If you’ve been thinking blockchain is all about Bitcoin, you’re not alone. As a recent study by BuzzSumo shows there were more than 40,000 Bitcoin-related articles published every week in December. With the mainstream media spotlight shining brightly on “Bitcoin Billionaires,” it’s hard not to notice. Of course, Bitcoin and other cryptocurrencies are based on the latest in blockchain technology. But technology is “technical”—which explains why this great, enabling advancement lives in the shadows of the coin crowd.
From Crypto to Cash
Whether talking about Bitcoin or blockchain, even new technology cannot immediately overcome old thinking. At the Inman Connect New York event, one lucky Miami real estate professional talked about how she had brokered not one, but four cryptocurrency real estate deals. As the interview came to a close, the question was posed, “How did the escrow work?” The answer? The buyer converted their Bitcoin millions to the common U.S. dollar. In the end, the story was about the common “cash deal.” Crypto is coming to real estate, and there are edge cases today, but it is far from mainstream as it is still treated as a simple asset class. With that interview as motivation for a more common-sense approach, let’s take a closer look at how the future of blockchain might unfold.
Tech Titans, Interested Incumbents, and Smart Startups
The history of technology is replete with stories where companies of all sizes play in the same space. IBM recently revealed they have over 400 blockchain projects with 63 forward-looking companies, including financial firms like HSBC and Visa alongside non-financials like Walmart and Nestle. In addition to IBM, we have seen numerous blockchain advances from Microsoft, Oracle, Google, and other tech-first players.
Technology advancements are seen as innovative—or disruptive—to existing financial players, depending upon their perspective an ability to execute. The R3 consortium partners continue to make headlines and Bank of America has applied for or received at least 43 patents for blockchain. Having learned lessons from being late to the Internet, many in the banking and financial services industries are looking not to make the same mistakes in the coming blockchain era.
With such broad application, blockchain has attracted numerous startups focused on everything from cryptocurrency to literally ending world hunger. Several vertical market startups are focused on models that could be highly disruptive to the current real estate industry model, with two examples found in RealBlocks and Factom. RealBlocks is an Ethereum smart-contracts governed ecosystem and funding platform focused on using the functionality of blockchain for improved liquidity, transparency, and security, as well as a reduction in fees for secured real estate investments. Meanwhile, Factom brings a collaborative blockchain platform that can preserve, validate, and publish evidence for the mortgage industry where a single source of verifiable truth has always been needed but lacking.
Meanwhile, the interested incumbent players look to innovate or invest in, but not disrupt, their own vertical markets. Indeed, that is a fine line to walk.
Our industry is fraught with areas where improvement in mundane processes could yield dramatic benefits for all involved. For instance, could our system(s) of managing mortgage payoffs be improved using a highly visible, fully traceable, immutable blockchain approach? Most certainly. Would it speed transactions while reducing or eliminating fraud? Quite possibly. Will a project like that ever be funded by an interested incumbent? Doubtful. Like any other project, the return on investment question must be answered. If payoffs are a headache for all participants, then it is a “level playing field” where blockchain offers little benefit other than perhaps as a tightly controlled, publicity-focused, proof-of-concept.
The Innovator’s Dilemma
This brings us to Clayton Christensen’s timeless insights from his landmark book The Innovator’s Dilemma, first published in 1997. The main takeaway, still true today, is that it is challenging for entrenched incumbents to devote dollars to projects that do not yield immediate returns. As such, they often fall prey to short-term thinking thereby leaving themselves open to disruption by startup competitors who have nothing to lose. Look at recent examples where relatively new “platform” companies like Airbnb now face competition from blockchain startups that look to eliminate the middle-man. The disruptor gets disrupted. Recently, well-funded “ibuyers” have begun to look at speeding the transaction via smart contracts and Internet-of-things (IoT) technology. Imagine what could happen in real estate, mortgage, and title as tech-first innovators begin to deconstruct an often confusing, but universally accepted, transaction process.
Innovation is here and disruption is coming. Though blockchain is still in its early days, the number of innovative and disruptive use cases continues to grow. Don’t simply follow this new technology but be on the watch for disruptive new models that are only made possible by new technology.