Real Estate Investor Magazine South Africa February/ March 2020 | Page 8

Direct your property investment question to [email protected], go to our Facebook page or participate in our regular Facebook LIVE interviews to ask your questions Using blockchain in real estate transactions Q How will blockchain change commercial real estate transactions in the future & how will blockchain make the due diligence of an investor easier? CAREL DE JAGER Consultant at The Blockchain Academy A A blockchain is essentially a place where digital data can be stored. But what makes it unique is that it is decentralised. It functions according to a set of rules for adding and removing data, yet it has no owners and is not stored on any single hard drive. The first and most obvious use case of such an exceptional database is a financial ledger. The utopia of real sovereign money with a fixed monetary policy can be accomplished for the first time in history. The mere fact that Bitcoin is still not dead after 10 years shows us that it works. But a decentralised database can be useful for much more than money. A promising application developed by big corporates include identity management – one of the biggest barriers to progress in the modern world. Governments are generally poor at recording, maintaining and protecting identity systems. A self- sovereign identity system is one where an individual, company or robot records and maintains its own identity on a blockchain, and the role of government is reduced to the simple act of verification. Other interesting blockchain use cases include insurance (through smart contracts), voting systems, healthcare, intellectual property, accounting and supply chains. From smart rental contracts to transparency in all areas, the real estate industry stands to be disrupted as well. However, none as much as the Registrar of Deeds. A property registry is an obvious database that 6 FEBRUARY/MARCH 2020 SA Real Estate Investor Magazine would benefit from decentralisation. On a high level, the deeds office maintains a record of property ownership. This record is opaque however, with frequent and costly disputes. It is not scalable and built on a foundation of fragile technology. A blockchain on the other hand would produce an unambiguous record of ownership. A simple smart contract would govern changes in the record, replacing the trust provided by a conveyancer. Transferring a property would therefore be as quick and costly as sending an email. Blockchains and smart contracts also allow for infinite complexity, meaning that a full title property with thousands of owners is possible. Imagine holding a title dead for a single square cm of property, bought for R5. Since the recording and change of ownership is free and instant, this is possible. A South African founded company called Fraxeum has already laid the groundwork to enable this. Blockchains have the ability to make any asset liquid and like the internet. It has no apprehension for a geographical boundary. If a deeds registry is recorded on such and regulators eventually wake up, it would open ownership to a global market with zero barriers to entry. This has immense consequences for the industry. When a property can be sold and settled instantly (potentially several times per day) to any of the 5 billion adults in the world, its real market value will be realised. Debt, risk and ownership would be redefined.