Blockchain in Real Estate
Blockchain is the new buzzword, and everybody seems to be talking about it. But what is it about and how could it be used in a Real Estate business?
Imagine 20 people standing in a circle on an Italian plaza. Everyone is carrying a small personal notebook. One person in the circle shouts to another “Can I buy your boat for 1000 Euros?” All 20 people in the circle write the question down in their personal notebook. The owner of the boat answers – yes! And everyone writes the answer down too. And for every part of this transaction; the contract being signed, the money being transferred, the key being handed over, the boat registered on the new owner etc. – all 20 people record what is happening in their personal notebooks. The truth about this transaction is now in 20 small notebooks. And not the seller nor the buyer can change any part of the agreement, without making a new one.
This is how blockchain works, only the 20 people standing in the Italian plaza are millions of computers all over the world, connected on a distributed ledger called Blockchain, and the small “notebooks” they write into are their local copies of the ledger.
There are thousands of Blockchains out there, all with different purposes, designed to keep a specific type of data or enable a specific type of business.
Why is this important?
Up until now Blockchain has primarily been used in financial services and the crypto market, however recently, it also expanded into enabling new cases across industries like supply chain, manufacturing, healthcare, insurance, and of course real estate. And we will argue that 2022 is the year when we will begin to see lots of industry adoption. Consumer use cases in digital art, collectables, music, and sports have brought the technology into mainstream.
Technology is, however, never important on its own. It is the value it can create that is important. And in the case of blockchain three fundamentals are:
The decentralization and transparency, making it a perfect technology to use for information or data that should be public and not tampered with.
The so called “trustless” design which refers to the fact that there is no longer any need for trusting a third party to be the “impartial middleman” in the transaction between participants.
The possibility to create and easily manage a (crypto) currency for any community.
To understand how we can benefit, we need to zoom out of IT problems or our day-to-day operations to find structural patterns in a business that could be solved in new ways. Patterns the business may have been built upon for a long time, sometimes making them hard to question or even to acknowledge. Blockchain can be a disruptive game changer and offer competitive edge. And the best way to predict the future is, as we all know, to create it.
Blockchain for Real Estate
Combining the benefits of Blockchain with the challenges in Real Estate could result in a lot of different solutions. To make it more tangible, we have three examples of how it could be applied:
Trusted queuing systems
The queue systems for housing should be correct, fair, and not possible to tamper with. When handling the queue, the information and actions taken must be correct and undisputable by any party. History has, however, shown that gaining the trust of people in the queue, many times desperate to find somewhere to live, can be challenging.
With a Blockchain solution, the timestamp for each queue member is saved and all transactions regarding renewals and/or applications for an apartment from that point could easily be identified and everybody can rest assured that no one has tampered with the queue.
The benefit of placing the queues on the Blockchain would be that trust is secured. It is also possible for you to form your own queue and use this function as a part of your customer relationship strategy.
100 owners of one apartment?
Up until now the logic behind owning your own apartment has meant a 1:1 relationship. One apartment, one owner. And in the logic of producing new apartments, different thresholds for how many percentages of the apartments should be sold before starting to produce are set. What if that logic can change?
What if there can be 100 owners to one apartment? If you tokenize your apartments, you can sell a fraction of them to different owners and keep track of the owners through so called “smart contracts” on the Blockchain.
If that was possible, people could buy and sell a fraction of an apartment as an investment. And the process of reaching the threshold of sold percentage could be reached faster. It also would massively expand the market for possible buyers. What if there were marketplaces where fragments of apartments are being bought and sold on a daily basis? This case is disruptive, it will create a new structure that challenges regulations on speculation and the separation between owner and resident. Could it balance the need for rental apartments, giving people the possibility to live in apartments they don’t own? Could it be interesting from a financial point of view for the real estate business?
Create a sense of belonging and nudge behavior, with your own social token
Real Estate owners are often very engaged in society, trying to constantly improve the ecosystem regarding living, working, and socializing in their area. There is a lot of effort put into social sustainability development in the geographical areas of property management with the goal of stabilizing and increasing the feeling of belonging, safety, and satisfaction. It is simple math – taking into calculation that a happy tenant tends to stay longer, reducing the transactional costs and effort to find a new tenant. Satisfied tenants also tend to be more careful with their own local area and report damage, which makes it possible to act quickly and keep the feeling of well-being.
With your own social token, you could enhance your own reward system, to increase the feeling of belonging and nudge the preferred behavior. Compare with how the loyalty clubs in retail or in the credit card industry are doing and steal with pride!
With the use of an easily managed social token, the wished-for behavior can be awarded with coins that can later be used for something else within the eco-system. Imagining a tenant delivering a package to an elderly person, receiving coins, and using it to rent a bike the next day. Or the tenants would get rewarded loyalty coins for each year they stay on as a tenant and use the coins to get access to the house cleaning offering that you are providing.
Let us innovate together!
OK, so how is the Blockchain implemented, in practice? Is it hard? How do I get started?
We have technical knowledge, and we are experts in the field of discovering business needs from our many projects with different clients. And the combination of these two elements is the fundament to get started.
We look forward to discovering your possibilities and we have a unique offer where we work with your chosen business case and create a Proof of Concept for you within 6 weeks. Are you curious about Blockchain and how it can enable your business? Reach out!
Liselott Lading is a Business Consultant working at Stratiteq. She has a M.S information systems degree from the University of Stockholm and has since gathered experience from being a serial entrepreneur, a board member, working for global tech company and done occasional public speaking for the past 20 years. Her expertise is within digital transformation and data-driven agendas. She’s passionate about bringing European companies into the forefront of technology, as she thinks it’s needed in between China and the U.S