Unlike just about every other technology application, blockchain is a decentralized, peer-to-peer platform. Sometimes referred to as distributed ledger technology (DLT), blockchain records, stores and distributes each transaction across thousands of computers around the world. This makes hacks and other data breaches exponentially more difficult to execute. Instead of targeting massive data sets stored in one – or even several – locations (think hacks of Yahoo, Uber, Equifax and numerous others), hackers would need track down a specific data set on thousands of distributed computers. And that’s just one element of blockchain’s security profile. Encryption, authentication and no process for revisions or deletions are a few of the others.
Transparency in Real Estate Transactions Is No Longer a Pipe Dream
Transparency is another major blockchain benefit that solves a major real estate transaction problem. Once an entry is made on a blockchain “block,” that’s it. There’s no altering or updating or even deleting. In order to change the entry, that specific block on every other blockchain on every other computer would need to be updated. Needless to say, this makes fraud virtually impossible.
With blockchain, all parties involved in a real estate transaction have access to the same information at the same time. This saves a significant amount of time and human resources that are typically used for validating information.
While all this security and transparency is great, there is a legitimate concern – especially in large transactions, which are common to real estate — about the verifying the identity of a blockchain account’s owner. After all, if you are entering into a deal you want to know for sure that the other party is legitimate. My company had to overcome this issue in order to provide a transparent and verifiable way to create and track an offer while, at the same time, preserving the privacy of our clients. We were able to do so using Ethereum “wallets.”
The Waiting Is the Hardest Part. It’s Also Unnecessary with Blockchain.
One thing most people don’t envision when they think about real estate transactions is speed. Just executing a simple sale or rental agreement could easily take weeks. Or months! The paperwork can be overwhelming, and other hurdles like credit verifications, the back-and-forth to nail down contract terms, and communication between the interested parties all conspire to slow the process down.
Blockchain dispenses with delays because everything happens in real time. For example, once a buyer accepts a seller’s offer, the transaction is immediately executed. All the background work has already been built into the process; all that’s left to do is say “Yes.”
Ethereum and Smart Contracts
Of the many blockchain applications to choose from, Ethereum made the most sense for building real estate applications. The best way to define Ethereum comes from its source, the Ethereum Foundation:
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.
These apps run on a custom-built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.
While Ethereum has its own cryptocurrency, ether, what makes it especially appealing to real estate professionals is its ability to create and execute smart contracts (also known as “self-executing contracts”). A smart contract is basically a programmatic agreement that is set up to execute the moment its predetermined terms are met.
Buying, Selling or Renting? Blockchain Has You Covered.
It might be difficult to believe that security and transparency in real estate transactions can be increased while, at the same time, paperwork can be decreased. But it’s true; we built a business on this claim. Blockchain is no longer a futuristic technology built on hype and potential. It’s as real as the spreadsheet application on your laptop and is being used by millions of people across industry segments in every corner of the world. It may have taken real estate a while to jump on the bandwagon, but, as the saying goes, there’s no time like the present.
Visit ShelterZoom’s website for more information about their blockchain-based real estate offer and acceptance program