Blockchain – What is it and what does it mean to the real estate industry?
If you haven’t heard the terms ‘bitcoin’ or ‘cryptocurrency’ then I have solid fears about the health of your social life. It’s backyard BBQ season, Christmas parties and get togethers’ are in full swing and there isn’t a hotter topic. Personally, I am fortunate enough to have caught up with plenty of friends in the last month happy to volunteer – usually well lubricated with the good stuff – that they “know someone” or, far less commonly, have themselves “made a killing on crypto”.
For the benefit however of those who have no clue what I am talking about, very briefly, Bitcoin is a form of cryptocurrency (as is Ethereum, Bit Cash, Ripple, and some 1,350+ other cryptos).
Cryptocurrency is digital currency. Bitcoin was the original cryptocurrency and, it may surprise you, was launched way back in late 2008 by Satoshi Nakamoto as a “peer-to-peer electronic cash system”, which we now refer to as digital currency. Why is it such a hot topic? Bitcoin traded at USD$0.0025c when it was used to buy US$25 worth of pizza in May 2010 in a landmark transaction in which it was used to exchange for goods. At the time this represented 10,000 Bitcoin. Today that 10,000 Bitcoin would be worth US$161,940,000.
Graph below shows price history:
That is an extremely brief overview, however enough to have you perceived as an expert in a ‘later stage in the evening’ BBQ conversation.
I am actually not going to talk much further here on cryptocurrency, and if it doesn’t go without saying, I cannot stress enough, please do not make any cryptocurrency buying decisions off the back of anything you have read here.
This article will form the first piece of what will be a series of articles going forward on the underlying technology blockchain. It is this technology that is of particular interest to me and whilst you might reason it has been around for a while if Bitcoin was released in 2008, it is actually in it’s infancy as a technology, particularly with respect to it’s application to industry. The list of industries it has application to is being continuously built – extending well beyond finance. What is on this list already however is the real estate industry.
Whilst applications to the real estate industry really are in very early stage I will endeavor to bring you updates on – both complementary and disruptive – applications to the industry with a focus on companies emerging in the space.
What is blockchain?
Blockchain is a distributed database system. Traditional databases have all storage devices connected to a common processor. Distributed simply means that devices are not connected to a central, or common processor. Each participant to the blockchain maintains, calculates and updates new entries (e.g. monetary transfers) in the database. Each entry is called a ‘block’. As new entries are made to the transaction it effectively forms a ‘chain’ – a growing list of ordered records. Each block has a timestamp and a link to a previous block.
Built into the technology is cryptography (security built in by way of unique 13+ digit electronic keys) that ensure users can only edit the parts of the blockchain that they “own” by possessing the private keys necessary to write to the file. It also ensures that everyone’s copy of the distributed blockchain is kept in sync. Once all parties confirm a block it is effectively ‘locked down’ it cannot be altered or tampered.
As exchanges/transactions can occur digitally in real time in a peer-to-peer format, the technology effectively does away with the need for an intermediary (i.e. Banks. Light bulb moment!) and parties can effectively transact anonymously and without having necessarily established trust with the other party.
How is it being applied in real estate?
I will only cover off on one of the companies I have come across in researching the topic, in subsequent articles I will delve deeper. REX is a real estate start-up built on blockchain technology to facilitate transacting on a global property portal. Their concept is that peer-to-peer transacting will lower the cost to list and lower transaction fees on properties exchanging hands.
Interesting concept and difficult to learn too much more because they are very early stage – in fact it seems they are getting their ducks in a row to go through an ICO (Initial Coin Offering) to raise funds to actually build a product (only at concept stage). I should stress that peer-to-peer does not necessarily disintermediate the real estate agent in this case as concept would be they can list properties on behalf of sellers as is currently the case.
More to come on blockchain in subsequent articles.
Article written by Shaun Bassett