Since the inception of the blockchain, its uses have proliferated in various industries, such as medical data storage, air flight security, and banking. Its utilization of elliptical curve cryptography helps people to transfer sensitive information from one person to another safely and efficiently, and blockchain technology applications are set to revolutionize the way in which real estate transactions are handled. In this post, we’ll discuss two key areas where change is already happening.
Transmission of Information
The current MLS system, or multiple listing service, exists to provide real estate agents with a means of assisting one another with selling properties, and it provides a platform with which to share information. Real estate agents share their earnings with those that can produce a buyer, and it benefits sellers, as they will benefit from numerous brokers attempting to sell their properties.
The blockchain system does not rely on a centralized hub with which to share information, as users all have access to the entire ledger of transactional information. Currently, for example, title transfers are run through middlemen before they are secured, and the blockchain could enable homeowners to conduct their own transfers quickly without involving a third party. This has huge ramifications, as escrow companies could easily become obsolete.
The blockchain facilitates peer-to-peer transactions, as its encryption system and verification method is secure, meaning that settlements can be expedited, as it requires less time to complete transactions. This technology also provides a means of storing data, such as property records, deeds, plat information, surveys, and title search information.
It is thought that the blockchain may become an incorporated part of the MLS, and homeowners may be able to cut costs on attorneys’ fees as well. How these developments will ultimately play out has yet to be seen, but it promises to add a level of efficiency, transparency, and autonomy that has hitherto been unheard of in the real estate world.
Tokenization of Real Estate Assets
One central issue with real estate planning and development has been the absence of liquidity. Long-term projects are often difficult to finance, because investors must obtain significant capital without the benefit of seeing profits for, potentially, a number of years. In the 1980s, securitization sought to offset this by creating securities undergirded by underlying assets.
The problem with this now outdated system is that the verification and analysis of assets and other related information is costly and time-consuming. This presents significant challenges for the originator, and the blockchain opens up significant opportunities in this area.
Blockchain technologies enable firms to distribute shares of an ongoing project in smaller amounts using tokens, providing a means for more people to invest. This method eliminates the need to spend vast sums of money to create and purchase financial instruments, and it can be done more quickly as well.
Benefits of the Blockchain Ledger
The blockchain allows for transparency across the board while keeping sensitive information private. This is done with the use of public keys that are encrypted into a hash signature and sent, along with the user’s transaction amount and timestamp, across the internet for specialized computer nodes to verify.
This process is called mining, and it enables the blockchain to authenticate transactions, as the complex mathematical formulas that confirm hash signatures require significant computing power and can often take intricate computer systems roughly ten minutes to complete. When Bitcoin was initially created, it needed a ledger that would prevent double spending of coins, and the blockchain was invented for that reason. In a real estate application, this feature is particularly important.
The advent of using blockchain technology to revolutionize the real estate market has experts excited to see the unleashing of the sector’s full potential. It is currently estimated that $237 trillion exists in the field, much of which was largely untapped. It is hoped that the blockchain will lead to a boom in real estate investment and profitability.
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