Recently, while taking a break from Zoom calls, a video popped up in my Twitter feed from two Cryptocurrency industry leaders — Tyler Winklevoss (Facebook inventor and founder of key crypto products) and Brendan Wallace (PropTech Fund Fifth Wall) discussing that this will be the year that the real estate industry finally starts leveraging the blockchain.
I agree — a number of PropTech businesses (including mine) are using blockchain at their core, and real estate professionals are finally starting to see the benefit. So I thought it would be a good time to dispel some of the myths:
Myth No. 1: Blockchain is great in concept, but will take 20 years to implement
No, blockchain in real estate is not just a concept anymore, it’s happening. Deeds are being recorded on blockchain via Smart Contracts and HELOCs are being done via blockchain as well. Billions of dollars in real estate volume are being recorded on blockchain, but many clients and real estate professionals simply don’t know about it. Why? I can only answer for my company: We don’t talk about blockchain because to our customers, it’s just another piece of the secure infrastructure used to record and manage title and data.
Myth No. 2: Blockchain doesn’t make sense for real estate because it’s a physical asset
Real Estate and blockchain are actually a perfect combination. Real Estate is an immovable asset with complex ownership chains that could benefit immensely from a better “tech vs. paper-based“ system. PropTech companies are leveraging blockchain to simplify the home search process, title management, transaction management, and payment transfer. The National Association of Realtors has been a vocal advocate of the potential of blockchain and launched an educational program about blockchain nearly three years ago.
Fractional ownership is also considered one of the “next big things” in real estate, yet the current system isn’t set up to support it. Blockchain, which tokenizes property, makes fractional ownership much easier to execute and manage.
Myth #3: Blockchain isn’t secure and is susceptible to hackers
Blockchain is actually a decentralized system — no single party is in control and even administrators don’t have the ability to change the information recorded in each chain. This system actually makes blockchain technology MORE secure than current processes. In fact, the nature of blockchain ensures that even if a breach occurs, there is an exact record of everything that was fraudulently changed. For example, if hackers are able to access a blockchain-based transaction management system, there would be a 100% accurate record of the interference, exactly what happened and when. This is not the case with a traditional database where, when hacking occurs, there is no reliable record of the event.
Myth #4: Using blockchain will require lots of regulatory changes.
Blockchain is simply another way of exchanging and managing data. There are no regulatory changes necessary for it to be widely used during the buying and selling process. Regulators already view real estate assets offered via security tokens as financial instruments, similar to traditional equity or stock holdings. And, many U.S. federal and state regulatory bodies have passed blockchain-related legislation, with bills addressing understanding about cryptographic signatures, smart contract standardization, and record-keeping.
Myth #5: Blockchain is expensive and slow.
Blockchain-based applications in real estate aren’t any slower or more expensive than other real estate software applications, and most charge standard licensing fees. Ultimately, blockchain-based transaction software could be less expensive and faster since blockchain could eliminate many of the time-consuming steps in the real estate purchase/financing process.
As customers become more tech savvy, and blockchain grows in popularity, innovation and desire will drive demand – and companies investing in this technology today will find themselves better positioned to support these issues tomorrow.
Natalia Karayaneve is the CEO of Propy (propy.com), a proptech company that makes property purchase transactions easier and more secure by bringing the entire offer and real estate transaction process online and recording them on the blockchain. She is an award-winning software engineer, as well as an expert in blockchain, cryptocurrency, and the token economy for physical assets.