Emmanuel Darko, distributed ledger technology expert discusses the capabilities of purchasing real estate through the blockchain
Today, it is almost impossible to hear about businesses and trade without referencing blockchain and its importance to the trading process. Blockchain has been exceptionally influential when it comes to real estate and the trade between buyer and seller.
This makes it possible to eliminate real estate agents and their (somewhat unnecessary) charges that often make up a percentage of the real estate that you are purchasing.
The most important value of the blockchain is that it gives traders the opportunity to directly share the database. With blockchain, power is decentralized and there is no central administrator or set of administrators.
These centralized methods of storing data by third-party organizations (such as banks) have been replaced with a consensus mechanism. When it comes to the purchase and sale of real estate, the blockchain has been projected to be a revolutionary factor.
One of the main cause of this outrageous (or is it?) prediction is the fact that blockchain affords traders the opportunity to be 100% liquid at any point in time.
You can make transactions worth millions of dollars (or any other major currency in today’s market) just by the mere click of some buttons, and the transactions are closely monitored without the use of any agents or middlemen.
How can the blockchain influence your next real estate purchase?
With the constant (and somewhat swift) evolution of the regulation of tokenized assets, it is possible for you to make trades in any currency with the use of cryptocurrency.
So far, the currency market has not been successful in their bid to influence the values of cryptocurrency, therefore, real estate owners can make transactions regardless of what their local currency may be.
This opens up doors for intercontinental trade and helps you ensure the purchase of that overseas real estate that you have always dreamed of.
Why consider blockchain?
Blockchain signals an imminent replacement of third-party organizations by utilizing clever cryptography. It has been projected that blockchain would have a huge impact on the future of how we buy and sell real estate, since, with the blockchain, there shall no longer be trade barriers between countries in the global market.
The blockchain is poised to bring significant change to the way transactions are done in real estate transactions. This is due to the fact that many experts agree that the current tracking systems for the purchase and sale of real estate are disjointed and inefficient.
The trade process at the moment involves some an intermediary or some kind of exchange point that takes days for the final exchange to occur. With the blockchain network, the speed at which real estate is going to be traded will be significantly hastened; hence, real estate trade can be carried out in a matter of minutes.
That’s not all; the use of blockchain can increase the efficiency in the overall trading process of real estate. This is simply because blockchain uses a transparent model to ensure accountability, as well as security.
What does the future hold?
The ‘future’ that many speak of—regarding blockchain—may be closer than we think. There is a huge opportunity for the standardizing of real estate data into a secure database. This window of opportunity opens up new ways to store information, such as land records, real estate listings, and leases.
Although these possibilities are enviable when imagined, it is going to take a lot to get from where we are today to the desired future. Although industries, such real estate, can immensely from the use of blockchain for its processes, it’ll be a monumental shift to incorporate blockchain into the real estate value chain.
Perks of trading on the blockchain
Businesses, as well as individuals, can enjoy the range of benefits that come with trading on the blockchain. These include:
- Cross-Border Transactions: Traditional trading methods often come with multiple difficulties to do with tax laws, exchange rates, difficulty in transferring funds, to name but a few. With the use of blockchain technology, these problems are non-existent through a process called tokenization.
- Transparency: Blockchain is a great way to trade due to the fact that it allows users, as well as developers, to see what is really going on. Also, this makes it impossible for anyone to alter data that has been entered into the database, making it a safe and transparent technological advancement.
- Reduced costs: Buying and selling real estate on the blockchain is an excellent way of saving on transaction costs. This is due to the removal of the third party (often a bank) and all the associated fees.
Downsides of blockchain
As great as it seems, blockchain has some hot-topic disadvantages and challenges.
The nodes that are used to maintain consensus around the blockchain are wasteful. These nodes are said to repeat tasks in order to reach a consensus and maintain the blockchain. It’s these exact nodes that the blockchain to be both unchangeable and secure but in the process, they increase processing times and electricity costs.
The possibility of human error in the computing of the blockchain database is often likely. The information that goes into the database needs to be of high quality at all times in order to maintain a high level of trustworthiness.
Wrapping it up…
The blockchain is poised to influence the way business is done when it comes to the real estate industry.
With the development of smart contracts and other similar methods of skipping the hassle of having middlemen (in form of title companies or attorneys), the blockchain is definitely on its way to reforming the way real estate business is carried out.
In the near future, home buyers will have the opportunity to complete the purchase of a home by clicking on a shopping cart on a website.
It is easy to get distracted by the numerous potentials that the blockchain holds; you may need to take a closer look at its intricacies to see the downsides to it.
Although there are certain risks involved, buying and selling on the blockchain is futuristic and it is important for individuals, as well as corporate bodies, in the real estate market to seize the opportunity and have a first-hand experience of trading on the blockchain.
Emmanuel Darko is a Blockchain technology entrepreneur and an advocate for the adoption and use of Distributed Ledger Technology (DLT). An ex-banker who has had stints in both commercial and investment banking when he worked with Zenith and Data Banks respectively. He is currently VP at ICOWatchlist.com.