You’ve heard us mention blockchain in Derek’s most recent Quarterly Apartment Download, but why do we think blockchain will affect the future of real estate?

How does it work?

At its most basic level/[to break it down], blockchain is a method of storing data. The data is stored in the form of a ledger and once a few transactions take place they are grouped together in a block. These blocks are chained together referencing the previous block hence the name blockchain!

This blockchain ledger has some properties that distinguish it from other methods of data storage. This database is stored across any number of computers around the world each having the ability to assist in verification of the new data being proposed. This verified and unchangeable data set generates trust with users.

The blockchain does not only work with currencies. Logistics companies are using blockchain to track supply chains resulting in no lost packages to the system… they can still fall off the truck though! The blockchain has almost infinite uses and will find a home in every industry.

How will it affect the future of real estate?

Companies like SVN Rock advisors are looking to involve blockchain by tokenizing real estate assets. Tokenization is like creating shares of a company. In theory you can take an apartment building and piece it out to any number of shares, called tokens, and store them on the blockchain. These tokens will convey ownership of the building and receive proportional income distributions. Exactly like a REIT but tradeable directly from person to person instead of sold on a market (although you could still do that as well) and for a specific building instead of a portfolio. This increase in liquidity could shake the market and create a pool of buyers the likes of which have not been seen before.

Due to the numerous use cases, we are only scratching the surface of what is possible in the industry. Currently, blockchain is being used by companies such as: SafeWire, to ensure security over vulnerable real estate transactions, and Meridio, to allow commercial property owners to sell digital shares of their real estate. View builtin’s list of 19 blockchain companies boosting the real estate industry.

What we’ve learned:

We’ve learned what blockchain is, how it is currently used in real estate, and how it can be used in the future, but the most important takeaway is that it WILL affect us, and we need to be ready to use it to our advantage. To learn more about this topic, visit Investopedia.