ConsenSys, a blockchain software technology firm founded by Ethereum co-creator Joseph Lubin, and open-source development group OpenLaw Core have created a new method for processing real estate sales on Ethereum’s immutable blockchain network.
Increase in Usage of Cryptocurrencies in Real Estate Industry
Since early 2017, an increasing number of realtors and property holders in the global real estate industry have begun to utilize cryptocurrencies to purchase and sell properties, such as apartments, apartment complexes, office spaces, and buildings.
In January of this year, a real estate company put a large-scale commercial building in Tokyo up for sale for 547 bitcoins, worth about $4.9 million based on the current price of bitcoin (around $9,000). At the time, the bitcoin price was just about $11,000, and the building was valued at $6 million.
In September of last year, Michelle Mone and Doug Barrowman announced that their 2.4 million square foot, $300 million apartment complex was on sale and that investors could utilize bitcoin to purchase studio apartments.
Barrowman told CNBC that the two decided to accept bitcoin payments because an increase in the number of early adopters in multi-trillion dollar industries like real estate would boost the mainstream adoption of cryptocurrencies.
“I’ve been invested in the crypto world for the last couple of years really, and it’s a sector I’ve watched grow and emerge. So I see it coming to that stage where the early adopters are giving way to a more mainstream application of cryptocurrency, and therefore it’s a logical extension to take land and buildings and effectively offer people the opportunity to pay in cryptocurrency or bitcoin rather than just fiat currency,” said Barrowman.
In consideration of the increasing demand for cryptocurrency from investors and realtors, ConsenSys and OpenLaw Core partnered to utilize Ethereum’s non-fungible token standard known as ERC721 to allow buyers and sellers of real estate properties to store records on Ethereum’s decentralized blockchain network.
As a smart contract-based protocol, Ethereum enables multiple parties to embed legally binding contracts onto its blockchain. Through escrow accounts and multi-signature wallets, buyers and sellers can settle payments in Ether without the involvement of third-party service providers to purchase and sell properties in a peer-to-peer manner.
“ERC721 [is a] non-fungible token standard, a new token standard that provides basic functionality to track ownership and transfer tokens separately within Ethereum-based smart contracts. These tokens lay the foundation for international, tamper-resistant land registries that may provide an improved way of tracking the chain of custody in real property. They curtail fraud and avoid the risks inherent in traditional land registries,” explained the ConsenSys team.
Already, both organizations have showcased the application of the Ethereum blockchain protocol in settling real estate deals in accordance with Australian law. In Australia, ownership of a property is considered fully transferred from one individual or institution to another when a transfer of title is registered with the government’s land titles office. However, this process often requires insurance and the involvement of costly third-party service providers.
The use of the blockchain protocol during this process substantially decreases the cost generated by auditors and investigators that are necessary in the traditional real estate property settlement process.