Over the past months, we have discussed how the real estate sector has evolved beyond the ordinary sale, mortgage, and rentage of property to so much more.
In a previous email, we have also elucidated how technology is constantly making a significant impact on the world and the real estate sector with innovations like virtual reality, augmented reality to assist in property inspection, blockchain, and digital tokens to facilitate co-ownership of actual property, and 3-dimensional drawings to mention a few. It has indeed never been a better time to be part of the property industry.
You know people will always say that charity begins at home and that seeing is believing and I for one stand firmly behind this principle because to preach a certain gospel, a preacher must properly illustrate and exemplify his own teachings so as to assuage his congregation; a salesman must use his own product or illustrate how it works at the very least to assure his prospective customers of the authenticity of his goods.
So today, your favorite proptech buddy will be preaching to you how Ellamediate has adopted the use of blockchain technology to facilitate co-ownership of prime real estate. However, before we proceed on this journey, there are a few terms that we need to understand to help guide our train of thought. Five terms to be precise, are
- Fractional ownership agreement
- Smart contract
Co-ownership means where two or more persons simultaneously or jointly own a piece of property. We have written a lot of explanatory articles on what co-ownership entails.
Fractional ownership agreement is a legal agreement that details the terms of purchase, fractional interest, obligations, benefits, and responsibilities of a customer who purchases a fraction of a property. It is also a form of title that the co-owners hold to represent their interest in a specific property.
Smart contracts are self-executing contracts that have the terms /conditions of the agreement between buyers and sellers directly written into lines of codes. The key feature of a smart contract is its ability to react to online data triggers and the access of the smart contract to the value itself. A simple example of how a smart contract works are when a person visits the Ellamediate platform to purchase a fraction of a property and pays, once payment is received, the purchaser immediately gets his fraction or lot with a fractional ownership agreement.
Thus, there is an exchange of value between parties. On the Ellamediate platform, the fractional ownership agreement is incorporated into a smart contract, so it reacts to the data as detailed in the example above.
Tokens/Tokenization. Tokens are a representation of something. In tech parlance, it represents an asset, ownership stakes, and special rights amongst others for a specific use. Tokens will usually contain general data on any asset they represent as well as its ownership.
Tokenization on the other hand is the process of transforming ownerships and rights of particular assets into a digital form. By tokenization, you can transform physical assets like property into digital token form to be held by more than one person. Using the Ellamediate platform as an example, a person’s fractional interest is represented by the token he or she owns.
Blockchain is a decentralized and distributed digital ledger that can be used to record transactions. It can be likened to a database that is maintained not by one person but by a network of other computers allowing for transparency and accountability.
It can facilitate the process of recording transactions and tracking assets in a business network. Information or data that is recorded on a blockchain is immutable because it cannot be altered, deleted, or authenticated by just one person. It takes the authentication of the entire network of users to alter data that has been placed on a blockchain.
This, therefore, guarantees transparency and security of the blockchain network. One of such data that can be placed on a blockchain is the data relating to a tokenized asset. This is what Ellamediate is using blockchain for, to record data of assets that have been tokenized and placed on its platform so that our customers can easily track and record all and any transaction relating to the tokenized asset they own.
Now that these five concepts above have been explained, I believe we have a clearer understanding of how the above form the basis of Ellamediates’ operation.
Our adoption of the Blockchain technology is to ensure there is a seamless transfer of real estate assets to our customer, there is guaranteed security of all records relating to every asset onboarded on our platform, that the transfer of assets is made public, and cannot be altered, deleted and easily ascertained.
Further, every asset on our platform is tokenized and a customer’s fraction or ownership stake in an asset is represented by the token the customer owns. This means that once a customer pays for a fraction or a lot, the customer is immediately assigned a token that represents his or her ownership stake in that asset. Thus, all customers can see all transactions on that specific asset and keep track of their fractions and assets.
As earlier mentioned, each customer upon purchase is immediately sent a fractional ownership agreement which contains the rights and benefits of the customer in conjunction with other co-owners. This is made possible with the help of the smart contract metadata on the blockchain network.
By virtue of all these processes, everyone including our customers has a singular and unison version of the transaction records, allowing for transparency and accountability. On the other hand, once a co-owner sells his or her fraction, this is equally reflected on the blockchain so that everyone can see it and the owner cannot be subsequently disputed or altered. This is because the blockchain is a public and record ledger with information on all assets onboarded on the network.
With the adoption of this Blockchain technology, acquisition and transfer of real estate assets and the title are seamless, documentation is quick using the smart contract, the typical middlemen usually associated with real estate transaction is eliminated, and the cumbersome entry and exit barrier are eradicated and security of the asset and customer’s title is guaranteed and protected.
If you are interested in learning more about how the blockchain works in real estate transactions, or how we use the blockchain to guarantee the security of our customer’s title, please visit our website and do not forget to reply to this mail with your questions and comments.