Sally Davies in the FT Tech Report states that “Blockchain is to Bitcoin, what the Internet is to email”. Patrick Spens of PwC claims that it will revolutionise the way we transact much like the internet revolutionised the way we exchange information. We are certainly seeing some of that impact in the real estate sector, especially when it comes to land registries. In Honduras, the land registry used to be held in a central database which many government employees had access to. Unfortunately, this meant that corrupt officials in the equivalent of the Home Office could log into the system and transfer the deeds of desirable properties to themselves or to shady associates. When the property owner complained and went to court, the deeds were not in their name so there was no recourse.
By using Blockchain, a form of ledger on the web where a copy of the same ledger is stored on multiple computers, the Honduran registry was secured against this type of theft. When a transaction occurs all copies of the ledger are updated with the same information at the same time and there is no master copy. Since there could be hundreds or thousands of computers with a copy of the ledger, the system is not hackable.
It is not just in the developing world where Blockchain has been adopted, for example the Lantmäteriet (Swedish Land Regsitry) recently started to test Blockchain technology to register land and properties.
The goal, according to Mats Snäll (Lantmäteriet’s head of development), is to reinvent the way land titles are registered. The current system uses paperwork and he thought it would be a good idea to see if the current process was possible to change for the better.
In the last year or so I have seen a massive increase in Blockchain interest in the UK Real Estate industry. For example in October 2016 Datscha UK hosted a Blockchain presentation with guest speaker Patrick Spens and we had around 25 delegates. Six months later and in conjunction with the Society of Property Researchers we followed up with another Blockchain seminar and had over 125 delegates. Questions that arose included those relating to security, application, adoption and benefits.
Blockchain in countries such as Brazil, Georgia and the Isle of Man has either been adopted or is being experimented with to register land. In countries that are predominantly rural and unregistered there is a great opportunity of include large swathes of land into the economic system.
Perhaps the combination of Blockchain and ‘What Three Words’ (an organisation that has divided the world into a grid of 3m x 3m squares and assigned each one a unique 3 word address) will make it much easier to officially register land parcels and property. The benefits range from being able to mail goods, raise funds by remortgaging, less fraud and a benefit for government is the ability to tax registered land.
Since Blockchain was conceived there have been questions regarding security. However, to put security into perspective the vast majority of people in the Western world currently rely on the chip & pin payment system which can be compromised in under 10 seconds with the right software.
Of course there are some disadvantages associated with Blockchain. These include potential high infrastructure costs due to needing multiple computers in the chain, potential performance issues partly caused by the need for every node in the Blockchain to be independently processed, being at the mercy of slow internet connections and regulation in many countries remains unsettled which could hamper widespread adoption.
Nonetheless, the potential for Blockchain is vast because according to Proptech commentator James Dearsley anytime an intermediary can be removed it has the capacity to greatly reduce cost, save a lot of time, lower risk and increase transparency.
Olly Freedman MSc MRICS
Director of Sales, Datscha UK
Olly is the Director of Sales for Datscha UK; a web based solution for the real estate markets in Sweden, Finland and the UK. He is a member of the Royal Institution of Chartered Surveyors and has an MSc degree in Information Systems and Technology from London's City University.