[Editor’s note: This is a guest post from Tobias Briegel, a cryptocurrency and blockchain enthusiast and National Account Manager at Chetu Inc. As an experienced leader and communicator, Tobias offers commentary on the changing tides within the finance industry, offering predictions on how emerging technologies will rattle the pre-existing system.]
Blockchain, the decentralized ledger behind the cryptocurrency curtain, is a force to reckon with, offering a compelling alternative to traditional exchanges of all kinds. Rather than compiling transaction records in a central hub, blockchain technology fragments this information and keeps records across an immense network of hard drives and servers—keeping a transaction as public record, but keeping the exchange anonymous.
In its infancy, blockchain represented an anti-establishment movement, putting a microscope to the deficiencies of centralized banking systems and building bridges where those gaps exist. Blockchain operates with a less is more ideology, keeping risk low by reducing the parties involved and increasing transparency.
Transactions are encrypted and verified in one of two ways: Proof of Work (PoW) or Proof of Stake (PoS). Crypto miners verify transactions through a series of sophisticated computations before the transactions are added to the public ledger. The miners are then compensated with fractional ownership of recently mined cryptocurrency.
Blockchain and Smart Contracts Save Real Estate
In 1996, over a decade before Bitcoin came to market, digital currency pioneer and computer scientist extraordinaire, Nick Szabo, introduced a contractual protocol that was entirely self-executing. We call this protocol a “smart contract,” an encrypted and trackable agreement between consenting parties.
Since the dawn of organized property exchanges, real estate brokers and legal entities have existed in pairs. Sometimes they coexist productively, but more often than not, the cross-industry dialogue is a pain point. We need legal representatives to outline the terms and ensure these terms are met by all parties—land registry, mortgage providers, surveyors, the buyer, the seller, an agent. With a high-value exchange dependent on the compliance of such an immense web of people, the process frequently encounters long-term setbacks and unexpected tribulations.
Smart contracts eliminate the number of hands involved by cutting out extraneous third parties. Who remains? The buyer, the seller, and the agent. The conditions are established and then coded into blockchain technologies. Met conditions (dollar amount or date of execution) trigger a reaction automatically, and the contract self-executes.
The process remains relatively similar to traditional contracts: property selections through blockchain MLS, negotiation of letter of intent, smart contract pre-lease, smart contract lease agreement, automated payments and cash flow, plus real-time statuses. However, this all happens without any legal involvement. [Read more…]