Blockchain in Real Estate
Blockchain technology is being adopted across many industries and has wide-ranging implications for almost every area of the law. Despite the real estate industry’s traditional hesitancy to embrace new technology, there are compelling reasons to use blockchain in real estate transactions and property management. Practical Law asked Kris Ferranti of Shearman & Sterling LLP to discuss the potential applications of blockchain in real estate, as well as the hurdles that must be overcome before the real estate industry widely adopts blockchain and related technology.
What are some of the use cases for blockchain in real estate?
Blockchain is expected to have a long-lasting and wide-ranging impact on real estate and the real estate industry. By gaining an understanding of blockchain, it is possible to comprehend the endless potential use cases.
Blockchain is a digital distributed ledger, which is a form of database. Its chief characteristic is that it is immutable and, therefore, information entered on the ledger cannot be deleted, modified, or altered. Blockchain technology has the potential to replace any third-party intermediary that serves the real estate industry.
An early application has been the use of blockchain to tokenize equity interests in real estate. Digital tokens that evidence an investor’s ownership in an entity have been offered to real estate fund and joint venture investors as a method of funding commercial real estate projects (tokenization). With tokenization of equity, ownership interest registries of any entity up and down the capital stack of any real estate project may be replaced with a blockchain-based ledger system.
A blockchain-based ledger system could also potentially be used to register land records, such as: