Interest in blockchain technologies has grown dramatically over the last 12 months. But what is a blockchain and how is it relevant to real estate businesses and transactions?
In its simplest form, a blockchain is a ledger or database of the assets held and transactions entered into by members of the same blockchain network. The information can then be shared or “distributed” among those members. Blockchains are:
- public or closed: they can be public, open for all to inspect, and controlled by no-one, or they can operate privately within a closed community of participants with rules governing who may join and access the information;
- distributed: the record or ledger of all transactions is replicated in full on each participant’s computer (and not a central database controlled by a third party); and
- immutable: once made, records cannot be altered or deleted, only added to in “blocks”.
Key virtues of a blockchain relevant to real estate applications include: security, transparency, no single point of failure and speed.
What about the impact of blockchain on the real estate industry?
- It has the potential to enable properties to be marketed simultaneously across multiple locations.
- It may soon be possible to deploy smart contracts for real estate transactions through blockchain (some changes to real estate law would be required to support this).
- It could transform centralised land registries. HM Land Registry stated in its Business Strategy 2017-2022 that a digital land register using blockchain technology could revolutionise future property transactions.
- Blockchain technology underpins Bitcoin cryptocurrency, which is already being used to market properties.
- At the end of November 2017, the launch of the first multi-million cryptocurrency property fund was announced “enabling institutional investors to buy property bonds and real estate on the blockchain”.
And this is just the start...