The dictionary definition of blockchain is “a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.” Clear enough, right? Well, not exactly. In front of a packed room on the second day of MIT’s World Real Estate Forum the question was posed: how many people have heard of blockchain? Nearly every hand in the room was raised, a difference from what was observed just a mere 2 years ago. But, when the question was posed about who really understood blockchain, less than half of the room raised their hands.
As Avi Spielman, an alumni of MIT’s Master’s in Real Estate Development (MSRED) program who wrote his thesis on the topic further explained, “it’s a digital ledger where all copies can sync among the parties involved. Each update forms a block of information which attaches to previous blocks of information, thus creating a ‘block chain’.” If you want to hear more about what Avi has to say, he attempted to demystify the concept even further in a recent Forbes article.
Described as a “pioneer in real estate blockchain,” Avi was clearly on to something before others were. But now blockchain is one of real estate’s hottest buzzwords. In fact, just days ago, it was revealed that more than $1.3 billion had been invested in blockchain globally so far in 2018, exceeding the 18-month total prior to that from July 2016 through the end of last year. And, as one panelist at the event proclaimed, that’s nothing compared to where it’s headed in the future.
But just how high is the “hype?” On Gartner’s 2017 Emerging Technology Hype Cycle, upon which MIT’s Real Estate Innovation Lab is conducting similar research, blockchain has passed the peak of inflated expectations and is on its way to the trough of disillusionment. It is expected to plateau in 5-10 years.
But before it plateaus there is one critical question that still needs to be answered: just what is blockchain?
Well, for starters, it is not a self-contained solution. As one panelist at the MIT event described, “to be most effective, blockchain should be added to an existing system, functioning as one component in a larger chain of technologies, and helping to provide an improved package of services.”
Blockchain is also not a solution absent a problem. According to Sandy Selman, Co-Founder at CPROP, a blockchain powered real estate firm, “We saw a lot of other companies in the real estate sector starting with blockchain as a solution, but they hadn’t identified a need. At CPROP, we identified a problem, vetted it for commercial viability and marketability, and looked to see if blockchain could play a role in solving that problem.”
So what problem does CPROP use blockchain to help solve? According to Sandy, CPROP helps eliminate the difficulties associated with closing residential real estate transactions, particularly at a long distance. In developing CPROP, Sandy and his team first sought to understand if there was a need for a transaction management platform with 100% transparency on getting the deal closed, and the answer was yes. They then sought to understand if they could hang a blockchain technology onto the platform, and once again, the answer was yes. Thus, they found a real problem that blockchain could play a role in helping to solve.
CPROP will be integrated into property portals around the world. Ultimately, using the popular U.S. home finding site Trulia as an example, there would ideally be a button on a property listing that would say “Let Trulia help you” and if someone clicked that button it would allow them to “safely, securely, and transparently get to the closing table,” all thanks to blockchain.
This video does a great job of showcasing, fairly clearly, the value that blockchain can add in this business model.
So, that makes total sense, right? Probably not completely, but hopefully this helps. While many people left the room at MIT’s Media Lab with more questions than answers following the blockchain session, one thing was abundantly clear, there is a very high likelihood you will be leveraging the technology in your life, in some way, in the not so distant future.
As Steve Weikel, Head of Industry and Alumni Relations at the MIT Center for Real Estate said at the beginning of the session, “Blockchain is to transactions what the internet was to information. It will allow amazing things to happen.”
Check out even more about blockchain and the other exciting things happening at MIT’s Real Estate Innovation Lab.