What is block chain and how will this change the real estate industry?

Isn't it something that has something to do with cryptocurrency?

I don't deal in cryptocurrency. The people who have the most use for it are going to be speculators--- but they tend to be so volatile, why waste it on actually buying stuff, if it's going to increase in value in a little while?

Plus, if you accept one kind of altcoin, what's keeping you from accepting all of them? Not just Bitcoin, but what if someone wants to pay you in Dogecoin? Or Ethereum? What about Petro--- the new official cryptocurrency of Venezuela, because they totally trashed the value of their "real" money?

And then you run into articles from just a few weeks ago like---

The death of a Canadian entrepreneur has left a huge stash of cryptocurrencies locked off from the people who own them.

Quadriga, Canada's biggest cryptocurrency exchange, said it's unable to gain access to $145 million of bitcoin and other digital assets after Gerald Cotten, its 30-year old CEO and co-founder, died of complications arising from Crohn's Disease while traveling in India.

Many of the digital currencies held by Quadriga are stored offline in accounts known as "cold wallets," a way of protecting them from hackers. Cotten is the only person with access to the wallets, according to the company.

The unusual case highlights the risks investors face looking after their assets in the thinly regulated industry.

Cotten's death has plunged Quadriga into crisis and left it struggling to figure out how to refund more than 100,000 of its users.

On Tuesday, the company said it was granted creditor protection in the Nova Scotia Supreme Court as it tries to sort out its financial mess.

Read this: ibm.com/downloads/cas/36KBMBOG

Ray, think of "blockchain" as an accounting ledger of transactions that can be reviewed by anyone that wants to.

Blockchains can hold anything, but they usually contain info that describes who owns what of an asset and how it changed hands in the past. The 'who sold asset' and 'who bought asset' is sort of anonymous.

How will it change the real estate industry? Uh, I'd guess the most likely usage would be just to replace current money transfers for rental payments, but that's not really that real estate specific.

Another, more futuristic scheme would be wipe out the entrenched paper tracking system of property ownership and liens. Example:

Today, let's say you wanted to buy Shady Dude's SFH. You know Shady Dude has a checkered past, so to make sure you're not on the hook for his surprise liens against the property, you take out title insurance before you buy. This costs you money, and requires a human being at title company to try and find anything against the property at the county courthouse. Then they make a title report before the real estate is transacted. Boring, takes days, sorta expensive, totally necessary because everyone knows Shady Dude doesn't pay his debts. After these are found, and the closing is handled, papers are filed at the county courthouse, which also cost money. You're done.

Well, let's say that we had a real estate sales blockchain. Let's also say all property transactions from the last 20 years were on the blockchain. Also, any potential liens filed were also on the blockchain. It'd then be trivial to:

- prove that Shady Dude really did currently own the property, once he provided identification on the blockchain

- find all liens against that property and handle them upfront, no real way to hide them anymore (unless they're older than 20 years)

- transfer that property from Shady Dude to you (you provide an identifier as well to transfer it) for a transaction charge that's way less than what the courthouse charges to file paperwork.

No need for title insurance, time, or expenses.

This is a BIG stretch obviously. This blockchain doesn't exist, and it'd have to have liens going back REALLY far in time to be useful. But it sort of makes sense...look up Ubitquity if you want to see a company trying (failing, but trying).

Deanna - Blockchains are the underlying mechanism that transfers value for (most) cryptocurrencies, so you are correct. The blockchain's just a technology though, and like nearly any other tool, can be used for good or evil.

A blockchain ledger contains things like "Wallet X transferred 40 magic beans to Wallet Y on 2/14/2019 04:00 EST"

and everybody that looks at the blockchain - users A through ZZZZZ - can see the transaction occurred and agree it was a real thing. They don't necessarily know that Wallet X is owned by Deanna and Wallet Y is owned by Skunk, though.

