Transactions drive the property market. Simple. When buying or selling a property, the payments involved are numerous. In my previous post, I wrote about how the property market is being affected by virtual reality. This involved the designing, viewing, and communication aspects, but what about the money side of things? In this post, I will talk about The Blockchain.
Essentially, The Blockchain is a public record of online transactions. These transactions are tied together and distributed across a network of people that will decide if the transactions are valid. These people are the witnesses to transactions, and I’m talking possibly millions. Satoshi Nakamoto developed this hack-proof system. However, this is a pseudo name and is either used by a single person or a group of people.
How does it affect the property market?
The Blockchain system makes it possible to make direct transactions. This means companies and consumers to make large payments without going through an intermediary. Property would be sold quicker and for a lower price. By taking banks, brokers, the government, and other entities out of the picture the process can become less tedious.
How can The Blockchain be applied to the property market?
The Blockchain has incredible potential, and it is not to be confused with cryptocurrency. Remember, The Blockchain is a system that keeps a record of transactions and is not the payment itself. If this system was to be applied to all aspects of the property market, smart contracts would be the centre of attention.
This new technology could make the home buying or selling process as easy as pressing a button. Hence why the property market could fall into the category of “online shopping”. This is possible, as a record of the transaction would be copied into hundreds of thousands of computers. Effectively, this reduces time and cost.
Another use for this system in the property market is tokenization. What do I mean by this? In other words, it means replacing portions of assets with tokens using cryptocurrency and then storing this onto The Blockchain. This is done through secondary trading, but there are a handful of start-up companies like Templum that provide this alternative trading system. Putting this into context, it means people can sell a percentage of their home to get extra cash or buyers can use it as an investment opportunity. Gone will be the days of advertising with “No onward chain!”.
Additionally, other companies like JetClosing explore the possibility of keeping a property’s title, deed, title insurance and other relevant documents stored in The Blockchain.
What are the pros and cons of The Blockchain?
The main benefit of The Blockchain is decentralization. With data being stored in hundreds and thousands of computers, it is virtually impossible to hack. Recently, a bank was hacked so the hackers had control of and access to all online operations. The Blockchain doesn’t fix this, it eliminates it. By making transactions direct, a bank is not needed. This gives buyers peace of mind and added confidentiality.
Additionally, the possibility of fraud is reduced. Due to the fact that everything is handled by the system, fraud is almost impossible in The Blockchain. However, the adoption of this system in government entities would cost a lot of money, money that most governments are not willing to invest. Transactions are also completely irreversible, with no guidance on what to do if a mistake is made due to there being no middle person.
Many people consider the anonymity of The Blockchain a perk, however, it is important to remember that anonymity can be used in a negative way. If hackers find a way to hack The Blockchain, millions of pounds could be at risk of being lost forever.
Is The Blockchain a blessing or a disruption?
The Blockchain is an innovation. Due to this system being so recent, its potential hasn’t been explored completely. There are many ambitious ideas presented by various start-up companies. However, it has not been made popular amongst your everyday people. This is likely due to the fact that it seems complicated, but really, I believe it would make transactions a lot easier.
As of right now, people may see The Blockchain as a disruption because they believe it has no future inside the property market. I actually consider this a valid opinion, highly due to the fact that implementing this system would make a lot of jobs redundant. On the other hand, The Blockchain is a step for change, and in order to keep up with the competitive markets, the property market will have to adapt and develop. Once it is polished and made popular, I believe The Blockchain will hold a lot more potential and control over payments.