I know a lot of readers will roll their eyes at the title of this article, but if you’ve got this far, hey you are still reading! First, let me clear up a few common misconceptions about Blockchain - Blockchain is not Bitcoin. Blockchain is not something used by nefarious underworld characters, at least no more so than the web and internet are.
Blockchain is an exciting technology that is what the internet and world wide web were back in 1995. At that time, most of us didn’t see the value and application of the technology. The internet allowed data to be exchanged in our globally networked society. The main beneficiaries were large companies such as YouTube, Facebook, Google, etc. Blockchain allows economic value to be exchanged globally. The beneficiaries of this technology will be much more widely distributed.
So what is Blockchain? Blockchain is a database that chronologically and securely records all transactions across a peer-to-peer shared network. The chain of transactions are publicly verifiable, making safety, transparency, and collaboration key.
Imagine a world where contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from revision, deletion, or tampering. In this world, every agreement, every process, every task, and every payment has a digital record and signature that can be identified, validated, stored, and shared. This is the world we are rapidly heading into. Blockchain’s benefitsj for CRE include increased speed, lower cost and better security.
Blockchain is the platform which will allow app developers to create new and valuable products in much the same way that the Apple Appstore has spawned thousands and thousands of useful custom tailored applications.
As a CRE broker, here are three reasons why you should care:
- 1. Tech Startups are gunning for a piece of your action. A lot of the processes that this technology does automatically are now done by brokers, attorneys, notaries, and title officers. There are dozens of tech startups (and hundreds of millions of dollars behind them) right now trying to figure out how to automate the processes of commercial real estate. That means they are trying to eliminate a big chunk of what brokers do, or make it a much cheaper service. Very smart people + huge sums of invested capital = you better keep an eye on this technology.
- 2. Cryptocurrencies- I am sure you’ve heard of Bitcoin, and maybe Ethereum, but did you know there are over 800 different cryptocurrencies right not being traded on open markets daily? The market cap of just Bitcoin and Etherium alone is approaching $100 Billion Dollars! If cryptocurrencies become more widely accepted, what are the implications for payment in CRE transactions? This currency exists outside of governmental controls and regulations. How will governments respond? Can governments control this or is the genie out of the bottle?
- 3. Tokens- In the not too distant future, a coded token will contain a purchase agreement which automatically executes all instructions in a CRE transaction. The most popular token right now is the ERC20 Token. Will this reduce closing costs? Absolutely. Will this compress brokerage fees? Probably. Will it reduce the use of paper in transactions? Most definitely.