Blockchain and Real Estate: An Industry Overview
Blockchain is going to change nearly every industry under the sun, but the effect will not always be the same. The big strengths of blockchain technology are efficiency, security, and transparency, and each industry will be affected in a slightly different manner.
Real estate is one example of an industry that presents a huge opportunity for the technology, with different areas showing weakness and providing a chance for the technology to reign supreme.
How Real Estate Connects to Blockchain
The fact is that distributed ledgers provide a level of efficiency that current systems lack. The technology also prevents fraud and increases trust in the system, since all the information is public. Finally, even though blockchain technology is transparent, it is also private.
Combine all these features, and you have a big winner of an innovation. One of the topmost predicted innovations is the tokenization of assets, which will lower transaction costs and open up commercial real estate to more retail participants.
The three most sought after purposes for blockchain technology are smart contracts, transfers of value, and record keeping.
Current Big Players
As would be expected, the biggest companies have the largest opportunity for growth within the space. For example, Propy was founded in 2015 and raised $15 million for a platform that allows for international home purchases. It is essentially AirBnb for foreign investors, but operates in a much more efficient manner.
Harbor fulfills a more niche function by helping list real estate and private equity assets in an SEC compliant manner. There is huge value in adding liquidity to these assets, and the ability to resell them adds even more liquidity. However, current regulations prevent the trading of these security tokens, if at least for the time being.
Finally, you have a company like Ubitquity that focuses on the record-keeping aspect of real estate, which is probably where the most inefficiencies are. The innovation here is simple: humans make errors, blockchain doesn’t. It also can’t be incentivized to commit fraud and works as an AI solution to much of the problems in the space.
What’s the Hold Up?
Right now, one of the biggest holdups is the nascent stage of the technology. No one can decide upon the proper consensus protocol, and that has slowed down its chances of being accepted by the industry-at-large anytime soon.
Processing speed is also a common objection that needs to be faced before a scalable solution begins implementation.
It is expected that the real estate industry will adopt blockchain technology in accordance with their clients’ needs. Whether occupiers or investors have adopted it will have a huge effect on their decisions to adopt it. Based on past experience, banks and insurers are likely to be some of the first to adopt the technology.
Analysts in both the technology and real estate industry tend to agree that it is reasonable to expect widespread adoption within a decade, with many more individual applications being formulated along the way.
As an investor, the best course of action is to investigate the individual use cases, and make a decision based on which one you believe will have the strongest future in each space.
Featured image courtesy of Shutterstock.