5 Ways Blockchain Technology Will Disruptive The Real Estate Industry

Could Blockchain technology – Replace Government in Real Estate?

Smart contracts have the potential to eliminate the need for trusted third parties to facilitate transactions. In the case of real estate agreements, contracts could be verified and enforced automatically without the need for human interaction, reducing the need for agents, lenders, inspectors and title insurance providers.

Computer scientist Nick Szabo is credited with originally conceiving of smart contracts in the nineties. The original example used by Szabo was a vending machine — by inserting an amount of money and selecting a product, a contract is made between the purchaser and seller that requires them each to perform. The purchaser pays and selects the product, and the vendor — through the logic embedded in the vending machine — provides the product and any necessary change.

The latest version of smart contracts comes from Ethereum.


Quick Recap of Blockchain?

A blockchain is a distributed and highly scalable database that is hardened against tampering, even by operators of the datastore’s nodes. The most prominent application is the public ledger of transactions for Bitcoin. Distributed technology has finally advanced to the point where we can host physical asset types in the virtual world in a distributed and near-impossible to tamper with format.

To transfer ownership of a home today, there are countless checks of authenticity and intermediaries involved to insure the transfer is legitimate. By using a distributed database to prove authenticity, you could legitimately transfer ownership immediately without the need of a middleman.(Just pause and think about that) In fact, when you think about blockchain technology and the industries it could disrupt, real estate is usually on the top

Houses in the future will be digital ones.

For example: imagine your house being able to answer:

•Who is my owner?
•Who are my inhabitants?
•Who are my caretakers (Ex. Plumber,) and what is their reputation with me?
•When was my HVAC system last serviced? When is the next service?
•How much electricity am I using? What’s my billing history? Am I late?
•Am I currently owner-occupied, rented, for sale, or vacant?


The president of the International Bitcoin Real Estate Association, Ragnar Lifthrasir say there is great potential of Blockchain technology for development in the real estate industry. His team wants to create a digital alternative for government land and title registries.


 5 Ways Blockchain Technology Will Disruptive The Real Estate Industry

“If a buyer and a seller of a property both agree to use Bitcoin Blockchain solutions instead of government solution, nothing will stop them as long as they both agree to use it.There are many ways we could use Blockchain technology in the real estate: purchasing real estate; escrowing real estate; recording the transfer of ownership of real estate onto the Blockchain.”




Blockchain will transform real estate in 5 ways:

  1. Fraud prevention
  2. Disintermediation
  3. Money 2.0
  4. Smart contracts
  5. Overall experience


1. Reducing fraud

Real estate fraud costs unwitting buyers millions of dollars each year.

Criminals are able to fake title ownership, often simply by using editing software to stipulate transfer of property ownership in their favour, and at negligible expense. Indeed, title insurance itself is a $20 billion industry, and Lifthrasir estimates that at present it is costing around $1 billion to combat title fraud.

“Forgery of documents showing someone is the owner of a property but really is not is one major problem. It’s been reinvented with technology as the duplicating of notary stamps and grant deeds is much easier with the use of the Internet.”

Paul Barbagelata, owner of Barbagelata Real Estate in San Francisco told MarketWatch.



One of the most common types of real estate fraud is rental scams.

As reported by Morgan Brennan from Forbes, one of the most common types of real estate fraud is rental scams, in which a scam-artist will copy details and photos from a real listing, then re-post on another site while posing as the agent responsible for the property. The crook will then ask for money up front from interested parties — as a security deposit or a fee for their “services” — or request that funds be transferred to a third party (who is part of the scam) as proof of available funds to make the purchase. The unwitting buyer is unlikely to see a dime of this money again.


Blockchain as proof of existence; proof of ownership; proof of transaction; proof of exchange; proof of value in any form of proof, is where this technology is showing its strength.

Replacing paper proof with digital proof is the heart of blockchain technology and it’s where most blockchain start-up companies are focusing.

Everledger is leading the pack, as it has addressed a very specific issue with a smart solution.

Blockchain technology would allow you to upload your land title documentation to the network, which other users can record and verify if needed. This would provide proof that you are the first owner of the documents, and decentralised network verification would prevent forgery. When it’s time to transfer your title, the document simply requires ‘rehashing’ (encrypting) by you to prove he/she is in possession of the document.

The elimination of costs associated with title insurance and fraud, according to Lifthrasir, is the biggest advantage of using blockchain.

Companies such as Everledger are currently trying to solve this problem in the Diamond industry.

 5 Ways Blockchain Technology Will Disruptive The Real Estate Industry

Image source: Everledger

Everledger was created by Leanne to address this issue, and was one of the companies selected by Barclays for coaching through the Techstars program in the Barclays Accelerator.  Everledger offers a permanent ledger for diamond certification and related transaction history on the blockchain, and acts as verification for insurance companies, owners and law enforcement.


2. Disintermediation (That means cutting out the middleman)

Do you like these parties leeching off of you?

1. Brokers
2. Government property databases
3. Title companies: Insurance and property databases
4. Escrow companies
5. Inspectors and appraisers
6. Notary

These middlemen exist because they hold information (The keys) that you can’t access or have skills/ licenses you don’t have that needed are needed to operate in the existing property transaction ecosystem.


With a Public blockchain you can distribute a database where anyone can record information, without it being censored, and without needing permission. Equally, anyone can access that information. (Transparency)

For example:

Prior to the internet, the government and title companies were necessary to verify and record property data.

