A blockchain links individuals or organisations on a secure distributed computer network, allowing them authorised access to view and edit the same ledger – much like an online Google document. The value of the technology lies in its transparency and security. The blockchain ledger is extremely secure because each ‘block’ (ie each entry on the ledger) is cryptographically linked to the preceding and succeeding blocks. The blockchain is at the same time transparent because it is held on a distributed computer network, meaning that all of the network participants can ‘see’ the same version of any asset, block or document in real time.

How is this relevant to real estate?

In the current model, for a standard property transaction, buyers and sellers must go through multiple intermediaries. This process is longwinded, creates a substantial paper-trail and sometimes falls through without buyer or seller really understanding why. It is opaque, often costly, and inefficient.

The blockchain ledger can facilitate direct interaction between buyers and sellers, effectively cutting out intermediary processes and streamlining the entire transaction process. Complete, secure property transactions that mirror current processes and registrations can now happen in hours on a blockchain-enabled property platform.

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What would a blockchain-enabled property market look like?

The current UK Land Registry system is a relatively slow and cumbersome process compared to a blockchain-enabled registry with a similarly enabled market. Plans are being discussed within the property industry for a blockchain-enabled registry that would enable property to be parcelled into smaller owner portions than the current system allows – this is because the providence of a ‘block’ of property registered on the blockchain is now more easily traceable thanks to the public blockchain ledger.

With a property owner able to ‘blockify’ (register) their property into smaller, tradable instruments, they can then trade the parcels on a blockchain-enabled, peer-to-peer exchange which links global buyers to sellers directly. The transactions can be trusted because of the traceability factor built into the blockchain ledger.

Why is this important?  

This technology will have profound consequences for those involved in the property sector. The ability to divide property into tradable instruments means that property owners can very efficiently unlock equity in their assets – effectively creating a new tradable asset class. Sellers will now be able to access a large global body of potential investors who wish to invest directly in their newly securitised property instrument. The velocity and value of property transactions is very likely to increase as access to property as a form of secure, stored wealth becomes increasingly open to the global community as a new asset-backed form of tradable investment.

In this new world, buyers may shortly be faced with the enticing and very real prospect of home occupancy for just 51% of the previous asking price of the property should the value of the remaining 49% of their property be deemed attractive enough by global investors as a form of tradable stored wealth.

Blockchain is bringing transparency and trust to an industry which is overdue an overhaul of its processes and systems. For buyers, sellers, agents and intermediaries a more easily navigable market with a much higher number of cash-rich buyers with a then much higher velocity of transactions can only bring positive benefits to all those involved in the process.

Although the blockchain will mean change for all of us, it should ultimately be actively embraced for its benefits… and not feared.