Blockchain is about to revolutionize the Commercial Real Estate industry. Are you ready?
If you don't know what blockchain is yet, don't feel bad. You're not alone.
Marco Iansiti and Karim R. Lakhani’s piece “The Truth About Blockchain” describes blockchain as "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”
A more technical definition is found in Wikipedia: a blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a digital fingerprint of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data.
While this technology will reshape the world of Commercial Real Estate in myriad ways, here are two of the biggest I foresee:
First, blockchained financial transactions utilizing cryptocurrencies will eventually replace traditional financial transactions. This shift will expedite the CRE acquisition process and reduce investor costs by cutting out the middlemen. (Or, at least, reducing the number and type of middlemen.) Early adopters will include crowdfunded REITS and online auctions. Think it will never happen? Suit yourself. It already is.
Second, as all property data becomes digitized, so shall the information become part of a blockchained property record. Things like transaction data, blueprints, ALTA surveys, environmental reports, historical imagery, tax records, and anything else that should remain unaltered may eventually be included. Augmented Reality overlays of underground utilities? Check. 3D representations of the interior and exterior of the building as it existed at a certain point in time? Why not? Even deeds will become digitized via blockchain, making things like Title work much more efficient.
Ultimately, blockchain technology will drastically improve and speed the availability of financial and property data, and thus the transactions themselves. Getting there, however, will pose an interesting challenge to an industry loathe to change.
I, for one, am excited about the possibilities.
To learn more about blockchain and how it will change CRE, read Jeffrey Steele’s excellent article “Simplifying CRE Finance Through Blockchain Technology.”