Research Paper on Blockchain Revolutionizing Real Estate: Vacation, Parking & Dream Homes

Introduction

Blockchain technology is a decentralized, distributed, and most public digital ledger that records transactions across various computers so that any record involved cannot be altered retroactively without altering all the subsequent blocks. The technology has and is likely to revolutionize the real estate industry resulting in various views on its application in the real estate and sharing industries (Yavuz, 2019).

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Vacation rental houses, parking lots, and even dream homes would soon be purchased via blockchain. The concept and application of blockchain-based real estate have been on the increase and gained popularity in the recent times (Daley, 2019). The technology has been widely accepted in the real estate industry as it provides a way for investors, buyers and sellers to interact with each other and obtain more knowledge about properties.

The system of trust that is inherent in blockchain technology makes it ideal for the real estate industry. The real estate companies globally are incorporating blockchain's ledger abilities, and smart contracts to transparently and efficiently facilitate buying, renting, investing, and even lending of properties. The technology is highly being appreciated and is poised to give the real estate industry a significant growth. The growth arises from the existence of Distributed Ledger Technology (DLT) in the blockchain systems that increase trust by enhancing greater transparency among buyers. Trust of an agent, website or a listing is imperative in the real estate industry. Blockchain technology accelerates contract processes, reduces costs, and saves time involved in real estate proceedings, hence its wide-range acceptance.

The real estate industry also records immense daily rate transactions, with the common lease and purchase databases becoming more necessary than ever. These immense transactions call for blockchain technology to streamline the operations. This involves an upgrade from the traditional Multiple Listing Service (MLS) databases to blockchain-based technologies as they help to establish a more transparent ledger system that allows for free access of data and the entire transaction history of the property by brokers, or agents.

Besides the advantages brought by the technologies in the real estate industry, blockchain technologies are also highly adopted by the rapidly increasing property-sharing sector. Airbnb provides a platform where people can search, list, or rent a temporary residence. The platform has over 1.5 million listings that stretch over 190 countries (Redman, 2016). The company disrupted the rental industry through its streamlined version of a stale business model, successfully removed the middlemen from the traditional rental agreement, and sped up the processes of verification and payments (Artuc & Kaliannan, 2019). However, with the disruptions brought by blockchain technologies, the company is likely to incorporate the technologies in its systems. Blockchain technologies provide various advantages that would transform Airbnb by enhancing the storage of people's online identities (Redman, 2016). This will enable clients to easily check if one is a trusted host by checking their accounts. The blockchain technology would also enhance the decentralization of its marketplaces, which would come along with various advantages to the company to enhance its survival in the property-sharing industry. These include a considerable reduction in the rental fees, increased controlled on the bookings and client screening systems, increased levels of trust between the clients and the hosts and increased loyalty in the home-rental industry, all of which are problems facing Airbnb and the industry (Artuc & Kaliannan, 2019).

Suggested Course of Action

Airbnb can establish a blockchain that is based on reputation and use the infrastructure to increase efficiency and safety in their systems. The company's network will depend on the reputation of its users, and the company can build a reputation that is based on blockchain to provide room for different sharing economies. Export users may use the reputation signals to help the different sharing economies determine if someone is reliable or reputable. In this case, the network users would act as nodes and facilitate the transactions. They would also be provided with voting powers in the network and control of the direction of the company.

Airbnb has reached a cash flow profitability, and in the long run, the technology that gave rise to bitcoin and digital currencies would pose a threat to the company (Schiller, 2018). The distributed ledger systems would therefore, help the dis-intermediate sharing platforms that eat into the fees that startups like Airbnb charge. The company currently operates on a centralized system of exchange where sharing economy companies are in the middle of transactions. The blockchain system would ensure automation of interactions in the system and proper distribution of power to the users. The technology would endeavor to establish a communication system that is more linked to email or the web. Moreover, other than sending the orders to a company that then gets a customer, a blockchain-based network would match the requests using protocols that automatically route the orders (Schiller, 2018).

The concept is highly linked to the one used in banking and finance. The blockchain technologies used to ensure that no data is visible to the network operator, there isn't a central database, no central point of failure, and increased privacy that ensures that the identity provider cannot tell where the identity claim is being used (Swapna, 2018).

Airbnb is familiar, and blockchain technology and decentralized currencies and systems and are enthusiastic about learning the concepts. Implementing the technology would return the control to the users by providing them with digital credentials that are kept in custody by the individuals and only shared by trusted parties (Liebkind, 2017). The infrastructure would ensure that the credentials are issued, stored, and verified at a scale irrespective of whether the two parties are meeting personally or interacting online.

