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The global real estate market is worth $217 trillion, and one-third of income-generating real estate transactions are cross-border. But cross-border real estate transactions are notoriously complicated and rife with delays and impediments inherent to antiquated property rights registrations systems. However, an American’s purchase of $60,000 apartment in Kiev may change everything.
In September, TechCrunch founder Michael Arrington remotely purchased a $60,000 apartment in Kiev in a deal that will change real estate forever.
The transaction was the world’s first real estate transaction on the distributed public blockchain network Ethereum, and it has opened the floodgates for real asset transfers on the blockchain.
The deal was facilitated by Propy, the world’s first international real estate marketplace. We set out to solve the problems of purchasing property across borders by facilitating connections between international entities to enable the seamless purchase of international real estate online.
So how does one buy property over the blockchain?
The process started with the Propy app. In this case, Arrington chose his apartment and reserved it with $5,000. Then Propy deployed the smart contract, which is designed to comply with local regulations, into the Ethereum MainNet. (In the case of the Arrington sale, the contract included the property price, the wallets of the parties, payment sequence, and Notary confirmation.)
Propy performed ownership verification and generated a preliminary agreement to be electronically signed by the seller, buyer and broker. Once all parties signed the agreement, the buyer used cryptocurrency to make a payment to the address of the smart contract. Then the Notary made another verification of the property ownership and transferred conditions in the Registry of Ownerships and Burdenings of Ukraine.
Once the Notary verified all was in order, representatives for the buyer and seller signed the final agreement, as required by Ukraine’s laws. The Notary sent the information to the Registry of Ownerships of Ukraine and the transaction was marked as approved in the Propy decentralized registry.
At that point, the property’s ownership was changed in both Propy’s Decentralized Registry and Registry of Ownership of Ukraine. The electronic title deed with the blockchain hash and a QR code was sent to the buyer and the seller could withdraw the funds.
The smart contract address is included on the title deed, and the transaction data is public on the blockchain.
Seem complicated? It is now, but it won’t be for long. We are working to simplify and automate the process even more. Peer to peer real estate transactions are coming.
We are leading the charge in putting real estate on the blockchain -- bringing transparency, efficiency, and security to an industry traditionally fraught with red tape and bureaucracy.
Many governments are wary of cryptocurrencies, but others are embracing and even sanctioning commerce on the blockchain.
We entered into an official partnership with the government of Ukraine, which has agreed to pilot the blockchain title registry. The partnership -- our first with a foreign government -- coincides with new legislation allowing foreign investors to purchase land in Ukraine as of January 1, 2018.
Ukraine is the perfect place to start this experiment in global real estate transactions. Ukrainian real estate is very affordable, and the Ukrainian market will soon be growing dynamically. This initial $60,000 purchase is an important signal to foreign investors -- especially Chinese, who face strict capital controls of $50,000 per person -- that they can safely and easily invest in this market and, soon, in other countries, too.
This is only the beginning. With this transaction, we’ve broken first ground in putting the $217 trillion real estate market on the blockchain. We’re starting with Ukraine, but over the coming year we plan to facilitate real estate transactions with the use of PRO tokens in California, Vermont, and Dubai.
Natalia Karayaneva is the CEO of Propy, the global property store and decentralized title registry.