Learn the Basics of Blockchain and Commercial Real Estate

Crash Course 101: Confused About Blockchain? We’re Here to Help.

Cryptocurrency made waves in the world of investing over the last decade, and blockchain technology is taking place of traditional investment transactions. The future of blockchain is near. Blockchain can be implemented in a variety of industries, including commercial real estate. The professionals at Lumicre are taking a dive into the world of cryptocurrencies and applying the principles of blockchain technology to the many components of CRE investments. Join us as we share the basics and explore the benefits of blockchain.

IBM defines Blockchain as a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.

An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.

Each block is connected to the ones before and after in an irreversible chain — A Blockchain

The blocks that make up a blockchain are always accessible in real-time and record exactly how much data is stored in each block and at what time that block was created. Each block is given its respected number in line of the blockchain. For example: block 1, block 2, block 3, and etc. This is known as the block height. Thus, why we refer to it as a blockchain. Users can look up a specific block to gather historical data for analytical purposes further fueling their confidence knowing the information projected is 100% error-free.

A Brief History

In 2008, during the economic crash of the United States and the global financial crisis, a new asset was created known as Bitcoin. This new asset sparked a revolution among governments, financial markets, and our everyday lives.

In 2009, the Bitcoin network went live, introducing a brand new technology, blockchain. On top of that, this newfound technology was found to be censorship resistant, as well as resistant to any manipulation by a single party. Cryptocurrencies are extraordinary in how they can be exchanged in U.S. dollars, pounds, Euros, and Yen. A central bank or country does not control cryptocurrency.

Therefore, it makes it different from most currencies controlled by a nation. If you are confused here is a crash course for those who need it. After my recent interview with an expert in blockchain technology, I was given his thoughts on how the use of blockchain technology can be proven beneficial to commercial real estate as well as a thorough rundown on what exactly a blockchain is.

The Different Types of Blockchain Networks

There are different types of blockchain networks. You will find below a brief rundown of different networks and how they compare and contrast with one another.

Public Blockchain Network

A public blockchain is a network anyone has access to and can add to such as bitcoin. Bitcoin is open sourced meaning anyone can contribute to the blockchain. There are no requirements and no administrators and is free to use to anybody.

Private Blockchain Networks

A private blockchain network, similar to a public blockchain network, is a decentralized peer-to-peer network. However, one organization governs the network, controlling who is allowed to participate, execute a consensus protocol and maintain the shared ledger. Depending on the use case, this can significantly boost trust and confidence between participants. A private blockchain can be run behind a corporate firewall and even be hosted on premises.

Permissioned Blockchain Networks

Businesses who set up a private blockchain will generally set up a permissioned blockchain network. It is important to note that public blockchain networks can also be permissioned. This places restrictions on who is allowed to participate in the network and in what transactions. Participants need to obtain an invitation or permission to join.

Consortium Blockchains

Multiple organizations can share the responsibilities of maintaining a blockchain. These pre-selected organizations determine who may submit transactions or access the data. A consortium blockchain is ideal for business when all participants need to be permissioned and have a shared responsibility for the blockchain.

At Lumicre, we specialize in helping investors successfully secure their desired properties and expand their portfolios. Our expert staff has great experience successfully closing deals on all asset types and meeting our client’s unique needs. Contact us today to see how we can help close your next deal.

Benefits of Blockchain in Commercial Real Estate

Quality Assurance In Data

Due to the nature of blockchain technology, it is extremely difficult to tamper with a blockchain and revert the data that is found in each block. An interesting example to help put everything into perspective is the vast amount of capital needed to make an attempted attack on bitcoin’s blockchain. It would cost roughly 75 billion dollars to conduct a 51% attack on the network. This is a known attack vector, which the change has builtin mechanisms to prevent against. Due to the decentralized nature of bitcoin, the miners would be able to prevent any known attack should one ever present itself. That being said, users of a blockchain can feel confident knowing the data they are gathering and inputting will be forever sealed and untampered with due to the airtight security of the blockchain.

Blockchain Has Airtight Security

Similar to Bitcoin, each set of data making up a block is encrypted using the NSA’s SHA-256. The government uses this encryption to secure Top Secret files.

That alone should give you an idea of how secure the data found in a blockchain is. Along with this encryption, blockchains can be created as a members-only chain. Only members of a certain organization can use the data found in these blocks for whatever purpose they need. Client info, property listings, future economic outlook, etc… The particular information in question can then be made only sharable within the network, or blockchain. Members of this chain can only add or share the data, they can not delete blocks or data, once the blockchain has picked it up, not even administrators are even able to render it differently.

Efficiency

Blockchain technology has some of the fastest transaction times when it comes to sharing data. Time is everything when it comes to business. Using a blockchain that already has information about a listing for example, would decrease the time it takes to close a deal, saving time and money. Another aspect of blockchain is the use of smart contracts. Instead of the typical escrow account, the blockchain would hold the funds until the deal is closed and then the funds are released to the respective party. If for some reason the deal goes south, both parties still benefit from the time saving advantages and all is well.

In the typical world of real estate, all transactions take time. It takes time to inform each party as each part of the deal slowly advances through the process.

In the world of cryptocurrency, all records update automatically and involved parties remain up-to-date in real-time.

Read more about the benefits of blockchain in commercial real estate in our blog, ‘Is Crypto the New Way Forward in Commercial Real Estate Investing?’

Lumicre helps investors successfully secure their desired properties and expand their portfolios. Our expert staff has great experience successfully closing deals on all asset types and meeting our client’s unique needs. Contact us today to see how we can help close your next deal.