theSun Property May 2017

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theSun ON FRIDAY | MAY 12, 2017
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> Bitcoin and its application in property purchase
Property in a digital era
WHILE last week, we
introduced the term
bitcoin to those
oblivious of this new
age cryptocurrency and system
of payment, this week, we share
bitcoin whiz Andreas M.
Antonopoulus’ insights on how
this technology is applied in
property. Here is what he had
to say:
PERMANENT RECORDS
“One very common application
is the registration of assets or
ownership of tangible and
non-tangible things like the
registration of title over land
and the ownership of assets
like homes.
When you record something
on blockchain, it cannot be
modified ... it is immutable. Once
recorded on the blockchain, the
system of trust prevents anyone
from reversing or overwriting it.
That makes a record on
blockchain permanent, an
immutable record which is really
important in real estate transaction
as it allows one to pass the title of a
piece of land from person to person
independently with no one being
able to falsify the record or steal
land through paper,” Antonopoulos
said.
Moreover, he mentioned that
this technology can benefit the
industry tremendously as it is able
PART2
BYBRIAN CHUNG
to resolve a huge problem in real
estate and property transactions —
the falsification of strata titles and
property documents.
His view is further enhanced
with the emergence of another
bitcoin-based system, ethereum.
Like bitcoin, ethereum has its own
cryptocurrency known as ether.
However, ethereum adopts a
different technology that is based
on the blockchain public ledger
system known as Smart Contract.
According to Antonopoulos,
a smart contract is an electronic
contract with all the contractual
obligations of the buyer and seller.
The contract is written and coded
into an application, which will
ensure both parties fulfilling their
obligations.
Like blockchain technology that
is built on trust and verification,
these contracts are encoded in a
public ledger in the ethereum
community. If anyone tries to
forge the contract, the
ledger will reject it. As
such, this smart contract
cannot be rewritten and
altered as it is a
permanent and
immutable contract.
vetted and
have foresight.
Bitcoin can replace
all of this by usingmulti-
signature, which allows the seller
and buyer to transact escrow
programmatically, with the third
party acting as mediator only in the
case of a dispute.
Buyer and seller will be able to
execute a transaction on their own
without the need of an escrow agent
andwithout any of the parties
having custody of the entire fund.
Through bitcoin, you do not need to
spend that additional 1%of the sale
of the house – the escrow agent is no
longer necessary.
It can also change the speed of
escrowby doing it in hours instead
of amonth and changes the security
because no one of the three parties
can run awaywith themoney. It is
faster, cheaper and secure. It can be
done in other industries related to
real estates like purchasing assets,
corporation, mergers and
acquisitions.
INTERNATIONAL PROPERTY
PURCHASE
With the use of decentralised
digital currency, one can assume
that purchasing items and
properties is a little easier, and it is.
The chance of purchasing
international property is further
reinforced by the fact that bitcoin is
not controlled by anyone, not even
political and banking institutions.
This attribute of bitcoinmakes it
easier for people buying property
fromanother country. Although
each country has its regulations, the
use of bitcoin to purchase property
abroad saves time andmoney as one
does not need to change currency.
The Australia Real Estate
website has stated that there are
properties in the United States and
Latin America being sold using
bitcoin. TheWall Street Journal
wrote an article in 2014 regarding a
Lake Tahoe property, whichwas
sold for US$1 million in bitcoin.
Followour column next week for
more interesting information on
bitcoin, its challenges and how
stable a cryptocurrency it is.
SOURCE: WWW.PWC.COM
SOURCE:
SOURCE:
DIRECT TRANSACTIONS
Besides the use of a contract, the
technologywill make transactions
direct, fast and secure.
Antonopoulos also shared about
the removal of third parties and its
altered role. He said, “Another
example relevant to real estate
application is the function of
escrow. In order tomake
transactions for real estate today,
people have to use a third party
agent, an escrow agent. This escrow
agent charges a significant amount
of money inmost countries. During
the process, that agent holds
custody of the entire fund, which is
dangerous. This means that the
escrow agent has to be carefully
Embedding distributed ledger technology
A distributed ledger is a network that records ownership through a shared registry
Centralised Ledger Distributed Ledger
In contrast to today’s network, distributed ledgers eliminate the need for central authorities to certify
ownership and clear transactions.They can be open, verifying anonymous actors in the network, or they
can be closed and require actors in the network to be already identified.The best known existing use for
the distributed ledgers is the cryptocurrency Bitcoin.
FT graphics. Source: Santander InnoVentures, OliverWyman &Anthemis Partners
Pre-defined
contract Events Execute &
Value transfer Settlement
On-chain assets
(Digital)
Off-chain assets
(Physical)
a)
b)
• Terms are establishedby all
counterparties, such as:
X Variable interest rate (e.g
LIBOR).
X Currency of payments.
X Currency rate.
• Conditions for execution (e.g
time and date, LIBOR rate at
given value).
• Event triggers contract
execution.
• Event can refer to:
X Variable interest rate.
X Transaction initiated.
X Information received.
•Terms of contract dictate
movement of value
based on conditions met
a. For digital assets on the chain,
such as a cryptocurrency,
accounts are automatically
settled.
b. For assets represented off
the chain, such as stocks and
fiat, changes to accounts on
the ledger will match off chain
settlement instructions.
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Joe Alice
Gopesh
Alice Bob
Bob
INPUT OUTPUTS
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