Unlocking the benefits of blockchain
Real estate bitcoins are here and trials of blockchain technology for property transactions are underway. How can we unlock blockchain’s benefits? We check in with some of Australia’s experts to find out.
Blockchain originated as the technology underlying cryptocurrencies, but is evolving rapidly.
At its core, blockchain refers to a distributed ledger, or database, that can represent assets, transactions or both. Transactions are ‘chained’ to the preceding ‘block’, which enables direct peer-to-peer transactions and a shared source of truth.
“Blockchain technology is rapidly becoming a core infrastructure for the global economy,” says professor Jason Potts.
Potts is leading the RMIT Blockchain Innovation Hub, the world’s first research centre on the social science of blockchain. Launched in September, Potts and his interdisciplinary research team are focused on the economic, cultural and social implications and impacts of blockchain technologies.
This technology enable smart contracts and instant global payments systems that will “revolutionise business as we know it in coming years”, Potts explains.
“It’s what roads and bridges and ports were to the industrial economy, but for the handling of records and data that we all need to agree on for the economy to function.”
Shifting data, information and records to a decentralised network will change the way business operates and the sorts of business models that can be built,” Potts adds.
Steve Glaveski, chief executive officer and co-founder of Collective Campus, agrees.
He leads a consultancy that works with large organisations to help them navigate the fast-paced, volatile and uncertain realities of today’s business landscape.
He says blockchain presents many “game-changing opportunities” for business.
“The tokenisation of real estate assets can help to democratise property investment and make property a more liquid asset class.”
Glaveski says the days of professions profiting by “offering simple boilerplate activities” are gone.
“The blockchain can replace many of these intermediaries by serving as a central source of truth, verifying transactions and preventing fraud.
“These are just some of the many applications of blockchain in real estate, and like the early days of the web and other once emerging technologies, most of the eventual applications of blockchain in real estate may not have even been dreamt up yet.
“For that reason, it’s important that we don’t attempt to prematurely regulate the blockchain or some of its more profound applications may never see light of day.”
Ellie Rennie, an associate professor in RMIT’s school of media and communication also talks about the “tokenisation of property”, which will “give owners the ability to sell fractions of property to investors, creating greater liquidity in markets and simplifying overseas purchases”.
“The current benefits of blockchain for property include lower costs and fewer intermediaries in the transferral of property, and the ability for all parties to access a property’s history including leases, maintenance and construction records,” she says.
But there’s a “long way to go” before true peer-to-peer property transfer can be realised, Rennie adds.
“The projects in development still involve legacy systems due to regulatory compliance issues. One major step will be putting land titles onto blockchain platforms. We know of a dozen different states that are piloting this right now.”
Dr Jake Goldenfien, a lecturer in Swinburne University’s law school says blockchain technologies and platforms will “not replace or usurp the law”.
While blockchain will help to automate the execution of agreements, parties will always have disputes, and existing legal mechanisms likes courts, mediators and arbitrators will maintain their role in resolving disputes, he says.
“Moving to automated smart tenancy systems will not remove the ability of parties to go to tribunals to get remedies.
“Building and property complex are often very complex, with many moving parts, and human decision makers will still govern the execution of those agreements.
“At the same time, blockchain technologies and smart contracts may make legal compliance in the building industry much easier, and could facilitate smoother and faster technology-based dispute resolution.”
Blockchain is “not a panacea”, Deloitte’s payments advisory practice lead Richard Miller warns. And it will not make traditional technology is redundant or obsolete. “You will still need to integrate data from other systems.”