To learn more, I had a very quick chat with Steve Nson, the founder of ASD, and producer of ASDToken London.
Personally, I started looking at blockchain many years ago when it was first heralded as a technology set to revolutionise real estate. I’ve come to believe, however, that it will require a generational shift to drive full adoption.
It is too revolutionary to happen any quicker than that. Like electric cars - they are certainly seeping into society at the moment, but it will be the next generation of car buyers who drive broad adoption.
For this reason, my first question to Steve was: why do you think it’s important for the UK residential market to understand blockchain right here, right now?
“I believe that having an understanding of blockchain is crucial for UK residential real estate people right now because it will play a vital role in how people own, trade, and operate real estate.”
“It also has the potential to truly open up investment opportunities for people regardless of their socio-economic status. Furthermore, it will increase transparency around the ownership structure.”
I love this concept of creating opportunity for more people to invest in real estate. We’ve seen what happens when real estate, especially commercial, is too much of an exclusive club, reserved only for the mega wealthy and this is a genuinely workable alternative.
Broadly speaking, the area of blockchain which is set to democratise real estate investment is called tokenisation. This is the ability to split the value of a property into small pieces.
Owners can sell these small pieces if they wish to liquidise some, but not all, of their capital. On the other side, anyone can now get a foot on the ladder because they can invest only in the portion of the property they can afford rather than having to buy the whole thing.
Steve’s event tomorrow (June 13) is focused entirely on this exciting idea of tokenisation. This is, he tells me, “because, at its core, tokenisation is just an alternative way to finance real estate. Most real estate professionals understand the value of creating a system that increases liquidity while simultaneously diversifying the investor pool.”
Blockchain is one of those technologies which has been hyped beyond belief. It’s a buzzword for any startup looking for funding, it’s the subject of many a Wired feature, it has the attention of Silicon Valley and Westminster in equal measure.
This amount of hype will only ever be followed closely by intense scepticism as people start to ask why everyone is talking about blockchain but nothing of great interest is happening.
So, I have to ask Steve: what’s actually happening in real estate? And how is blockchain most impacting our industry?
“There are so many areas,” he says. “I stand by what I said, it is the investment process first being transformed. This is where the impact will be the fastest and most direct for a large amount of people.”
“The ability to create tokens and fractionalise real estate automatically opens up the investor pool to include the masses. There is still a lot of work to be done in terms of building out a fully robust ecosystem but the wheels are already in motion.”
“A lot already happening, a lot still to be done; that's why I decided to cover real estate tokenisation in such depth at ASDToken London.”
Do you think it’s more accurate to call Blockchain and associated technologies innovations or disruptions?
“I would definitely call Blockchain an innovative technology. Its promise is the digitisation of most real estate process.”
“We won't really know whether or not it is a disruptive force until it's fully adopted at scale within the industry. To be innovative, a technology has to create something new or different to the process, to be disruptive a technology has to be fully adopted at scale by the industry it's seeking to disrupt. This will happen, but it will take time.”
I agree with Steve entirely, and would add that adoption rates will vary from country-to-country. It will depend on the sophistication of existing systems.
The UK has a Land Registry, for example, which works relatively efficiently in comparison to other nations such as Nigeria. This means that blockchain will likely be a hard sell here for a few more years. In those places that desperately need more transparency and reliability in their land registry, blockchain is ripe and ready to be applied.
This makes me wonder: why did Steve choose London for his event?
“First, there is a nascent blockchain scene here. But, more importantly, the big promise of blockchain and cryptocurrencies is that they’re poised to disrupt our financial structures. London remains the European finance capital and so it only makes sense to have a presence here.”
I have always found the entire concept of blockchain difficult to understand. I’m not very bright. After a long time of trying, I gave up trying to understand and instead place all my focus on the practical application of blockchain rather than the theory. This I find much more easy to grasp.
It was tokenisation in particular that persuaded me blockchain was worth paying attention to. Last year, in fact, I was involved in producing an advisory report for a UK housing association and one of the key recommendations we gave them was to look closely at blockchain.
It was listed above many other areas of PropTech which currently enjoy wider adoption. If you’ve been put off by the hype of blockchain and cryptocurrency, I urge you to look again. Residential real estate is now primed for their arrival.
PropTech is all about removing the inefficiencies in real estate, but blockchain means that it is now also about removing the illiquid nature of the asset class. This is true transformation - its impact will touch everybody every day.
*James Dearsley is a leading PropTech influencer and commentator, and is co-founder of PropTech platform Unissu. You can follow James on Twitter here.
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WTF? And it even mentions Nigeria, that's so reassuring. Buying a small portion of a property is about as exciting as buying a leg of a racehorse. And the legal bills! Solicitors already get thrilled at houses with solar panels bought on the never never against the lender owning the freehold of the roof space. Yours sincerely, aged cynic from Tunbridge Wells who never quite got sucked into timeshare apartments either
Nothing wrong being an 'aged cynic' Michael. To be honest there is nothing wrong with the established methods in anyway.
Just to pick up your points on the legal costs. Tokenisation will mean little or no legal costs and equally some of the benefits of a blockchain based LR is that speed of transaction will increase and costs decreasing especially in legal processes as they stand currently.
This is massive and as a nation, we definitely need to understand and accept this is going to happen. If we don't acknowledge this our future property wealth is at stake. If people and institutions can securely invest in property, outside of our shores, with ease and in increments that they can afford, they will do so. It will be far easier to invest elsewhere and get the same, if not better yields but without the painful conveyancing process we have here.
I was at a Land Registry Tokenisation workshop last week so I can assure you this is real and happening. It is very exciting albeit in its infancy right now.
would love to hear more about this workshop Christian.
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