Professional Report

Real estate is not an industry known for change. Perhaps that is why it’s so surprising that the “hottest” new technology to come around since the advent of the Internet has its sights set on disrupting the real estate industry. The digital currency, Bitcoin, has frequently been making recent headlines, maybe you’ve heard of it, maybe not. Regardless, it is blockchain, the underlying technology for digital currencies such as Bitcoin, that has technologists and investors excited.

What is blockchain? The Wall Street
CIO describes blockchain as, “a data
structure that makes it possible to cre-
ate a digital ledger of transactions and
share it among a distributed network
of computers.” Furthermore, “It uses
cryptography to allow each participant
on the network to manipulate the ledger
in a secure way without the need for a
central authority.” In other words, a copy
(or partial copy) of a shared ledger is
saved on every computer connected to
a blockchain network. This “distributed
ledger” is a reorganization of how in-
formation is typically stored, providing
an unparalleled level of transparency,
audit ability, and security. The WSJ
CIO shares that “Today, more than 40
top financial institutions and a growing
number of firms across industries are
experimenting with distributed ledger
technology as a secure and transparent
way to digitally track the ownership
of assets, a move that could speed up
transactions and cut costs while lower-
ing the risk of fraud.”
How does this affect the real estate
industry? It starts with the more
nimble technology-based real estate
companies. For example, Airbnb recent-
ly “acqui-hired” Bitcoin and blockchain
micropayment company ChangeCoin.
Flip, a lease swapping company, stores
verified financial, education, and back-
ground information on blockchain. More
and more, real estate companies are
finding ways to integrate Bitcoin and
blockchain, including buyers accepting
Bitcoin as payment for property and
real estate crowdfunding websites
accepting digital currency for debt and
equity investment.

Although these developments are worth keeping an eye on, the more intriguing long-term possibilities lie in how blockchain can revolutionize the way public records are processed, maintained, and verified in the United States, particularly real estate title.

Consider the Following
Possibilities:

Property ownership – Blockchain enables all data pertaining to a property or owner to be easily verified and accessed by a buyer, seller, and trusted third parties. Furthermore, information asymmetry may be eliminated, theoretically assuring provenance of title, transfer, deed, and liens. Domestically, this may reduce human error or the need for redundant database systems. Internationally, it could stymie corruption and promote participation in formalized systems.

Contracts 2.0 – Blockchain enables the use of “smart contracts” (also known as “smart property”), which are computer protocols that emulate contractual clauses through facilitating, verifying, and enforcing contract performance. These “self-executing” agreements can automate certain processes of a real estate transaction (i.e. escrow services) while providing additional assurances to the participants (i.e. validate identity), in turn shortening the life-cycle of a deal and reducing associated risks and costs.