Don’t leave your real estate investment financing to chance .
The Machineries of Opportunity BREAKING THE TRANSACTIONAL SPEED BARRIER WITH BLOCKCHAIN TECHNOLOGY.
by George Koo
nyone watching the financial news last year certainly heard the term “blockchain,” but many people do not really understand what it means. Often, even educated reporters and analysts use it interchangeably with other familiar words like “cryptocurrency” and even “initial coin offering (ICO).” Unfortunately, although blockchain technology is certainly relevant to these terms, it is not synonymous with them. In fact, blockchain is, at its heart, simply a technology for authenticating transactions securely at high speeds. Every time a party, which may be anonymous or known, validates a transaction, a “block” of that
blockchain could function in the real estate industry in such a manner as to exponentially expand the potential for investment and returns in groundbreaking ways, such as by securitizing office leases or, at a minimum, eventually removing the need for title insurance and physical closings. Perhaps most significantly, a transaction that might take months today might be done in a matter of minutes. Consequently, these technologies will change how we complete financial and economic transactions. Currently, we rely on the government municipalities, banks, and finance companies to validate and record the original docu- ments of real estate transactions (currently created digitally) and continue to be held in paper form at repositories. Blockchain could change that by having all the real estate transactions sim- ply validated and confirmed by the public ledger and the original documents will reside with the buyers and sellers without the need for the centralized repositories. All this could be done efficiently without the intervention of title companies, munici- palities and other intermediaries. As a result, transactions can be done quickly and at substantially reduced costs for all parties. While there is a lot of excitement for bitcoin and other cryp- tocurrencies, the real gem is blockchain and the possibilities that it holds for validating many different forms of financial trans- actions; all without the need for intermediaries and at very low transaction costs. And at the speed of the internet. •
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transaction is added to the chain of “decision” codes until an additional supported and authenticated deci- sion is subsequently made. Does that make you think of anything? Perhaps a real estate closing or the search for a clear title? Well, it should. In today’s economy, almost every document is digitally produced. With the aid of authenticating codes, such as blockchain, that digital document
BLOCKCHAIN: A digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.
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could have a unique code that travels the web from one owner to another to signify that it is indeed an original document and not a replica of an existing document. This prevents fraud and does not require a central party to validate its authenticity. In the future, blockchain technology could reduce the timing of closing real estate transactions in a substantial and disrup- tive way. Combined with emerging artificial intelligence (AI),
George Koo is the CEO/CIO at Clearmark Partners LLC and a data scientist and researcher pursuing a PhD in Quantitative Finance and Technology. He holds a master’s degree in International Relations from Harvard University and an MBA in Finance and a bachelor’s degree in accounting from St. John’s University. He also holds the
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