Blockchain is a hot topic in the real estate industry these days, but what exactly is it, and how will it impact the future? Justin Segal, President of Boxer Property, recently spoke at Realcomm 2018 and appeared on “Building Success: A Real Estate Podcast” to further explain the implications of blockchain, what makes it appealing, and how it’s affecting the real estate industry.
What is blockchain?
Public blockchain is a decentralized network of computers owned by different entities in different locations that communicate with each other to replicate and verify data using an established set of protocols. While this technology is typically associated with Bitcoin, blockchain is pushing into new markets every day, and the real estate market is already feeling the effect.
If you take a database of information and place it on one machine in one part of the world, you run a significant risk of having all of that data stolen or tampered with in one catastrophic incident. However, those results change when you split up that database into hundreds of different pieces. Place those pieces on different machines in different parts of the world and the database itself becomes exponentially more difficult to corrupt. This is what public blockchain does in its basest form.
This decentralized model of storing data fortifies the validity of the data and also makes it easier to identify problems in individual machines when they occur. While these computers communicate with each other, they are consistently replicating data, meaning that if something happens to one sole source of data, the correct information can be cross checked, and problems or discrepancies can be resolved easily.
A greater impact than just Bitcoin
While blockchain technology has become the defacto data storage method for transactions involving cryptocurrencies, blockchain’s ability to store and use “specific use” currency – information of value that isn’t monetary – has an appeal to many different markets.
When you complete a transaction through a blockchain, the sale isn’t the only thing recorded. Through blockchain, detailed “transaction administration” data is saved onto the system. This type of data includes who made the purchase, who currently holds the currency exchanged in that purchase (monetary or otherwise), who signed which documents, and what assets were included in the transaction. This makes record keeping with large-scale transactions easier and makes the transaction itself less of a risk.
What does this look like in real estate?
For now, the capabilities of blockchain have remained largely untapped as the industry has not begun a mass application of this technology. However, blockchain could have a major effect on the industry if applied to the realm of title insurance. When buying a piece of property, the purchaser is buying a description of the property and a deed in addition to the property itself. This is an important process, and an error at this stage of buying can have significant ramifications, to say nothing of problems that may show up further down the line once the purchaser takes ownership of the property.
If one were to insert blockchain technology into this process, the parties involved in the transaction would be able to easily confirm the accuracy of the information sold and guarantee that the deed has not been sold before.
This is where Boxer Property comes in. Boxer Property realized that in addition to these applications that will take time to implement, there are ways that blockchain could be applied to real estate record keeping immediately. They began developing “hashes.”
A hash is a way of denoting a complex piece of info with a single number for the purposes of validation and not creation. Think of ISBN numbers for books. You can’t duplicate a book with its ISBN number, but you can use it to confirm that the book you bought is, in fact, the real book from the right author and publisher.
A hash is to real estate property as an ISBN number is to a book. Boxer Property takes all of the information regarding their properties from inception to the present day and breaks them down into hashes which are sold to property owners. They’re used to ensure that the current information available for a property is the same information that’s always been there, like years old utility bills or renovation history. Boxer Property uses blockchain to sell the physical versions of property as well as the information versions of them.
In addition to providing better verifiability for property information, these hashes are also changing the culture of property management. If all the information regarding a property, what’s been done to it, and whatever construction errors might have arisen in the past is accessible, then all the parties involved with these properties will be motivated to perform accurate work because the information will always exist on the blockchain.
For more information about blockchain and how it will affect the real estate industry, you can hear Justin Segal give all the details himself in episode 9 of “Building Success: A Real Estate Podcast.”