It seems like blockchain is all the rage, these days. The emerging technology, which started out as the backbone of Bitcoin, is now being used across dozens of different industries, from tech to healthcare and real estate.
Blockchain technology might seem confusing at first, but the truth is that you don’t need to understand it to reap the rewards – although it helps. The best way to think of it is as a digital ledger in which every transaction is written down and which can never be corrupted. It’s like a spreadsheet which is duplicated across a network of computers and which is continually reconciled. Hackers can’t corrupt it because there’s no centralised repository to store the information.
The benefits of blockchain, then, are numerous and can apply to many industries, with some people referring to the technology as “the start of a bigger revolution than the Internet itself”. Here’s how it’s set to shake up real estate.
1. Cutting out the middleman
It’s not just buyers and sellers who are sick of the murky process of negotiating the property market. Real estate agents are also sick of cumbersome processes and expensive middlemen – such as brokers, insurers, and escrow companies – who take away from their profit margins.
Blockchain, meanwhile, offers a system in which anyone can access and record information, which can cut out the middlemen and give more power to the buyer, the seller and the real estate agent. It also speeds up the process by digitising the process and enabling instant, encrypted transactions and communication.
2. Reducing fraud
Because blockchain is incorruptible, it has the potential to make forged documents and real estate fraud redundant. Essentially, every property would have its own unique record which would be impossible for anyone except the owner to replicate. Only the owner would be able to sell or advertise the property.
3. Smarter contracts
Smart contracts are designed to reduce the need for the manual processing of transactions, enabling certain actions to be executed whenever their conditions are met. In the case of real estate, it effectively means that deeds can be processed as soon as appropriate payment is received, cutting out the potential for buyers or sellers to default on part of the agreement.
This is great news for the real estate industry, of course, because it means that consumer confidence will be raised thanks to the knowledge that their transactions are guaranteed due to the system itself – and not just the process that people follow.
4. Easier international transactions
Because blockchain is decentralised by its very nature, it becomes easier than ever before for people to make international transactions, which is why Bitcoin has enjoyed so much success as a global currency. For this to happen, deals will need to be struck between providers and different governments, but as the demand continues to rise from members of the public, the governments of the world will be left with no choice.
5. Increased transparency
Blockchain has the potential to make it much, much easier to verify credit history and income levels, and it can also prove that a seller owns the rights to the property. Every step of the process would be mapped out and tracked in a way that’s impossible for hackers to gain access to. Every step of the process would be fully tracked and accounted for, and even the house itself would have a digital identity that would stop surprises from happening once it changed hands.
6. Fewer errors
Blockchain technology can’t completely stop errors from entering a system, but it can at least reduce their likelihood by requiring users to enter information fewer times and by having a larger pool of data to cross-reference against. Some errors are just that – an error. Others are deliberately added by human beings with malicious intent. Either way, blockchain will help to make the whole process much more efficient and cohesive.
7. Fewer systems
Because blockchain could provide a democratic platform for the sharing of real estate data, it would reduce the number of systems that we need to use to keep track of everything. This also reduces the likelihood of falling victim to an exploit – not only because blockchain is almost impossible to comprise but also because there are fewer potential entry points.
The result is a system that third-party providers can tap into whilst offering additional services – a little bit like how different websites allow you to log in with social networking sites or how one Google account can access multiple different services. You’ll be able to take your business wherever you want whilst still accessing your data.
8. Less fragmentation
Fewer systems also means less fragmentation, which is good news for real estate agents who are sick of hopping between different systems to find the best deals for customers. For customers, meanwhile, it means they’ll be able to view impartial information in the same way that the real estate agents themselves can, so they can clue themselves up on the market and get a real idea of how much a property is actually worth.
This also encourages honesty between different parties. After all, when information is easily accessed, everyone is on a level playing field. The real estate companies that prosper will be those who add value to their customers without trying to rip them off somehow in the process. Everybody wins.
As with any new technology, it’s difficult to truly envisage exactly how blockchain will disrupt the real estate industry. The early signs are here and we can pick up on the initial trends, but predicting the future is notoriously difficult and anyone who’s brave enough to try it is likely to end up disappointed.
Still, it’s clear that blockchain has a huge amount of potential to revolutionise the way we work across all industries, and not just in real estate. But as a high-value industry that’s ripe for disruption, it’s sure to be near the top of the list when it comes to innovation.
Only time will tell how far those innovators are able to take it.