Your fear of volatility in cryptocurrencies is justified - hype (2017), shenanigans (scam altcoins), and stupidity (Quadriga's one user having the keys to the castle, oh my God, you idiots) are way too common for my taste.

It is an opaque value transfer method that criminals and criminal nation states use to circumvent the established banking system.

See also North Korea and possibly Venezuela.

Central to the idea is untraceabilty. Much more convenient that cash.

I think one key attribute of the block chain is that it is not easily altered. The "records" are not stored in one place...thus the word "chain". Portions of a record are stored on multiple computers/servers. If a change is made (for example, if hacked) to one computer/server, then the other pieces will not "link" up, and it will be detected.

Understand that blockchain is used in cypto-currency. I want to make sure this stays focused on the real estate side of the house.

If you can see the future of 10 years from now, you will be a great deal more prepared for it.

Block chains, there are several versions, are distributed databases hosted and maintained by a string of computers across the world. It's a giant transaction record book that's incredibly expandable.

They're talking about using it for all sorts of registrations, auto license, real estate, monetary, domain names, IP addr allocations, etc.

Ray,

I don't think block chain will entirely 'stop' anything. It's simply one more tool to make certain types of transactions easier.

Am I concerned with block chain being used by criminals? Sure...same deal with guns, cash, debit cards, and anything else you can think of. The tech is here. Criminals will use it, just like they've used every tool since the dawn of time. Tools make work easier, even criminal work.

I can see the applications of block chain for title work and transfer of ownership for large business or personal assets. But I think it won't convert entirely. Govt loves paper. I've been in the National Guard 22 years. Back in the late 90s, there was tons of talk about the military going "paperless" with our records. Fast forward to today....we have more paper records than ever....printed copies of all the stuff stored digitally! Most documents start as a printed copy, to be signed and digitized later. A few pieces of paper have been eliminated, but seems like we generate two more for everyone one that goes all digital. Could just be my perceptions. *shrugs

Regarding digital currency: NPR did an interesting article on the move toward a 'cashless' society. Here's a link if you're interested: www.npr.org/tags/691680655/digital-currency

This may seem off topic, but stay with me for a few sentences. One thing my church teaches about Sacraments is they must have physical means/elements, which seems counter-intuitive for what is often seen as primarily a matter of spirituality. My financial mentor Dave Ramsey says to use cash because it triggers the "pain" center in the brain in a way credit and even debit cards don't. Also, think of leafing thru the pages in a good book while curled up by the fireplace vs. "swiping" the pages on a digital reader.

My point with these three examples is humans are PHYSICAL beings. There's something that happens when a piece of paper touches our hands that doesn't happen when we click-itty-click. Something comforting. Something that if the lights go out or the passwords get lost (cough, cough...Quadriga) we still have that paper in the safe backing up our claim/title/right.

Well said, Skunk! Great responses there.

As was said, do not think of the blockchain as being only for crypto. That isn't what we're talking about at all here when it comes to blockchain and the real estate.

One thing I'd LOVE to see would be property title, mortgage, and lien records for real estate being blockchain-stored data. Imagine being able to very quickly and easily pull up any address and then see ALL of the past history of mortgages and liens, exactly when they started and were paid off/released, and so on. Without having to have a Title company go digging through old county records somewhere that MAYBE have been scanned in and maybe not. It would simply "exist" as the blockchain would be the definitive source for such records.

Some great potential there.

- John...

On a side note, I'm not convinced the Quadriga guy is dead. I'm going on the conspiracy theory side with this one. The guy went to India on some "charity mission" and basically dies of Crohn's while there at age 30?

Sorry, but I think Cotten is sitting on a beach in Belize somewhere enjoying his time. There already seems to be some indication that some of the wallets believed to be "lost" or "frozen" because no one has the keys have had activity OUT of them. It will be an interesting watch over the next few years. I won't be surprised at all when, suddenly, those cold wallets that "no one has the keys to any more because Cotten died" are suddenly drained. :)

- John...