By: Alexa D’Angelo
On October 12, 2017, the founder of TechCrunch purchased a $60,000 flat in the Ukraine from developer Mark Ginsburg. The entire transaction was completed via smart contracts on the Ethereum Blockchain. This was the first piece of property to have been bought and sold using this technology.
Blockchain technology is typically known for recording who owns digital currencies like bitcoin and other cryptocurrencies. But now, tech companies are taking the same technology and applying it to tangible physical assets like land and real estate property. The real estate industry is a $217 trillion market and proponents of Blockchains believe that this technology can reshape the entire market by tokenizing real estate and trading it like cryptocurrencies.
Traditionally, real estate transactions occurred entirely offline and required a variety of intermediaries. Brokers, lawyers, agents, and banks are some of the key individuals in which the entire real estate process depends on. Now, Blockchains can eliminate the need for these individuals. By doing that, buyers and sellers can get more for their money by saving on the various commissions, fees, and taxes. Additionally, Blockchains are transparent. Since they are public record anyone can verify the transactions. This decreases the chance of fraud.
There are a number of Blockchain startups out there. BitProperty, is a platform that allows owners of property to register on their Blockchain and issue tokens that represent a share of their property. If someone wants to invest in the property they can purchase its corresponding tokens. Contractors and construction companies are also using this platform to obtain investors for their projects. BitProperty launched initial coin offerings (ICO) to anyone who wanted to invest and purchase a project’s tokens. By doing that, they have a share in the value and revenue of the finished project. Platforms like these are creating fractional ownership. It makes it easier for individuals to invest without having to own the entire property.
Blockchains are creating a market for everyone through peer-to-peer transactions. This expanding platform is disrupting one of the largest markets in the world. Will it affect all of the intermediaries in the real estate industry? It is unlikely that Smart Contracts will have an immediate impact on the work of Real Estate lawyers. Drafting contracts for the sale of property can become a complicated matter in which the need for lawyers and negotiations will persist.
Change in the future is inevitable. Industry practices and standards will have to adapt. A complete transformation over to Blockchain for the recording and purchasing of property is in the far future. But, proponents of Blockchains are working towards their goal of making that future arrive sooner.
Bio: Alexa D’Angelo is a 2L at Suffolk University Law School. She is currently a staff member on The Journal of High Technology Law. Alexa holds a Bachelor’s of Business Administration from The George Washington University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.