In tech, “early adopters” are those who latch on to new technologies and learn how to capitalize on their benefits, pioneering concepts and gadgets for the rest of the world. Blockchain technology had its early adopters, to be sure, but most of the commercial real estate world (and a good portion of the overall business world) has ignored the technology, generally assuming that the passing fad would go the way of Betamax video cassettes.
Based on our research, we think blockchain is not only here to stay, but could also give your commercial real estate practice a serious boost. Read on for an explanation of this technology that sets the table for a series of blog posts in the coming weeks.
Blockchain (not Bitcoin)
Blockchain technology has been around for just over a decade, yet many still misunderstand what it is and how it’s used. Cryptocurrencies like Bitcoin, Ethereum, Ripple, and others, are not blockchain—they are allowed to exist because of it.
Blockchain is a database, or even more simply, a “ledger” of transactions. This type of ledger is decentralized meaning no one organization or individual controls it. The ledger’s validity and security exist due to that decentralized nature, with information contained in thousands of computers across the globe, all at the same time. The ledger’s data cannot be edited or corrupted because of this.
Why CRE should care
While there’s no way to fully unpack this in 500 words, the applications are staggering. If you can think of a single time a transaction was 1) difficult or 2) complicated, the value of blockchain will become more and more clear.
Competitive advantages in the forms of rental rates, closing costs, legal fees and other, can now remain private, locked up on a ledger only chosen parties can see. Secure “smart contracts” based on blockchain tech have the potential to become the norm in many steps of the process. With these potential changes, CRE professionals and firms should learn how to use the technology to their advantage to keep the plagues of inefficiency, inaccuracy and fraud at bay.
In a 2017 report, Blockchain in Commercial Real Estate: The Future is Here, Deloitte notes six main blockchain opportunities:
- An improved property search process through a blockchain-based MLS.
- Expedition of pre-lease and financial evaluation through blockchain-based digital identities of properties.
- Ease of leasing and cashflow management through transparent, efficient smart-contracts enabled by blockchain.
- Smarter decision-making with high-quality data from a shared database.
- Transparent and cheaper property title management with reduced fraud and simpler title records and checks.
- Efficient processing of financing and payments using blockchain-enabled smart contracts and digital identities.
“Insufficient knowledge about the technology is Blockchain’s biggest issue.”
The largest hurdle to blockchain’s adoption within CRE is our own apprehension about a seemingly complicated technology. But thankfully, change is possible with time and patience. Let’s give ourselves some of both.
Blockchain, at around 10 years old, is in its pre-teen phase. Like humans in that phase of life, it’s still prone to self-exploration and a changing definition of itself. While there is “significant potential to drive transparency, efficiency, and cost savings,” according to Deloitte’s report, we still have time to study, mitigate a few eye-rolls, and examine our findings.
In the coming weeks we’ll explore these concepts in more depth. In the meantime, more information can be found using the cited links below.