Most people have heard or read about blockchain and how it is set to revolutionise the real estate sector.
Many predict it will dramatically change the way we do business, record and store information. So does blockchain live up to the hype and what does it have to offer the real estate sector?
Understanding blockchain is tricky. It is the technology that underpins how the bitcoin network operates and borrows from a number of complex and difficult-to-understand disciplines, such as cryptology, gaming theory and computer science.
However, as with most technologies, it is not the understanding of how it works that is important, but rather what benefits it can offer.
It is early days, but by understanding blockchain, it is easy to envisage how the technology has the potential to be a game-changer.
Take buying a house. If land title information was held on a blockchain database, it would allow immediate access to historical information without the need to carry out searches, to get verification from third parties and to automate the sales contract via the use of a smart contract. This has the potential to significantly cut costs by removing intermediaries and speeding up transactions from weeks to days and hours.
Another obvious use is in residential lettings, where blockchain could facilitate the verification of tenant information and remove the need for referencing agencies. In the coming age of the ‘Internet of Things’, it is easy to envisage blockchain-enabled smart contracts being used to automatically control access to rented accommodation via smart locks, dependent on continued payment of rent. With the shift away from property ownership to property as a service, blockchain could remove much of the friction.
But it is still very early days. There are a number of challenges it must overcome before any meaningful impact is likely to be felt. From a legal perspective, significant changes to legislation would be required. Laws would need to be harmonised across jurisdictions to facilitate global blockchain transactions.
In addition, there are data protection issues raised by the decentralised nature of blockchain networks. With data protection regulations becoming increasingly stringent, this creates a real hurdle for blockchain applications.
While significant changes may be several years away, industry professionals (including lawyers) would be well advised to keep a close eye on future developments as blockchain moves from proof-of-concept stage through to commercial application. The speed of change is likely to surprise us all.