But first, the industry must digitise
News broke in March 2019 of the first successful global blockchain real estate transaction. It included participants from established organisations, such as Ashurst, Baker McKenzie, Barclays, Clifford Chance, AXA XL and the Royal Bank of Scotland, who were based in 23 major real estate markets, and spanning five continents. The Instant Property Network writes of their success in a trial report published in 2019: “[t]he first transaction conducted in the trial took just 36 min[ute]s from start to finish, thus proving that when participants work together in a collaborative way, the process can really become smarter, simpler and faster”.
Nevertheless, the emergence of a successfully functioning platform does not simply guarantee its adoption. In fact, this point is best illustrated by blockchain evangelist’s favourite comparison: the rise of the internet. Software developers will have you believe that blockchain will disrupt all walks of daily life, redesigning business models and exceeding the economic and social vitality brought by the emergence of the world wide web in 1990. For the sake of clarity, I very much hope it does, as it presents a fantastic opportunity for global sustainability and inclusion. However, I have to side with the sceptics in this instance. The first successful message was sent via the internet in 1969 yet, 50 years on, conveyancers still prefer certain processes that utilise pen and paper. So why is this?
The clue lies in the quoted content above. Nobody is doubting that blockchain technology has the ability to execute a transfer in 36 minutes, but the key factor behind its emergence into the market will be the requirement for “participants [to] work together in a collaborative way” – a fact all too often dismissed by techno-evangelists. When we pick apart what such collaboration requires, the enormity of the challenge becomes apparent. The difficulties facing the adoption of emerging transaction technologies, of which blockchain plays a key role, is explored in the 2019 report, published by Saïd Business School, “The Future of Real Estate Transactions”. The report’s conclusions detail the numerous operational, regulatory and social barriers to blockchain adoption, with no clear path to their removal currently available. Most notably: the lack of standardised, digitalised real estate data and the need for a critical mass of users.
Blockchain requires the transference of standardised, digitalised data. This is information that is machine readable, such as being available in a word-processed document, and a step beyond the industry’s current norm of transferring scanned documentation. The issue here lies with the wealth of historical titles, maps and search information currently in analogue (paper) format, which would have to be input into a digitalised software platform to enable blockchain to flourish. This is no small task. For efficiencies to be maximised, blockchain also requires all participants in the process to be using the same platform. One break in the chain and suddenly everything has to be scanned, emailed, printed etc., which reduces the whole process to archaic methods once again. How many residential transactions currently involve a chain of conveyancing firms, each with differing systems, processes and preferences towards technology? This is not to mention other key barriers: transition costs, a lack of regulatory framework, system trust and security, and positive protectionism. Such things have proven the downfall of many previous English and Welsh conveyancing technology pilots, such as Chain Matrix in 2007 and Veyo in 2016. So why shouldn’t real estate just turn its back on blockchain and dismiss it to the confines of the R&D departments of technology providers?