Blockchain is often conflated with the cryptocurrency bitcoin, leading to the view that blockchain is primarily a “database for money,” relevant to financial services, but with limited application to other sectors.
Blockchain is actually a shared digital ledger of transactions recorded and verified across a network of participants in a tamper-proof and visible chain. Permissions determine who can access or participate in the chain. Most commercial applications are expected to use a permissioned model.
Cryptocurrencies have been utilized by early adopters to purchase residential assets, however, their widespread use in CRE will probably be through the tokenization of assets, opening up commercial real estate to more retail participants.
Blockchain has the potential to disrupt the commercial real estate (CRE) industry. The three benefits of blockchain technology—efficiency, security and transparency—can transform CRE transactions ranging from property listings, asset management and the purchase and sale of properties.
Something that can be seen as a drawback for blockchain technology are the current barriers to its widespread adoption. In order to gain acceptance, all participants need to agree on a consensus protocol, and that is often cumbersome. Processing speed is currently also an issue. Other barriers include regulatory uncertainty, volatility of cryptocurrencies and, most importantly, the accuracy of the databases that underlie blockchain. However, companies are developing applications, standards and processes to overcome many of these hurdles.
If blockchain technology is to gain traction, early adoption by large users such as banks and insurers is vital. Once systems are in place, are verifiably secure and shown to improve efficiencies, other users will most likely follow.