Property ownership or asset acquisitions is a secured and wise financial investment one can make. There are notably several forms of ownership available in the market which are sole ownership, joint ownership and community property. Currently, property ownership or acquisition is made via traditional way, with pen and stacks of paper and requires not only many third parties intermediary and approvals but a painful amount of time-wasting.
Recently, with the widespread of Bitcoin and other digital currencies globally, blockchain technology has got a lot more attention from people and property players. Although the technology remains misunderstood and closely associated with Bitcoin, blockchain applications have recently found their way into the property world and there is much interest in tapping its potential.
Blockchain technology offers a form of shared record-keeping which is almost impossible to tamper with. Besides, the technology operates through decentralized peer-to-peer platforms, building resilience against the spread of corrupted information and boosting resistance to fraud. Other than that, blockchain technology has the potential to address many challenges within the real estate industry such as improving trust and transparency, making transaction processes more efficient and limiting the use of intermediaries.
The usage of smart contract application on a blockchain platform will further benefit the property and real estate acquisition processes. Smart contracts are computer programs which facilitate, verify and enforce the negotiation or execution of an agreement to prevent users’ data to be forged.
Two fraud cases were reported last year involving the Federal Land Development Authority with RM200 million real estate loss and RM9 million land purchase in Gombak and Hulu Langat, Selangor which involved over 100 people as victims.
Hence, with the use of a single decentralized application that uses blockchain-backed smart contracts, the entire property management process, from signing lease agreements to managing cash flow to filing maintenance requests, can be conducted securely and transparently.
As the blockchain technology and crypto-asset markets mature, the focus has shifted from Initial Coin Offerings and Utility Tokens to Security Token Offerings and Security Tokens. Tokenizing assets is using digital tokens to prove ownership of real-world assets to expedite the process of buying and selling securities and to increases liquidity of the assets, to be compared with traditional securities. Tokenization of assets will also reduce the time to have the processes completed.
In other words, tokenization of property or real estate converts rights into digital tokens. For instance, a property that has a value of $200,000 USD can be tokenized into 200,000 tokens. The owner of 100,000 tokens will then own 50% of the assets. Although it is not considered as a legal owner of the property, with blockchain technology and its immutable public ledger, it ensures that nobody can “erase” the ownership even if it is not registered in a government-run registry.
In conclusion, the usage of smart contracts application on a blockchain platform and tokenization of assets can be used to avoid the hassle of property ownership process. Moving forward, the acquisition of real estate and the property is made easy with less third-party intermediary besides eliminating time-wasting and helps to secure stability in the market.
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Nurul is an English Language graduate who is highly passionate on writing, she literally breathes on it. An avid reader and a critical thinker, she covers on blockchain news during day and weeps at sad novels at night.