Blockchain is the technology behind Bitcoin, a decentralized electronic currency. As stated by the Economist in October, 2015: “The blockchain lets people who have no particular confidence in each other collaborate without having to go through a neutral central authority. Simply put, it is a machine for creating trust.”. The value of a Bitcoin that year had been “pretty stable, at around $250.” Today’s rough value is give or take $6,500. Blockchain is a technology that does, in fact, allow senders and receivers to complete transfers of a token—currency, a contract, or otherwise—with tamper-proof security in a public ledger that is controlled by no singular entity. The possible uses of this technology are reaching a myriad of industries, and there is significant opportunity in real estate.
As a trusted and transparent technology, blockchain is being explored as a way to track land registries in several countries, and the Republic of Georgia became the first national government to secure official actions using blockchain. A significant benefit of such software on such scale is that there is no single point of failure. Cook County, Illinois, ran a pilot using Bitcoin blockchain on a public ledger to convey property and register liens in 2016. Besides allowing for essentially tamper-proof exchanges, such a public ledger could reduce transactions costs through significantly increased efficiency and improve accuracy.
John Mirkovik, deputy recorder of deeds for Chicago’s Cook County pilot, both sees the pitfalls and possibilities in the emerging technology: “Getting people to do something new is not easy,” he said. Still, he added, citizens and politicians should push for blockchain as a “good government” issue, making it “a populist technology.” Yes, there are pitfalls—or at least significant difficulty. Namely, all those records being brought to the technology replacing the existing records that exist in paper and older, inconsistent electronic formats. In Cook County’s pilot, residents purchasing a home were given a digital token (with a traditional paper deed) that represented their transfer or purchase. But that process only accounts for new records being created—not existing title records that number in the thousands for Cook County, let alone hundreds of other counties across 50 states. Digitization of all such records nationally began in the 1980’s, and still hasn’t been completed.
Title transfer is arguably the quickest identified use of blockchain in real estate. However, there are other uses. For one, a multiple listing service, or MLS, that brokers use to list and search for sale or lease properties on a blockchain ledger may have the potential to revamp a currently fragmented system. Currently, MLS’s vary between regions across the country, and are typically subscription- to search. In commercial real estate, where CoStar has become the premier centralized listing behemoth, a decentralized and scalable blockchain based listing service may offer brokers a lower cost alternative than this one monopolizing database. An intrinsic issue that brokers see in these separate, competing databases is that listing information is often not updated, and not verified. A decentralized blockchain ledger would rectify that issue, by ensuring only verified blocks (property data or listings) enter the chain.
Is blockchain going to revolutionize real estate? A Swedish company, Lantmäteriet, began testing blockchain-based real estate transactions (title transfers) in 2016, just as Cook County did. Like Cook County, Sweden is looking for other ways to implement blockchain technology to improve government agencies and processes. With tested and proven success, it does seem possible, albeit far off, for the real estate field to revolutionize.