Most people have little idea what blockchain even is as it relates to cryptocurrency. Now that the same technology behind virtual currency is being adapted for use in many other industries, firms in the CRE sector are bracing for its impact.
What is Blockchain?
Up until now, blockchain technology has been used to secure virtual currency transactions. Each block in the blockchain contains time stamped and encrypted information about each transaction that can’t be manipulated or modified after a peer-to-peer review validates the information. Because it’s a chain, no one can go back and change records.
Each time a new action is taken, it is added to the blockchain through algorithms that legitimize each transaction. The ledger is then updated with real-time information that cannot be altered.
How does it Work in CRE?
Think about how many record keeping duties are associated with a CRE transaction. There are legal documents that have to be signed and verified, financial information shared, deeds and liens transferred and or filed. If each transaction was tied to a blockchain, it would increase transparency thereby reducing a lot of fraud that takes place in commercial real estate.
For MLS databases tied to a blockchain database, the details of every property whether or not an agent is subscribed to a particular MLS would be available for all to see and verify. There would be just one platform that would host all real estate properties, hence reducing the chances for errors and omissions. Plus, all the information would be much more accurate helping to speed up the verification process leading to faster transactions.
According to the man credited with coming up with the idea for the World Wide Web, blockchain would take the power over user information out of the hands of big corporations and put it back into the hands of the people – as it was originally intended. At the same time, he cautions that there are still inherent issues with having databases containing such sensitive information without any kind of official oversight.
How will it Impact CRE?
Based on investors, blockchain is about to really take off. Last year, blockchain startups amassed nearly $250 million from backers. Just in the first quarter of this year, that number has doubled to $500 million and counting. Projects from using blockchain to make voting more secure to automating real estate transactions through Smart contracts, the impact to CRE is coming.
In fact, GlobeSt reported the first legal real estate transaction secured using blockchain technology in the U.S. Propsy is a blockchain company that is helping to push this technology in CRE. The transaction was part of a test program between the startup and two other companies working to build a real estate blockchain sales registry.
Where to Follow Blockchain Tech Trends in Commercial Real Estate
Working out the kinks is important before CRE jumps headfirst into blockchain. Still, developments are happening all the time pushing the envelope for what is possible. If the technology proves to be able to accomplish all of the goals innovators are hoping to achieve, it’s not so far-fetched to think of a future where Smart contracts and blockchain could virtually eliminate the role of the broker and agent in CRE. Because of that, it is imperative for agents to stay up-to-date about where blockchain in CRE is heading.