February 22, 2018
The drama of Bitcoin has taken the concept of the blockchain mainstream recently. With the price fluctuations, the mystery of its creator, the intrigue of Bitcoin’s early Silk Road connections, as well as institutional involvement from financial institutions, hedge funds, and even authorities, Bitcoin has taken quite the journey. Bitcoin may be the most popular manifestation of blockchain development, but there are countless other applications that have nothing to do with “cryptocurrency”.
Real estate is a significant example which has not escaped blockchain disruption either. Previously, transactions of high value assets such as real estate exclusively through digital channels has never been the norm. In other words, real estate transactions requires face-to-face engagements with various entities. However, blockchain development can now open up ways to change the situation. In 2018, the blockchain is expected to revolutionise the real estate industry in various ways.
The real estate industry appears to take pride in keeping several aspects of its operation secrets such as comparable lease rental rates, property prices and valuations, to create a possible competitive advantage. However, secrets are too difficult to keep, and may not even be desired, in the hyperconnected and digitized world nowadays. Moreover, in response to greater demand for transparency, technology advancements and the disintermediation by startups are gradually making some of this information public. As a result, property-related information is increasingly available in both digital and paper form. However, a significant portion of the digitized information is hosted on disparate systems, leading to a lack of transparency and efficiency, and a higher incidence of inaccuracies, which creates a higher possibility of fraud.
Blockchain technology, a digitized and distributed ledger that immutably records and shares information, could allow real estate industry to address these inefficiencies and inaccuracies. In 2015, according to a survey on 800 executives and experts in information and communication technology sector conducted by World Economic Forum (1), 57.9 percent of the respondents believe that 10 percent of the global GDP data will be stored on the blockchain by 2025.
Until recently, blockchain was known more as the technology powering Bitcoin. However, blockchain-based smart contracts can play a much more powerful role in real estate, potential revolutionizing core real estate operations such as property transactions (purchase, sale, financing, leasing and management).
And what’s more? Let’s have a look at the value proposition of blockchain development and its applicability to property leasing and management, and purchase and sale transaction processes.
Real estate industry has mostly been concerned with listing and connecting buyers and sellers. However, blockchain development provides new ways to trade property and enables trading platforms and online marketplaces to support real estate transactions more comprehensively. For instance, ATLANT (2), which recently launched its own ICO, is developing a platform based on the blockchain to facilitate real estate and rental property transaction.
By tokenizing real property, assets can then be traded much like stocks on an exchange and transactions can be done online. Specifically, ATLANT allows sellers to tokenize assets, essentially handling them like stock sales, and liquidating the assets through token sales using blockchain-based platform. The collected tokens can be exchanged for fiat money, with buyers owning a percentage stake of the property.
Lawyers, brokers and financial institutions have long been part of the real estate ecosystem. However, blockchain may soon usher in a shift in their roles and participation in property transactions. New platforms can eventually assume functions such listings, payments and legal documentation. By cutting out involvement of intermediaries, blockchain allows buyers and sellers to get more out of their money as they can save on commissions and fees charged by these middlemen. This also makes the process much quicker as the back and forth between these intermediaries is eliminated.
Real estate has long been considered as an illiquid asset as it takes a long time for sales to conclude. This isn’t the case with cryptocurrencies and tokens because they can be traded for fiat money through exchanges. In other words, as cryptocurrencies, property can easily be traded. A seller doesn’t have to wait for a buyer who can afford the whole property to get some value out of their real estate.
Blockchain can offer trust and security being a decentralized technology. Information stored in the blockchain is accessible to all peers on the network making data transparent and immutable. Moreover, a decentralized exchange has trust developed into the system. As information can be verificable to peers, buyers and sellers can have more confidence in conducting transactions. Therefore, fraud attempts would also be minimized. Smart contracts are increasingly becoming admissible records with Arizona (4) and Vermont (5) passing such legislation. Thus, they would have more enforceability beyond the technology itself.
The transparency in real estate transactions can also lower all associated costs. Beside the costs from intermediaries, there are other fees such as inspection costs, registration fees, loan fees and taxes associated with property. Like intermediaries, these can be eliminated from the equation as blockchain-based platforms can automatically manage these processes and make them part of the system.
Infinity Blockchain Labs is a visionary R&D company engaged in intermediary and RegTech services employing blockchain technology. We focus on forming alliances with established businesses and regulatory institutions across various industries, as well as providing collaborative incubation for early stage blockchain projects.
IBL aspires to empower Vietnam to become a global leader in blockchain development and therefore are committed to sharing information to nurture a passionate, educated blockchain community. One of the ways we maintain our role as ecosystem pioneer is by helping create educated blockchain enthusiasts. We are committed to sharing information and resources to help Vietnam become a blockchain hub through conferences, courses, contests, alliances, workshops, speaking engagements and incubations. Information regarding topics like hard forks helps people become more familiar with key blockchain concepts and thus able to adopt the technology.
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Contact: Nicole Nguyen PR@blockchainlabs.asia