Blockchain has been described as a technology that will ‘change the world’. It’s already causing a stir in the financial sector and with its potential to shift even major property deals online, it’s likely to revolutionise the world of property, too.
Better payments and smarter contracts
Conceptualised in 2008, blockchain has been described as a “distributed ledger technology built to power bitcoin”. The technology itself is now creating new payment methods and is driving a new era of ‘smart’ contracts, according to Ashley Perry in JLL’s Project Management team.
Blockchain platfoms now allow businesses to track and automate the fulfillment of agreements thus speeding up transactions. This opens up the possibility of creating, authenticating and auditing contracts in real-time, across the world and without intervention from a ‘middle man’. “With terms tied to the transaction, payment can only be taken if the instructions are fulfilled. This provides complete transparency to all parties and reduces the likelihood of payment disputes”, says Perry.
Added security and transparency
This enhanced security and transparency is inspiring confidence in many industries. For example Barclays has used it to process trade finance transactions which cut processing time from ten days to four hours, reduced costs, decreased risk and added transparency. In the music industry bands and artists are hoping to use blockchain technology to track who’s playing their songs and take royalties directly from their listeners, thereby usurping record labels. And in the diamond industry it’s helping track diamond cut, quality, as well as monitoring the spread of conflict diamonds from war zones.
Stumbling blocks in real estate
The property industry has much to gain from potentially faster, cheaper and more secure contracts and transactions but implementation of blockchain is not going to be easy. If you look at the construction sector for example, contracts often require certification from various approved companies and individuals, which can create long delays. Nevertheless, change is afoot.
Sweden became the first Western country to trial the use of blockchain for real estate in July 2016. The Swedish Land Registry tested how the groups involved in a property transaction – the buyer, seller, lender, and government – could track the deal’s progress on a blockchain. Due to its success, it is believed that a full-scale blockchain-based system could be implemented within the year.
Meanwhile, California-based blockchain start-up Propy has just announced its partnership with the government of Ukraine to allow foreign investors to make online real estate purchases for the first time. And in the United Kingdom, Cai-Capital is one of the real estate pioneers investigating ways to add Bitcoin and Blockchain to its accepted payments.
A new era of transactions
Like all new technologies there are unknown factors and concerns such as cyber security to be addressed. However, Perry believes that over time, trust will grow. “Conversations are starting to take place in the industry and with ever increasing demands for improvements to transaction efficiency, it might not be too long before we see blockchain revolutionise the way we do business.”
This article is based on an article first published on JLL Real Views, JLL’s global site providing expert insights on the trends and developments shaping real estate.