When the unexpected financial crisis of 2008 occurred, an equally unexpected technology came into the limelight. People wanted greater transparency and a more trustworthy source for fulfilling their financial needs, owing to the prevalent discontent for the established financial institutions like banks. People wanted to know what is happening with their money in the system, how transactions are processing, how and where the record for money trail is maintained and saved. Most of such questions were answered by a technology of distributed ledgers, the blockchain.
Since then blockchain has gained massive popularity, making its way to major industries around the world. Real Estate is no different. Just like any other major service industry, the traditional real estate is flooded with intermediaries who might break your trust, temper the data in the record or demand an unfair amount of profit for their service as a third body. Introduction of blockchain in the real estate industry has bucked such treachery.
So how does the blockchain work? It is a decentralized database which contains the record of all the transactions that took place in the past, all transactions are related to each other through un-hack-able, highly protected keys generated via cryptography. Once, a transaction is completed, it is made accessible to all users so they can validate it, as well as, identify market trends and comparisons, hence decentralized. Validating of transactions and adding it to the chain is achieved through a successful mining process, offering a Bitcoin to the miner. This removes the need for an intermediary to bridge the trust gap between the two concerning bodies, hence greater transparency is achieved.
Deloitte US, the largest professional services network in the world by revenue, has adopted the blockchain technology for its real estate ventures. It brought greater transparency in sharing large volumes of information like rental contracts and other financial details to numerous stakeholders.
Companies are looking for innovative ways to employ the technology. Cook County, Illinois’s 2016 successful experiment of tracking the property transactions is a great example. It showed that a property such as a building can be disintegrated into digital tokens per area, these tokens can then be assigned a paper currency value and a paper deed will come with it. Ultimately, the tokens can fulfill the need to have traditional papers and therefore replace the paper documents altogether. These tokens can not only ease the process of liquidity of a property but also allow the token holders to have multiple investments.
But to deal in cryptocurrencies can be costly owing to their volatile environment. With the lack of legislation in this field, growing market manipulation and scams can lead rookies to lose their cash. Moreover, as the volumes of information increase, the present computers will eventually get slower in processing the data. So, the transactions might take a longer time to finalize.
Nevertheless, considering the freedom from slower intermediaries, cost reduction, ease of access and secure transactions, blockchain can be the next revolution in the real estate industry.