'What’s blockchain?' is a question that we’ve increasingly heard within the property industry over the past year. Admittedly, it is something that I knew very little about when someone at Barclays Techstars first mentioned it to me in 2015, but as news coverage of blockchain technology being adopted by more and more businesses has increased, I thought it is about time to outline the basics of what it is and share the impact we think it could have on the property sector.
In simple terms, blockchain is an super-secure way of recording transactions and contracts and transferring data, but – and it’s a crucial but; one that makes blockchain such a game-changer – the information it holds is not held in one place. Instead it is broken down into thousands of tiny ‘blocks’, encrypted using advanced mathematical algorithms and stored on multiple computer servers, linked together in a ‘chain’.
In theory, this makes a blockchain impossible to hack. Once a block is added to the blockchain ledger it’s extremely difficult to alter as all parties involved in the network have to run algorithms to evaluate and verify the proposed transaction against the existing blockchain. If a majority agrees that the transaction is legitimate and matches previous activity it will be approved and encrypted into a new block added to the chain.The blockchain thereby becomes a mutually agreed, highly accurate record of activity, visible in real time to every participant, but highly secure.
Great, I hear you cry, but what relevance does this have to the property industry?
In essence, blockchain has the potential to transform and improve the way we do business, how financial markets work and – ultimately – the space demands that finance-related organisations will have in the future. Looking at the transactional side: buying or selling an asset on the traditional real estate market is not known for being quick and easy but blockchain can speed up some of the most laborious parts of the process.
Take, for example, the verification of title deeds. Holding title data on the blockchain would allow them to be checked and transferred quickly with less opportunity for fraud or error, which could possibly also lead to reduced insurance costs. Secondly, it could allow funds to be transferred instantly and securely around the world, taking many of the issues around calculating exchange rates and taxes out of the equation, and minimising the potential for theft or fraud.
In terms of property management, rental payments tracked on the blockchain will be fully traceable, simplifying the auditing process and minimising the risk of errors. Likewise, service charges can be automatically calculated, invoiced and paid. There is even the possibility of setting up full contracts via the blockchain, which are digitally signed and whose terms are automatically enacted – for example, rent payments taken or deposits refunded – via the blockchain.
Blockchain may be the new kid on the block, and is still being tested, but it is increasingly being looked at as a potential solution to some of the most frustrating issues property professionals face.