How can Blockchain technology replace these middlemen?


Ragnar Lifthrasir
Blockchain will enable every property, everywhere, to have a corresponding digital address that contains occupancy, finance, legal, building performance, and physical attributes that conveys perpetually and maintains all historical transactions. Additionally, the data will be immediately available online and correlatable across all properties. The speed to transact will be shortened from days/weeks/months to minutes or seconds.
Jason Ray, Nov 2, 2015.

Current way of doing things

The title to a property is a piece of paper. To transfer a property, you fill in the blanks on a deed, sign it with a pen, drive to a notary who puts their rubber stamp on it, and then drive this paper to your local government office to be placed in their database.

Do you see the problem here?

It’s SLOW and archaic. Too much time and money is wasted. Especially tax payers money



Bitcoin or Ethereum can create a digital title. This is a cryptographically secure token that can be transferred as effortlessly, quickly and cheaply as an email. Once people can easily verify property records themselves and transfer a title digitally, brokers, escrow companies, title insurance companies and notary publics will follow the decline of the post office.


3.Money 2.0

Bitcoin is a digital currency. Ethereum has its “Ether” token (Think of it as another currency) . Unlike the Dollar, blockchain currencies aren’t paper that are later represented by software, but are 100% computer code.

The power of cryptocurrency is you can program it to escrow and distribute itself. With fiat (Non-crypto) money, you need humans and banks.


Think about this

When you want to rent an apartment, the landlord takes your security deposit in case you damage the property.

By law, he’s supposed to keep the funds in a separate escrow account and not spend it. Once the lease ends, the tenant has to rely on the good faith of the landlord to return the deposit. But if you’ve ever attended small claims court you know how frequently this human/trust-based system fails.

Me as a renter and owner have gone through both sides of the coin

A) Never getting back the deposit
B) Tenant trashes the place and your deposit only cover 1/10 of damages.

Either way, it’s a bad situation. No Bueno!


Bitcoin has a function called multi-signature. In bitcoin, you use your private key to approve the sending of the digital currency to another person. With “multisig,” you can create a transaction with three private keys, where at least two are required for spending.

Cryptocurrency can be used to create a programmable escrow. Instead of sending the landlord dollars to a bank account, the tenant and landlord create a multi-signature transaction. The tenant and landlord each has one private key, and a third one is given to neutral third party (Arbitrator). For the security deposit to be spent, two out of the three people will need to use their private key. The funds are locked in crypto-escrow for the duration of the lease.


By using cryptocurrency, real estate escrows can be done more securely, quickly, and cheaply. Bitcoin is Money 2.0 also because it’s censorship-resistant.

Bitcoin isn’t held in bank accounts but in a digital wallet stored on your computer or smartphone.

 5 Ways Blockchain Technology Will Disruptive The Real Estate Industry
Image Source: randomdirections

4.Smart contracts

Using smart contracts based on blockchain technology, assets exchange could follow specific instructions.

Property transactions could be added on a blockchain in a similar way to how payments between parties are handled using digital currencies like Bitcoin. Every ‘coin’ represents a unique house or piece of land and exchange is just like in any other transaction using digital currency.

It is expected that a blockchain based business in real estate will not happen overnight. While the technology offers some exciting prospects for the future, streamlining such an innovative protocol with a very administration-based industry will take several years.


Chris Groshong is the founder and president at CoinStructive, a San Diego-based Bitcoin and blockchain consultant focusing on merchant integration. He is in the process of building a platform for homeowner’s associations and community governance using smart contracts.  


Chris Groshong

“Smart contracts can add transparency of funds, voting and help automate CC&Rs, which can in turn alleviate time spent dealing with legal issues.”




Smart contracts can also be used to aggregate inputs from various “oracles” and serve as a progress monitor for a real estate transaction. An oracle is a third party that is trusted by the participants in the blockchain. It can be something like a known API or another blockchain. An oracle could track the progress of the assembly of the various executed documents necessary to create a legally enforceable real estate transaction.”

The advantages of a using Smart contact over a traditional contract are


  • Trustless – The open-source nature of the Smart contracts means that it will execute exactly as the source code dictates. This allows one entity to confidently transact value directly with another entity without relying on a third party to stand between them and ensure that each honours the transaction agreement.
  • Autonomous – A Smart contract exists on a Blockchain where it will self-execute according to the pre-agreed contract conditions without any direct human involvement.
  • Self-sufficient – Smart contracts are stored permanently on a Blockchain where they have all the resources permanently available to them in order to execute and remain in existence. Once published a smart contract becomes irrefutable, irreversible and unalterable. This means that all participates have very high confidence in execution surety of the process.


5. Experience

Blockchain technology  provides a better opportunity for more accurate tracking of customers and owners histories, across borders and banks, reducing the risk of defaulters. Blockchain technology can contain a huge amount of data, including entire contracts. The impact of “smart contracts” will have a profound impact. Smart contracts eliminate the middleman, such as a legal firm, as payment will happen based on certain milestones being met. By its very nature, the smart contract is easily enforceable electronically, creating a powerful escrow by taking it out of the control of a single party.



The transformation is not going to happen overnight. Blockchain technology is still very early (Think internet in the 90’s), and it will take the examples of  forward-thinking real estate firms to lead the way and convince the masses that blockchain is the correct path to take.



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