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

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

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

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It is clear that this event is a step forward to the day whenreal estate transactions are easily recorded by blockchain andpossibly 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 notalways secure. Sometimes they are poorly programmed and do not workat all. And the blockchain technology itself is still raw — thereis no middleware or any kind of user interface that would make iteasy for business users to navigate.

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

“A Major Disrupter”

“Blockchain has the potential to be a major disrupter in realestate,” Steven Quick, Chief Executive, GOS ofCushman & Wakefield tells GlobeSt.com. “There are a host ofpossibilities that can take place in the near future, which willmake the leasing, buying and selling of property much moreinformed, fluid, and efficient.

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Quick, along with Bryan Jacobs, executive vicepresident, head of Global Operation Outsourcing, authored a newreport on blockchain and its applicability to CRE.

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Briefly, an explanation about blockchain is in order. Asthe report details, a blockchain is a digitized public ledger forkeeping track of encrypted financial transactions. Verification andrecord-keeping of transactions are done by the blockchainitself.

What It Will Be Able To Do

There are a number of uses that blockchain can bring to a CREtransaction, Jacobs tells GlobeSt.com. “Documenting and verifyingcommercial interactions in an auditable way will revolutionize realestate and facilities services in ways that will increaseproductivity, transparency, and value creation in those business,”he says.

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The technology offers many advantages over the traditionalmethod for CRE transactions, the report noted. For exampleblockchain could:

  • Shorten the title verification and transfer process from weeksto seconds.
  • Eliminate the need for title insurance and other closingfees.
  • Maintain anonymity and financial confidentiality for anyoneother 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 occupancycosts, using automatic payments and a full audit trail
  • Unlock access to the market for a range of new capital sourcesaround the world
  • Track credit histories and other relevant information oncorporate and individual participants.

“In a blockchain transaction, you can set up a triple-blindverification process that protects information on individuals andbuildings,” said Kevin Nolen, a senior associatein Cushman & Wakefield's San Diego office in the report. “Atthe same time, a corporate tenant using cryptocurrency can seewhere the money is going, whether it's for opeex or capex and otherkey information.” Thus, blockchain is more transparent thantraditional currencies in situations where transparency is needed,while retaining confidentiality in other situations, he said.

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Erika Morphy

Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.