Getting Past the Mental Block: The Full Potential of Blockchain Technology in Real Estate

March 7, 2018
Posted in Insights
March 7, 2018 DCT Capital Fund

Many people talk about how blockchain technology can influence different industries and most of them come up with the same results. Blockchain technology would remove central authority, be faster, and is built on trust. However, when faced with the question of how blockchain technology could affect real estate investing, these three answers simply wouldn’t change the industry that much. What people fail to see is that blockchain technology could have a significant influence on real estate investments, but this can’t be implemented on a small scale if you desire a lasting or visible impact.

Before we go into how blockchain technology could change how we make an investment in real estate, let’s go over what blockchain technology is. A blockchain is basically a ledger of transactions stored and encrypted on computers all over the world. It works because all the computers agree on which transactions have occurred and when. Anyone can download this blockchain and become part of the network and it has no central authority. When a computer, takes the time validate transactions it is called mining, and mining allows you to earn cryptocurrency like Bitcoin.

So How can this affect Real Estate:

1. Funds Escrow

Normally when a real estate investment needs to distribute funds to its investors, funds are moved from the property’s bank account to another bank account where funds are then sent directly to the investor.

You can also distribute returns from an investment by creating a trust or virtual account at the bank for an investor. This allows the investor to save the money for a later date; This distribution method can be expensive but allows for investors to hold onto their funds even if a company goes out of business.

However, Blockchain could register distributions and lock the token into a fixed U.S. dollar amount. This would relieve some of the work for distributions, keep businesses from having to set up costly bank accounts, and keep investors from losing money.

2. Liquidity

Many investors want their portfolios to be diversified. Real estate is a great way to do this, but real estate often means long hold periods usually from 3 to 10 years, and these hold periods often prevent liquidity.

Blockchain markets could offer liquidity. This would let investors out when the needed or wanted and give new investors a way into investing. While issues about loans and requirements would still certainly come up, they could become considerations from the beginning and simply be part of the calculated risk.

The possibilities with blockchain technology and real estate investment are endless. To see all the potential benefits, one must be innovative and imaginative. For more information on how blockchain technology can be used in real estate look into company ICO white papers and the Ethereum project, which is trying to create a platform for building blockchain applications. If real estate takes bold steps towards blockchain technology, it could lead to some major improvements and changes in the industry.