Modern technology is making our lives easier than before, especially with the introduction of smart contracts and blockchain technology in real estate.
Smart Contracts are self-executing contracts with the terms of the agreement between buyer and seller directly written into lines of code.
The code and agreements exist across a distributed, decentralised blockchain network.
Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority or external enforcement mechanism.
Smart contracts therefore offer a potential solution of the management of real estate transactions via the introduction of a universal, distributed ledger that does not require trust in a single third party.
According to Vitalik Butern, programmer of digital currency, Ethereum, Smart Contracts are "the simplest form of decentralised automation, and is most easily and accurately defined as a mechanism involving digital assets and two or more parties, where some or all of the parties put assets in and assets are automatically redistributed among those parties according to a formula based on certain data that is not known at the time the contract is initiated."
The main principle of a smart contract can be compared to the work of a vending machine. They execute only the instructions given to them automatically.
Firstly, assets and contract terms are coded and put into the block of a Blockchain. This contract is distributed and copied multiple times between the nodes of the platform.
After the trigger happens, the contract is performed in accordance with the contract terms. The program check the implementation of the commitments automatically.
Cryptocurrency powered by a blockchain technology and smart contracts, has the potential to eliminate the need for trusted third parties to facilitate real estate transactions. In the case of real estate agreements, contracts could be verified and enforced automatically without the need for human interaction, reducing the need for agents, lenders, inspectors and title insurance providers.
There are nine main ways in which the real estate market benefits from Blockchain technology: it allows for more fast, more secure and fully transparent transactions.
The contract execution on a decentralised rental platform will create a set of complete and traceable records. It means that any transaction between parties can be audited.
The transfer of the money to the seller would trigger the automatic transmittal of a specialised coin or digital certificate that represents the title to the buyer, with the title transfer immediately recorded in a block on the blockchain.
This allows for uniform financial data across organisations, improving financial reporting and reducing auditing costs.
The records at a future date, they also make an auto-release, auto-renew or automatically request collateral. In performing such functions, smart contracts reduce legal and auditing costs.
The advantages of smart contracts that have been innovative in so many industries - automation, predictability and speed - could finally be brought to bear on segments of the legal industry.
Representing contractual terms in code, rather than natural language, could bring clarity and predictability to agreements.
In Australia, the legal title can only transfer by deed. Legal charges over real estate assets are also typically created by deed.
Some jurisdictions, including England, Wales and Australia, require deeds to be executed by hand on a paper document. Other jurisdictions go further, requiring the in-person involvement of notaries.
Legislative change will be required if blockchain is to eliminate the interference between the real and online worlds.
Still in the small-scale pilot, part of Australian utility businesses have already been investigating blockchain for records management and use it build smart contracts for transaction management.
What it has already done is generated interest from much larger pools of capital, like outcomes-based procurement, where they pay only on verified impact achieved.
Within a few years, financial markets may be trading fully-digital assets across blockchain networks, with the terms of those trades enforced by code.
Banks, exchanges, and other financial institutions are actively developing blockchain technologies that will enable them to store and trade real assets over blockchain systems.
Real Estate Crowdfunding and Blockchain technology will invent a whole new way to invest and raise capital. As a result, any platform will have the ability to offer Investors from anywhere in the world, investment in real estate assets using cryptocurrency generating profits paid in cryptocurrency like Ether or Bitcoin.
The CrowdfundUP platform wants to make relations in the real estate process fast, transparent, efficient and reliable, via the use of Smart Contract technology, something CrowdfundUP sees as necessary for future industry growth.