The application of blockchain technology is spreading like wildfire amongst financial and technological infrastructures, and a Deloitte report suggests it will affect real estate. Third generation blockchains can carry smart contracts securely, verify identities, and make transactions in one smooth motion.Developers and entrepreneurs are quickly applying the technology to improve lengthy and outdated processes, including real estate sales and financing.
Posting on Reddit, a U.S.-based entrepreneur, who hopes to later launch an ICO, said “I just warranty deeded my house into an Ethereum smart contract.”He’s illustrating the use of smart contracts to facilitate the legal change of ownership of property via a blockchain network. Something he, and other advocates of smart contracts, believe will be the future of law, real estate, and finance.Technically, right now property laws won’t allow a change of ownership using blockchain because an entity or person must be named as the legal owner of real estate. The entrepreneur claims to have exploited a loophole based on the concept of a “trust”. Assets like property can be put into “trust” controlled by its owners. The entrepreneur’s assumption is that putting the property into a trust detaches ownership of the property from an individual. Unlike a piece of property, a smart contract can hold a trust document. Ownership of a property can then theoretically be held and transferred within the Ethereum blockchain through the “trust document”. Once the transfer is complete the buyer could, in theory, dissolve the trust contract. This would revert property ownership to themselves through regular legal channels.
In September 2017 the founder of news website TechCrunch purchased the first known property using a blockchain. He purchased a flat in Kiev, Ukraine, for $60,000 through blockchain real estate startup Propy.The transaction was made via the Ethereum blockchain and the property paid for with a digital currency. Propy is interesting amongst real estate blockchain startups as they look to provide a legal registry of property similar to a government provided land registry.
Another blockchain real estate firm focusing on land registry technology is Ubitquity. They began testing a blockchain solution with Brazilian municipalities in 2017, with the goal of replacing paper-based systems.The Delaware-based startup embeds hashes of key information like property addresses, owner, and zoning into a bitcoin blockchain. Records stored on blockchain smart contracts are less susceptible to corruption, damage or fraud. However, the cybersecurity risks to blockchain applications remain and are relatively untested.
The secure and decentralized features of blockchain technology, alongside the ability to quickly store, transfer and receive verified data have the potential to revolutionize real estate markets.In Canada, real estate transaction fees and services make up about 2 percent of Canada’s economy according to Statistics Canada’s GDP survey.Deloitte recently published a report entitled “Blockchain in Commercial Real Estate: The Future is Here,” which outlines the various abilities of blockchain technology. The report dives into how blockchain can hold historical data for both a property and the market. It further notes that this information would be instantly accessible to landlords, sellers, and intermediaries like brokers and lawyers. "If we have a blockchain approach … then it cleans that whole process and streamlines it," said Sheila Botting, national real estate and construction leader at Deloitte Canada. “In a blockchain world, assuming that confidentiality is cleared, that property would have a property identity, so the previous people who owned the property, any of the inspections or records, landlord information, would be fully disclosed [...] In theory, you're not involving a lot of paperwork and you're reducing the number of people involved in the process."They finish the report encouraging commercial real estate stakeholders not to ignore blockchain technology. They conclude by noting the “significant potential to drive transparency, efficiency and cost savings.”Image credit: Deloitte
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