Last month a $60,000 flat in Kiev, Ukraine, became the world’s first property to be sold using a blockchain. Michael Arrington, founder of tech news site TechCrunch, used real estate start-up Propy to help him snap up the home without setting foot in the country. The transaction took place entirely via smart contracts on the Ethereum blockchain using cryptocurrency.
Blockchains are cryptographically secure ledgers that store every transaction made in a system across many different computers, protecting them from fraud. Originally designed to support digital currencies, they promise to revolutionise far more than monetary transactions. The tech has already allowed people to trade things like excess energy from their solar panels, and to participate in a form of direct voting called liquid democracy. Little wonder “disrupting” real estate has been a long-standing promise of blockchains.
Moving international property transactions onto a blockchain should speed up the process of conveyancing and exchanging of paper contracts. It also should make transactions more transparent and properties easier to sell to overseas buyers.
San Francisco-based Propy is not the first to try to use the blockchain. Global real estate outfit REX is creating a global property listing service to connect sellers, buyers and agents across multiple countries. ATLANT, based in New York, is experimenting with a form of blockchain-supported property ownership where many people can co-own a property in much the same way shareholders jointly own a company.
But Propy is the first to understand that transactions need government involvement. “People can do property swaps all they want but without a government to enforce them, it’s meaningless,” says Paul Madore, who writes reports on blockchain start-ups for investors.
Real estate transactions need to be recorded in an official ledger that is legally binding and recognised by all parties. In the UK, this is the government-controlled Land Registry. Propy envisions that different jurisdictions will adopt the Propy registry as their official ledger. This would mean that simply transferring property via Propy would count as a legal transfer of ownership. “Making a traditionally bureaucratic process simpler and more transparent is a short-term win,” says Nina Jankowicz, a Fulbright-Clinton public policy fellow in Ukraine.
