Although normally associated with crypto-currencies, Blockchain is a secure ledger system and it’s a technology base has the ability to evolve and transform a variety of business and it has the power to reinvent the property sector. Understanding why is far from simple since Blockchain technology is complicated.
In the simplest terms, Blockchain is a shared record of transactions. Anyone can hold a copy of the ledger, and anyone can read it. Any changes in the ledger automatically ripple through all versions of the Blockchain held worldwide and a locking method is employed to prevent any tampering by one party – making it secure.
Land registries around the world are interested in the technology because it could enable the ‘almost instant’ transfer of property ownership in a secure way.
One of the world’s oldest land registries, Her Majesty’s Land Registry in the United Kingdom has announced plans to create a virtual ‘digital street’ to test the new technology and has called Blockchain a “highly ambitious objective” that would require the most “far-reaching transformation in their 150-year history”.
There are a growing number of similar trials with blockchain around the globe. The Ukrainian government is hoping to attract foreign investors by adopting blockchain technologies to replace paper processes. Investors will be able to conduct transactions online using smart contracts. The technology is based on the Ethereum blockchain – the second most valuable implementation after the one used for Bitcoin. Similar projects are underway in Honduras and the Republic of Georgia.
If the technology were to be implemented for land-registry purposes, it would have several possible benefits. The automatic processing of contracts would mean that costs are reduced. There would be increased security, as identity records are tamperproof. And deal times are reduced, as a deal can be an entirely digital experience.
Blockchain puts real estate on a new footing. Since it has the potential to increase liquidity and reduce costs, some of the barriers for investors are removed. If unitization of direct property holdings can be achieved and/or if income streams derived from direct property holding can be split, it also decreases the ‘lumpiness’ of real-estate investment; the barriers between real-world holdings and synthetic derivatives start to break down, making investment liquid, transparent and instantly tradable.
However, it may be some time before this can be achieved, as further safeguards would need to be in place. In August 2017, researchers at the Massachusetts Institute of Technology (MIT) Media Lab examined the code behind the IOTA cryptocurrency, ranked at the time as the world’s 8th most popular. They quickly found a basic security flaw, and warned the developers. At the time, the IOTA currency had a market capitalization of $2 billion, yet none of the investors nor technology partners, which included a number of Silicon Valley giants, had performed adequate due diligence on the code. Joi Ito, director of MIT, cited the episode as evidence of the immaturity of blockchain deployments – understandable, he stressed, given the technology’s comparatively recent development.
The real-estate industry, meanwhile, remains interested and optimistic that flaws can be ironed out. A Royal Institute of Chartered Surveyors (RISC) report, “The Impact of Emerging Technologies on the Surveying Profession”, argues that a radical improvement in the accuracy and timeliness of reporting, a reduction in the cost of managing buildings, and a change in the way property agencies work will be seen. Real-estate professionals, the RICS says, “are likely to become either data scientists or client managers”.
In Southeast Asia, Troy Griffiths, Deputy Managing Director, Savills Vietnam has been a proponent of the new technology and believes that “blockchain has the capacity to revolutionize land transfers”.
Griffiths is optimistic about blockchain application, particularly in Vietnam. “So far Vietnam has been slow on the up-take of this new technology, but that will change very quickly. We have a large population of dynamic, aggressive, smart young people and a big start-up culture. I think we are in a wonderful position to take advantage of the new digital age.”