Ryan Williams, Cadre chief executive officer and co-founder, discusses the future of real estate with Bloomberg’s Caroline Hyde and Scarlet Fu from the Sooner
How will blockchain disrupt real estate?
Blockchain: A real estate industry use case?
In real estate, if you really do it in pieces, you realize that there is a reason why no one has considered these blockchain projects – because they do not really change anything. The only advantage is removal of a central authority, speed, trust.
Let’s see how we can apply the blockchain to real estate space. Blockchain could have a big impact and change the way real estate is done, but it requires big changes, not just small changes.
It’s use came across a couple of times is where you can see the blockchain as a sort of Ledger. This comparison is not entirely correct, because the accountants know that a ledger always contains debt and credit that must be in balance. The spreadsheet is, where each transaction is added to the bottom of a new row.
The term register, however, seems to be the most appropriate. Furthermore, it is often explained that the blockchain contains the registration of a transaction. So something goes from one owner to another, in other words. In practice, the application is mainly cyptocurrency. Thus the blockchain principle could be described as a “register in which transactions are recorded”.
How does it work?
Keeping in mind what is the current operation of your bank account. The bank records the transactions on your bank account. Automatically the bank knows the balance on your account. The bank therefore has the function of validating and trusting party, that you actually have the balance if you want to make a transaction. The only point is that your bank account (i.e. the register with your transactions and the balance you have) is only transparent for you and the bank.
Blockchain is a public register. In other words, everyone in the system can see your mutations. However, they do not see your name and bank account number because all data is displayed with long codes of numbers and letters (see example below). However, your “wallet” (digital wallet) is linked to these codes. To simplify your business, you can create a QR code from a code on your wallet, so you can easily scan to perform a transaction.
Below you can see a cryptocurrency transaction, which is registered in the blockchain:
The innovative aspect of this system is that the transfer of ownership can take place digitally and that is clear to everyone. So a money transaction is not only visible to you and the bank. You can simply open and view the transactions above, as shown in the image. Moreover, it is no longer the bank that validates a transaction in the blockchain, but the system itself does this. The system can determine that you are actually the owner of a cryptocurrency (in this case), because it came to you once. The system thus assumes the function of the bank.
It is important to realize that you start with transactions, always preceded by a starting point. In other words, how do cryptocurrencies enter the system to be able to transact? This is done by “mining”. This means that programmers, or perhaps very intelligent software, create Cryptocurrencies that cost time, energy, and computational power of computers. Every “miner” who created a cryptocurrency sells it to a party that wants to buy it. This transaction is partly in current currencies, with supply and demand that determine the price. But the buyer can therefore get rid of working with his Cryptocurrencies.
The term blockchain isn’t limited to a single use case of cryptocurrency. It is also not an actual store of value but the accounting and transacting of value.
Blockchain is a so-called peer-to-peer network. This means that transactions all over the world are on various databases. This forms a decentralized computer network. This makes it already difficult to manipulate it. Furthermore, transactions are stored in so-called “blocks”. These blocks contain cryptographic codes based on data in the transaction. Of all the transactions in a block code, the codes are recreated and these then form the block header. If a block is “full”, a new block is created, starting from the header of the previous one. In other words, a historical transaction can never be manipulated again, because then the blocking headers will go. And everyone in the system can therefore see.
What blockchain isn’t:
It is important to understand that the blockchain is just a cryptography-based technology, and there are actually hundreds of different blockchains being built, differentiated by use case, developer communities, and governance.
In the various articles, a multitude of applications has already been mentioned. For example, mobile property with registration (e.g. cars), stationary property with registration (e.g. houses) has identity data and aging data. The latter is still not used especially because the blockchain is currently still dealing with transactions. But the developments are rapid, so who knows what applications are possible. What appears to be an important element is that the link of validation between many transactions in today’s life can be completely eliminated.
What does a blockchain real estate market does?
The Land Registry puts all data from Indian houses and their owners into a public database. This can therefore be compared with the cryptocurrency mining principle. All of a sudden everyone can see which property belongs to whom.
Each unit of ownership would be coded with a unique identifier. Property IDs already exist in most land registry systems, so just need to migrate them to a blockchain. Subsequently, the blockchain ecosystem must have defined who the nodes are, those stakeholders that include the owner, the lender and the government.
The information is immediately validation, dates back to the past, when we used notaries for this. The properties that exist in the blockchain are called ‘intelligent property’. Property transactions are conducted through “smart contracts” – digital rules in the blockchain that process the agreement and the conditions specified. The purchase and sale could still take place through agents, can be advanced to incorporate the sales rules and automatically take this decision. The blockchain for each property grows as the transaction blocks are added.
Suppose a seller now agree with a buyer who buys the home, for a price around $30,000 (₹2,000,000). The transaction from seller to buyer is ready. The system validates these transactions because everyone can see that the house is actually of the seller and that the currencies are actually the buyer’s. After validation the transaction takes place, the house is written in the name of the buyer and the currencies transferred to seller’s name.
In the current situation, the notary validates the ownership of the house and deals with the transfer of funds, but it is no longer necessary. In other words, “the middle man” goes out. This is valid for everything that has a registration like products with unique production numbers. They can fit in the similar blockchain use cases. And these are just the first examples; the possibilities seem endless at the moment.
In short, this seems to imply that a contract is registered in the blockchain and the parties with back and forth transactions are also recorded. As a result, the content of the contracts will also become fully transparent. And what kind of revolution will this transparency mean in itself?
It is hard to say where it’s going. It is true that many and large parts are already working on applications. In addition, the tools will become simpler with the application of blockchain technology. The most obvious, for example, is the use of apps in which transactions can be performed, without seeing the technological effect in the background.
Blockchain and real estate
A separate organization has already been created for the real estate sector.
This is IBREA, the International Blockchain Real Estate Association which now has various chapters around the world.
A real estate market without agents, and a land tenure office might seem decades later, but a handful of countries have already piloted a system to register block land. Sweden became the first country to explore the use of blockchain for properties in July, 2017. At the time, the Swedish land register verified that the parties to a real estate transaction – the buyer, the seller, the lender, the government – could follow the progress of the deal on a blockchain.
What can be a first interesting development for the real estate sector is the registration of house renting in the blockchain.
Blockchain in Banking