Understanding Blockchain’s Possible Impacts on Real Estate
The George Mason Center for Real Estate Entrepreneurship (CREE) hosted a class on “How Blockchain Will Disrupt the Real Estate Industry” last May 22 at Hazel Hall at the Mason Arlington Campus. The class was held due to high interest from real estate professionals to better understand blockchain technology and its possible and most probable applications in the real estate industry.
Many articles have recently appeared in industry publications about how blockchain technology will propel the real estate industry into a new world of faster, cheaper, safer and more transparent property transactions with significant changes to the traditional roles of third party intermediaries such as brokers, title companies, attorneys, and lenders. CREE hosted this expert panel of professionals working on actual real estate blockchain projects to explain the basics of the technology and to present some applications being currently tested.
The first speaker was Todd Miller, the Vice President for US Business Development of ChromaWay, a Swedish-based blockchain technology company. ChromaWay is introducing blockchain and smart contract technologies to facilitate conveyance and title processes with real estate entities, land registries, and banks in Australia, Brazil, Sweden, and India.
Todd provided an overview of the history of the distributed ledger technology which is the basis from blockchain. He explained how this new decentralized way of storing and maintaining data allows more secure transactions without the necessity of a trusted third party to hold and update information. Blockchain technology enables users to share their ledger of transactions. Records of transactions are distributed to all participants in a given network, who in turn use their computers to validate the transactions. No third party intermediary such as a bank or central clearing center is needed. Encrypted blockchain records can only be updated by consensus of the network, so are difficult to hack and change. Information can never be erased – providing a detailed audit trail of all associated transactions.
The second speaker was Drew Hinkes, an attorney and recognized authority on legal issues related to the emerging digital currency space developed using blockchain. Drew is also a co-founder and the general counsel of a start up investment bank, Athena Blockchain, focused on tokenized investment products. He is an adjunct professor at the NYU Stern Business School and the NYU School of Law, where he co-teaches “Blockchains, Digital Currencies and the Future of the Financial Services Industry” to law and MBA students.
Drew cited several applications in the real estate industry for blockchain technology which are in the early stages of being tested in pilot projects. “Smart” contracts are applications that self-execute and create data on transactions (i.e. payment for a sale or transfer of property title or the return of a security deposit) provided certain conditions are proven to have happened. Updating land title records is another application where changes in ownership, lenders, and other encumbrances to property title can be recorded more efficiently and securely with blockchain technology. A pilot project with the Swedish land registry was presented. Finally, “tokenization” or the conversion of property ownership into tradable tokens representing fractional ownership and created and maintained with blockchain technology, was also discussed as an emerging application.
Both speakers acknowledged the need to broaden efforts to educate the real estate industry on what blockchain technology is and to address the many misconceptions that exist. The technology is in its very early stages of development, despite the attention in the media around more well-known applications such as Bitcoin crypto-currency. Real estate organizations should continue to learn more about the technology and monitor the development of applications, to be ready for the benefits and changes that this new technology may bring.
Trackback from your site.