Blockchain is Enhancing Security in Real Estate Transactions

Blockchain continues to fascinate forward-thinkers in various industries in 2023. The technology might have had provocative beginnings in the crypto world, but its applications and potential stretch far beyond bitcoins. Experts now view it for what it really is: a simple yet revolutionary digital record tracking and storage system.

What is blockchain? What makes it an ideal fit for the real estate industry? And how is blockchain technology helping further security in real estate transactions? This article investigates.

What Is Blockchain, and Why Is It an Ideal Fit for Real Estate?

Blockchain is a decentralized, immutable, transparent and secure digital ledger. In lay terms, that means transactions on the blockchain are:

• Controlled by public authority rather than a central authority
• Unable to be changed over time
• Publicly visible
• Safely sheltered by robust cryptographic techniques

These inherent blockchain qualities neatly slot into long standing issues in the real estate industry. Immutability solves the problem of administrative human error and tampering in real estate documents; decentralization and transparency address accountability issues; and blockchain security finally proffers a solution to pervasive real estate fraud.

Here are a few specific use cases that highlight blockchain’s security potential in real estate.

Storing Buyer-Consumer Agreements on Blockchain

Recently, the end-to-end real estate platform Nobul announced it would offer users blockchain solutions. “To help manage the tangled web of contracts involved in the home buying and selling process today,” said the company in a recent press release, “Nobul has built and deployed a permission-based enterprise blockchain platform on IBM’s Hyperledger” to “provide a distributable record of what was agreed to between consumers and their agents.”

This cutting-edge functionality aims to boost security and consumer confidence in the real estate process. According to Nobul CEO Regan McGee, “Blockchain will not only help users through the arduous contract process, but will also give them a sense of comfort knowing that their contracts are safe and secure, and most importantly a sense of trust that Nobul’s platform will provide a level of transparency and audibility that is missing in the industry today.”

Smart Contracts for Real Estate Transactions

The market report for smart contracts looks deeply promising – with an estimated CAGR of 24.2% through 2028. If you’re unfamiliar, smart contracts (according to IBM) are “programs stored on a blockchain that run when predetermined conditions are met.” Essentially, they automate contract execution, cutting out costly third parties like lawyers and notaries while running under ironclad security.

The most notable provider of smart contracts currently is Docu Sign, which recently acquired smart contract pioneer Clause. The electronic agreement management company now offers average users the option to execute clauses and/or contracts on the blockchain.

Fractional Ownership and Low-Risk Market Participation

Lastly, blockchain addresses a separate security issue in the real estate industry – financial security. For many market newcomers, real estate was (and still is) a risky endeavor, requiring a sizable share of their savings in return for a fluctuating, illiquid asset that may dip in value.

But blockchain facilitates something called “fractional ownership,” whereby real estate consumers can pool resources to buy “tokens” of a property for a small cost. They can treat these tokens like any average stock, buying and selling them as a liquid asset. This innovation helps minimize the very real risks of foreclosure and financial collapse for many would-be real estate investors.

Compared to other technologies in real estate, blockchain is still in its infancy. Who knows how the industry will apply the technology in 10 or 20 years? For now, it’s reassuring to see blockchain addressing some long-standing security concerns in real estate.