Can Blockchain Be Used in Real Estate?

Against blue and red lighting, a hand holds up a holographic representation of blockchain.

Blockchain is most commonly associated with Bitcoin, which makes sense, given their shared origin story. Blockchain first emerged as a means for storing and facilitating cryptocurrency transactions, deploying existing Hashcash algorithms and new timestamp technologies to keep everything decentralized and secure.

But recently, bold thinkers in several industries have re-evaluated the technology, divorcing it from its original use and applying it to unlikely industries. The precious commodities sector is using it to track the ethical mining and provenance of diamonds. Online gambling sites use it to enforce transparency and security. And the food industry uses it in supply chain management.

So, can blockchain be used in real estate? The short answer is: yes, it can. For a more comprehensive exploration, read below.

What Is Blockchain?

Blockchain is an immutable, tamper-proof, distributed and real-time ledger. It validates and stores transactions and other sensitive information on “blocks” – publicly visible data structures that are all but impossible to modify without express permission.

Essentially, it’s a technology that’s really really good at keeping track of things, and keeping everyone involved honest. It’s a nightmare for people who like backdoor deals, loophole exploitation and fraud. And it’s a dream for people who value transparency.

For a detailed, visual explanation of blockchain technology, watch this informative YouTube video.

Can the Real Estate Industry Use Blockchain?

As you might expect for an industry that deals in massive transactions and complex title documentation, real estate can certainly benefit from blockchain.

Here are a few ways that blockchain is currently utilized in real estate. By no means a complete list, this should nevertheless give you a solid indication of the technology’s worth to the real estate industry.

Removing Third-Party Complexities, Expenses and Opacity

Blockchain technology helps clear up some of the complexities surrounding escrows, payment, documentation, title transfers and agent contracts.

Traditionally, the tasks above are executed by intermediaries, and therefore take time, effort and –critically – money. Real estate consumers and investors can use blockchain to circumvent intermediary costs. For instance, a real estate buyer can use a smart contract on the blockchain to escrow a deposit that’s automatically released to the seller on the completion date, removing the need for a costly escrow or title company.

Similarly, the real estate digital marketplace Nobul – helmed by tech innovator Regan McGee – recently announced it would leverage blockchain to record and manage consumer/agent contracts. The company embraced the technology to bring “a new level of transparency and auditability to a traditionally opaque and disputed business.”

Enabling Fractional Ownership

Because transactions on the blockchain are instantaneous, secure and independent of protracted intermediary processes, several investors have started using it to enable “fractional ownership.” Essentially, fractional ownership – or tokenization – involves buying small shares of a property, rather than relying on institutional lenders and large personal down payments. In this way, investors can use blockchain to play the real estate market like any other stock market.

Mitigating Fraud

Finally, blockchain technology helps mitigate fraud in real estate – a persistent problem in the industry. Because transactions stored on blockchain are tamper-proof and distributed, it’s nearly impossible for bad actors to commit title fraud.

To revisit the question posed by this article’s title, yes, blockchain can undoubtedly be used in real estate. Moreover, it can be used in several ways: to manage contracts, remove intermediaries, enable fractional ownership and reduce fraud.

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