Real Estate Investor Magazine South Africa July 2018 | Page 14

TRENDING
Bit by Bit
FEATURE ARTICLE
Blockchain and the
future of real estate
BY MONIQUE DU TOIT
Y
ou’d have a hard time turn-
ing your head without hearing
someone, somewhere, talking
about blockchain. Over the course of
a year, Google searches for the term
increased by 250%, governments are
looking at ways to regulate the use
of cryptocurrency, and supermarkets
are trialling accepting payment with
e-money. All in all, we’ve entered an era
where the seemingly impossible is be-
coming increasingly probable. But just
how affected will the real estate industry
be by the blockchain and cryptocurrency
movement? The answer, largely, depends
on who you ask.
Blockchain
Richard Bradley, a director at Deloitte
offers a simple-to-understand explana-
tion of blockchain: You (a “node”) have
a file of transactions on your computer
(a “ledger”). Two government accoun-
tants (let’s call them “miners”) have the
same file on theirs (so it’s “distributed”).
As you make a transaction, your com-
puter sends an e-mail to each accoun-
tant to inform them. Each accountant
rushes to be the first to check whether
you can afford it (and be paid their sal-
ary “Bitcoins”). The first to check and
validate hits “REPLY ALL”, attaching
their logic for ver ifying the transaction
(“Proof of Work”). If the other accoun-
tant agrees, everyone updates their file…
This concept is enabled by “Blockchain”
technology.”
This decentralised ledger ensures that
new information can be added, but ex-
isting or previous blocks can’t be edited
or removed. “This is accomplished by
using cryptography to link the contents
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JULY/AUGUST 2018 SA Real Estate Investor Magazine
of the newly added block with each
block before it, such that any change to
the contents of a previous block in the
chain would invalidate the data in all
blocks after it,” explains Arthur Iinuma,
President and co-founder of ISBX. He
goes on to explain that blockchains are
consensus driven: “A large number of
computers are connected to the network,
and to reduce the ability for an attacker
to maliciously add transactions on the
network, those adding to the blockchain
must compete to solve a mathematical
proof. The results are shared with all
other computers on the network. The
computers, or nodes, connected to this
network must agree on the solution”
Lisa Stanley, CEO of OSCRE In-
ternational explains: “The permanence
of this ledger means it lives as a perma-
nent record of activities between parties.
These activities can include recording
property transfers, asset digitization,
HVAC system activities, occupancy of
cubicles, or security access. Over time,
this historical perspective can enable
you to improve your decision-making,
make decisions faster, and be shared
with other emerging technologies, like
artificial intelligence.”
That’s where the apparent fun starts.
Many experts are claiming that block-
chain will be the biggest shift seen in
our generation. More than just a vehi-
cle for a new currency or two, it’s being
claimed that blockchain will change
how we do business and go about our
daily lives.
Applying it to business
While blockchain promises to have a
far-reaching impact, not all business-
es will see the same results or even be
affected by the spread thereof. Iinu-
ma holds the opinion that the types of
businesses that will benefit from block-
chain technology are those that possess
specific qualities: Transaction-based,
benefits from public scrutiny, benefits
from history that can’t be rewritten, de-
centralization benefits the end user or
customer.
According to Tom Bill, Residential
Research Associate at Knight Frank,
it’s time to start paying attention: “As
national land registries start using
Blockchain technology, now is the time
to look beyond the hype and ask more
profound questions about how it could
influence buyer behaviour and pricing in
real estate markets.”
The first shift to pay attention to is
the rise in liquidity. Between lengthy
transaction processes and having to find
willing buyers when the time comes to
sell, liquidity is notoriously absent in
real estate. Sweden has already trialled
using blockchain technology for trans-
fers and according to Mats Snall, chief
digital officer at the Swedish Land Reg-
istry: “It’s possible to shorten the pro-
cess a lot, but one of the most successful
aspects of the trial was security and the
verification of contracts.”
According to Bill, the second and far
more influential aspect of blockchain
technology comes in the form of token-
isation. “Enabling buyers to trade “units”
in real estate online, the impact of this
on markets and pricing is potentially far
greater than removing frictions from the
sale process,” he says. He cites the exam-
ple of Estatechain - a marketplace for
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