BLOCKCHAIN in Real Estate
A blockchain is an online ledger of transactions maintained by a network of computers, which gained prominence as the technology that allowed digital currencies such as bitcoin.
Blockchain verifies transactions by recording activity on a continuously updated digital ledger, with no central point of control. The technology has become increasingly popular throughout the supply chain and logistics worlds, but there’s still confusion around how exactly it can help managers in their day-to-day jobs.
Below, explore the four most common applications of blockchain in the supply chain – smart contracts, Transparency, fraud and theft prevention, and transaction processing.
1) Smart Contracts
Smart contracts, such as Purchase Offers, Rental Agreements, Purchase Offers, Addendum, Inspection Requests and reports, which live on a blockchain, are digital, self-executing contracts that allow for speedy, streamlined transactions.
Here’s how they work: Seller/Owner places property for sale or rent. Buyer/Renter finds property online and submits a Smart Contract Offer to Owner/Seller, Owner/Seller receives Smart Contract Offer and either accepts offer or submits a Smart Contract Counter Offer, Once Buyer and Seller agree on the terms of a transaction, payment, and other contingencies, they’re stored in the blockchain as a unique code via a Smart Contract Purchase Contract. This allows payments to be triggered automatically when specified conditions have been met. For example, after setting up a contract with a Seller, a Buyer can put a payment into escrow. Once the Seller confirms receipt of Earnest Money Deposit( EMD), the Purchase Contract can be ratified automatically and contingencies met and closed by existing Escrow/Closing Attorneys using their traditional processes on a Blockchain Escrow system.
This helps ensure all steps in a sale are carried out efficiently and creates trust among all parties entering into a contract. By cutting down on the risk of errors, delays and nefarious activity, costs can also be reduced—whether related to mitigating mistakes or employing intermediaries to carry out payments.
Because all parties given access to a blockchain are able to view the same data as it’s updated in near-real time, it’s easy to track all contingencies from initial purchase offer to final closing.Having this kind of visibility into every activity and transaction can provide users with the full story behind a property sale.
Because blockchain is a continuously synced ledger—updating in near-real time as transactions and activities are uploaded and recorded—real estate parties no longer have to hunt down the history of a property transaction’s movement step by step, party by party. This transparency cuts down on delays and associated expenses and can eliminate the need for costly intermediaries hired for oversight.
Property Management can also be improved, as rental companies are better able to forecast future demand, reducing the risk of excess inventory.
3) Fraud and Theft Prevention
In complex, Traditional Real Estate property processes with many moving parts, it can be nearly impossible to stay abreast of every interaction. Unfortunately, this can be an open invitation for fraud and theft. Blockchain provides great trace-ability and transparency, so all users can feel confident that all parties in the transaction have carried out operations as specified and are complying with contingencies.
If the security of the database owner is compromised in a traditional centralized database, then the security of the ledger may be compromised as well. With blockchain, no single party has ownership; all partners view and verify uploaded data, and the entire network establishes a set of rules by which batches of data are automatically validated or rejected.
Because each block, or batch of data, is linked to the one preceding it, tampering is almost impossible.8 This brings about a high degree of security, making it very difficult for hacking or tampering to go unnoticed. With the risk of fraud and theft reduced, the time and money spent mitigating such issues are greatly reduced as well.
4) Transaction Processing
Traditional, paper-based transaction processing throughout the process chain is often slow, inefficient and error-prone. With these setups, each party records their transactions for uploading onto a centralized database, owned and controlled by a single entity. When multiple parties are involved in multiple locations, it can be difficult to process all of these transactions quickly and accurately.
Blockchain, on the other hand, allows all parties, Buyer/Seller/Escrow/Inspectors. etc., to view and validate the same information at the same time, creating consensus and reducing the risk of disputes. This speeds up transaction processing, while the unalterable nature of Blockchain enhances security.
Blockchain can replace time-consuming, traditional paper-based processes in the world of real estate. With blockchain, intermediaries are no longer needed to process and cross‑reference complex transaction contingencies, and waiting for payments to be processed becomes a thing of the past.
Learn More About Blockchain
As blockchain becomes more common throughout nearly all facets of the industry, supply chain managers are taking steps to learn about the basics of the technology and what it can do for their business. Smart contracts, tracking, fraud and theft prevention, and transaction processing are just a few of the ways supply chain and logistics professionals can begin applying blockchain.