In A First, A Blockchain Smart Contract Is Recorded On A Deed

WASHINGTON, DC–Quietly and with almost no fanfare, last month blockchain startup Propy scored a coup for the technology industry and the real estate space in one transaction: the first government sanctioned blockchain recorded real estate deal in the US. The transaction happened under a pilot program that launched at the start of this year between a county in Vermont and the San Francisco-based company, which is developing a blockchain-based registry for real estate sales.

The deal created legal history, CTO Alexander Voloshyn said in a blog post.

It was the “first time ever in the US that a blockchain address is recorded on a deed, and thus also recorded in the official, statutorily mandated land records in a recording jurisdiction of a US state,” he wrote.

It is clear that this event is a step forward to the day when real estate transactions are easily recorded by blockchain and possibly paid for via cryptocurrency. It is equally clear though, at least to those in the tech space, that that day is not here yet. Despite buzz to the contrary, blockchain’s smart contracts are not always secure. Sometimes they are poorly programmed and do not work at all. And the blockchain technology itself is still raw — there is no middleware or any kind of user interface that would make it easy for business users to navigate.

But make no mistake — these are problems that will be solved. The Propy transaction, which addresses just one piece of these many moving parts, illustrates that. And when these bugs and glitches are put to rest, look out.

“A Major Disrupter”

“Blockchain has the potential to be a major disrupter in real estate,” Steven Quick, Chief Executive, GOS of Cushman & Wakefield tells GlobeSt.com. “There are a host of possibilities that can take place in the near future, which will make the leasing, buying and selling of property much more informed, fluid, and efficient.

Quick, along with Bryan Jacobs, executive vice president, head of Global Operation Outsourcing, authored a new report on blockchain and its applicability to CRE.

Briefly,  an explanation about blockchain is in order. As the report details, a blockchain is a digitized public ledger for keeping track of encrypted financial transactions. Verification and record-keeping of transactions are done by the blockchain itself.

What It Will Be Able To Do

There are a number of uses that blockchain can bring to a CRE transaction, Jacobs tells GlobeSt.com. “Documenting and verifying commercial interactions in an auditable way will revolutionize real estate and facilities services in ways that will increase productivity, transparency, and value creation in those business,” he says.

The technology offers many advantages over the traditional method for CRE transactions, the report noted. For example blockchain could:

• Shorten the title verification and transfer process from weeks to seconds.
• Eliminate the need for title insurance and other closing fees.
• Maintain anonymity and financial confidentiality for anyone other than proper authorities.
• Provide a secure method for paperless transactions, streamlining cross-border lease and sale deals
• Avoid human error when processing rent and other occupancy costs, using automatic payments and a full audit trail
• Unlock access to the market for a range of new capital sources around the world
• Track credit histories and other relevant information on corporate and individual participants.

“In a blockchain transaction, you can set up a triple-blind verification process that protects information on individuals and buildings,” said Kevin Nolen, a senior associate in Cushman & Wakefield’s San Diego office in the report. “At the same time, a corporate tenant using cryptocurrency can see where the money is going, whether it’s for opeex or capex and other key information.” Thus, blockchain is more transparent than traditional currencies in situations where transparency is needed, while retaining confidentiality in other situations, he said.