Blockchain meets real estate

What is the blockchain?

The term blockchain (English) translates as block chain. Block means a data set that is entered into a list. With every action that one of the participants performs, additional data sets are added. The data is connected together so that it forms a chain. Through a cryptographic process, each new data block receives a spread value (hash) of the previous block as well as transaction data and a time stamp.

Each new transaction builds on previous transactions, which means that the data confirm each other. This procedure does not allow any information to be changed or deleted, as the manipulation breaks the chain. Other users notice this break and can therefore immediately recognize incorrect and changed data. At the same time, an intact blockchain means that it is real data that every user can rely on.
 

How can users use a blockchain?

Each participant receives a digital wallet: called wallet (English). This is software that gives the user access to the blockchain. The wallet contains a public key that is visible to all participants. The user can use this key to receive payments or documents from another person. At the same time, there is a private key (private key) in the wallet, which serves as a password. Using this key, a party can decrypt the received messages, payments, and documents. Each action creates a signature that is stored in the chain of records in a forgery-proof manner.
 

Different types of wallets

The private key is a user's only access to the data or funds they store on the blockchain. It should be a strong password that cannot be recovered if lost. There are different types of wallets to store access keys:

• desktop wallet: stores the keys on the PC
• mobile wallet: Access to the blockchain from a mobile phone
• online wallet: stores the keys on an external server
• hardware wallet: electronic storage of keys
• paper wallet: printed QR codes with private key and public key

Benefits of blockchain for the real estate industry

In November 2017, the well-known auditing firm Deloitte found in a study that blockchain technology can be used not only for the cryptocurrency bitcoins. The real estate sector could also benefit from these advantages of the new technology:

• Transaction processing almost in real time
• direct contact between the contracting parties in a trusting environment without the involvement of a third party
• public record of all transactions including a secure source as proof of execution
• forgery-proof and unmanipulable transactions through verifiable records
• Reliability of data sets, so that no audit authority is required

How blockchain technology can revolutionize the real estate market

Until now, the sale of a property has been handled by a notary. The notary draws up the purchase contract and certifies the signatures of the buyer and seller. The new owner is then entered in the land register, which is protected by good faith. This means that everyone involved can rely on the fact that the owner registered in the land register is actually the owner of the property. Other parties involved in buying real estate include banks, insurance companies or building societies that grant a real estate loan. Each of the parties involved earns money from the deal and the transaction can take several months.
 

When using blockchain technology, buyers and sellers can process the purchase themselves. All intermediary parties are superfluous, saving those involved time and money. For example, an experiment in Sweden has shown that a blockchain real estate purchase can be carried out in just a few days and at low costs. Because of the high level of security, the use of the private key is sufficient to validate the purchase contract as a so-called smart contract and to register the new ownership structure in a digital land register. Investments in real estate are also becoming more transparent thanks to the blockchain and thus more accessible to retail investors.