The National Association of Realtors, a US trade association for 1.1 million real estate brokers, recently released a study on the applicability of bitcoin and blockchain in the industry, particularly in storing and distributing information in an immutable ecosystem.
Overall, the study, entitled “Blockchain in Real Estate: Useful Application Areas,” recognizes the factors of success behind bitcoin and other major cryptocurrencies in the market. The National Association of Realtors understands that security and immutability are two of the most crucial features and characteristics of a blockchain network.
However, the association believes major crypto-networks like bitcoin significantly lack the ability to engage in smart contracts and the settlement of agreements. Simply put, it aims to emphasize and prioritize flexibility, functionality and scalability over security.
As bitcoin expert and Adamant Research Chief Editor Tuur Demeester states, there exists one fundamental risk in approaching blockchain platforms and applications with this mindset.
When bitcoin was introduced in early 2009, it demonstrated simplicity, sophistication, and unprecedented security measures that have granted bitcoin the description of an “immutable digital currency.”
Other crypto-networks and blockchain-based protocols like Ethereum that have prioritized flexibility and functionality have struggled to deal with powerful attacks and Denial-of-Service attacks, which still pressures the Ethereum development team to execute various hard forks just to mitigate the attacks.
“No matter which configuration you choose, there will be a trade off between cost, security, speed, and flexibility,” explained Demeester. “Ethereum has a different approach. It prioritizes flexibility and, I argue, compromises on security, speed, and even cost,” he added.
The National Association of Realtors could potentially face the same issues the Ethereum Foundation is facing today, that is severe technical problems surrounding security measures and settlement of smart contracts. Upon the emergence of such issues, real estate brokers, firms, and users will experience substantial delays in the settlement of agreements, which ultimately will stall the entire network until a solution is introduced.
However, the association continues to target custom-built blockchain-based protocols, rather than leveraging the bitcoin network itself.
The strategy of the association still is technically sound, in the sense that it plans to utilize blockchain platforms from Hyperledger which at least, prioritizes immutability.
It has already evaluated five main blockchain-utilizing startups that have demonstrated useful applications in the Real Estate industry, including ConsenSys, Factom, TrustStamp, RexMLS and Ubiquity.
Despite the efforts of the abovementioned companies and their progress in the industry, the association strongly believes the real estate market will be skeptical towards the adoption of the blockchain technology.
“Real estate blockchain implementers will experience high profile poor implementations at first. All early adopters have suffered through this painful, yet educational period. These failures will complicate adoption,” wrote the association.
Overtime, after a series long trial and error phases, the association notes that the industry will demonstrate proper usage and applications of the blockchain technology, especially in situations involving legal conflicts and contractual disagreements.