The World Wide Web was created nearly 30 years ago and the private sector was quick to capitalise; there was the first secure online transaction in 1994 and the first internet banking service that same year. eBay.com and Amazon.com arrived the year after and since then, digital commerce continues to grow and this revolution has introduced more choice, more speed and greater convenience into the world of business.
The technology behind the World Wide Web allows information (hosted in databases and transferred across the Internet) to be effortlessly copied, linked, searched, used for many different purposes. This is very useful for everything from streaming video to sharing digital documents. However, the technology behind the Web does not capture many properties we require for conducting business - for example ownership and identity. If I hold a deed of ownership, I want to be able to prove that I am the sole holder of this deed, and prevent it being duplicated, or used as the basis for a fraudulent claim.
The Blockchain is a technology that permanently stores transactions in a way that cannot be later erased but can only be sequentially updated, keeping a never-ending historical record. It builds upon the World Wide Web but allows us to rethink how we record transactions, store data, and evidence ownership.
There are several different ways to think about Blockchain; technically, it is a back-end database that maintains a distributed ledger that can be inspected openly. Trust in the integrity of the ledger of transactions (or Blocks) is maintained using cryptographic proofs, and the record of trust is maintained by a network of (trusted) computers (honest nodes) that ensure the security and governance the information on the network. From a business perspective the Blockchain is an exchange network for moving transactions, value, assets between peers, relying only on the integrity of the network - rather than a trusted intermediary like a Clearing House, an Exchange or a Registry.
Today, we “Google” or search the Web for everything, mostly information or products. In the future, we will be able to perform the equivalent of “googling” on the Blockchain to verify records, identities, titles, contracts, and other valuable asset-related processes. Potentially we will get to the point in a networked economy where there is a digital mechanism for ownership for everything, and a digital record of ownership that mirrors our non-digital assets.
The real estate industry is a rich source of potential applications for Blockchain technology as the industry is characterised by fragmentation in processes, services and firms. There is frequently a disconnect due to the lack of a single open and trustworthy source of information across multiple complicated supply chains. To give an example project, the HM Land Registry’s "Digital Street" initiative is creating a digital register for a small selection of properties, which is a first step towards having a register that is fully machine-readable and able to be updated instantly. The goal is to explore how a digital register might enable new business models to make conveyancing simpler, faster and cheaper.
Furthermore, the construction industry has become increasingly litigious as projects have larger sums at stake, and where contractors and sub-contractors are forced to price their services more competitively. Blockchain has the potential to curb this current trend by creating a ‘Panopticon effect’, where all parties' behaviour is moderated as they know that there is the possibility that their conduct will be properly observed at a later date.
Finally, the Internet of Things (IoT) is changing the way assets and buildings are instrumented and serviced. Through the use of sensors and smart appliances, Blockchain technology could support the feasibility and reliability of IoT applications during both construction and management. Creating a digital signature or “DNA” of a building that persists across the full life-cycle of multiple owners, occupiers and service providers.
We are at the very early stages of exploiting this technology and whilst lots of high-profile projects have been announced many have not materialised yet. However, the Blockchain is simply part of the continued evolution of Internet technology, similarly to the Web, used to support the continued growth and prosperity of our businesses and society.
Dr Alastair Moore is head of Machine Learning at Mishcon de Reya, a Faculty Member of the Center for Blockchain technologies at UCL and senior teaching fellow at the UCL School of Management. He is also pathway leader for Construction and Property Entrepreneurship at the Judge Business School, University of Cambridge.
The ideas presented here are explored in more detail in The Business Blockchain, by Vitalik Buterin and William Mougayarn, 2016. More information on applications of Blockchain in Real Estate can be found at the UCL Construction Blockchain Consortium which supports knowledge transfer and assess and tests commercial services and technology www.constructionblockchain.org/