The decentralized nature of infrastructure designed by blockchain technology will move digital identity systems from an application to an ecosystem. The elements of the ecosystem will include an issuer, which issues credentials (The Airbnb Platform); user who stores credentials in the digital wallet (the client or the host); verifier who obtains credentials from the user and verifies the information via blockchain (Blockchain system); registry which stores the issuers and users identities on the blockchain and decentralized identifier which provides a unique identifier that proves ownership of identity (Baya, 2019). The system would work by using a mobile identity wallet, which is a smartphone-software that securely holds credentials that interact with verifiers and issuers. The metadata that will be required to make the system work will be written in the registry, and in the form of an industry-standard referred to as Decentralized Identifier (DID) (Baya, 2019). The credentials are transacted directly between the wallets. The system would also use cryptography to make the verifiable credentials tamperproof. The decentralized identity approaches do not require any sensitive data for proper storage on the ledger (Prisco, 2018). However, the ledger acts as the root of trust that allows the recipient of a credential to verify and confirm that the user credential is cryptographic and signed by the appropriate user (Baya, 2019). The technology will follow an enterprise implementation of the decentralized digital identities.

The blockchain technology model used to establish Airbnb's decentralized home-sharing system would be grouped into the following categories: user requirements that include legality, price stability, incentives, and privacy; hardware layer that include full nodes, and IoT devices; Protocol layer that includes smart contracts, file storage system, distributed databases, consensus mechanisms, transactional confidentiality, and cryptographic protocols; digital trust infrastructures that include identity verification, review systems, user interface, arbitration, and payment processing; and organization structure that includes the organizational objectives and governance (Menne, 2018).

While the decentralized identity technology is promising, it comes with some vital challenges that it has to overcome for more efficient adoption. The system requires building a lot of new infrastructures such as DID registries, third-party custodians, user wallets, and cloud application programming interface (API) to connect everyone (Prisco, 2018). The blockchain registry also stores public keys and DIDs, which provide room for loss of private keys, which is catastrophic to the holders. It is also cumbersome for digital identity systems to be used in offline situations (Baya, 2019).

Conclusion

To conclude, blockchain technologies enhance decentralized identity systems that aim at cutting out the middlemen and enabling people to transact in the decentralized marketplaces without the rent-seeking middlemen freely. The system provides a broad collection of vertical use cases that enable share users to establish a "shared network effect," which would be beneficial to the application providers and consumers.

References

Artuc, H., and Kaliannan, S. (2019). How does blockchain affect the established sharing economy services (SES)? Lund University. Available at http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=8983925&fileOId=8983933

Baya, V. (2019). Digital identity: moving to a decentralized future. Citi.com. Available at https://www.citi.com/ventures/perspectives/opinion/digital-identity.html

Daley, S. (2019). 17 Blockchain companies are boosting the real estate industry. Builtin.com. Available at https://builtin.com/blockchain/blockchain-real-estate-companies

Liebkind, J. (2017). Opinion: Airbnb needs to watch its back, as blockchain disrupts rentals. Techinasia.com. Available at https://www.techinasia.com/talk/opinion-airbnb-blockchain-disrupt

Menne, A. (2018). Blockchain in the sharing economy. The University of Twente. Available at https://essay.utwente.nl/76517/1/Menne_BA_EEMCS.pdf

Prisco, G. (2018). Decentralizing the sharing economy with blockchain technology. Bitcoin Magazine. Available at https://bitcoinmagazine.com/articles/decentralizing-sharing-economy-blockchain-technology

Redman, J. (2016). Airbnb Co-founder speaks on blockchain technology. News.bitcoin.com. Available at https://news.bitcoin.com/airbnb-speaks-blockchain-technology/

Schiller, B. (2018). On this blockchain-based version of Airbnb, there's no middleman. FastCompany.com. Available at https://www.fastcompany.com/40524021/on-this-blockchain-based-version-of-airbnb-theres-no-middleman

Swapna, M. (2018). Digital identity in Fintech. Medium.com. Available at https://medium.com/datadriveninvestor/digital-identity-in-fintech-fdf9f9ffecc6

Yavuz, M. (2019). Blockchain travel service to offer hotels 20 percent cheaper than on booking.com or Airbnb. Cointelegraph.com. Available at https://cointelegraph.com/news/blockchain-travel-service-to-offer-hotels-20-percent-cheaper-than-on-bookingcom-or-airbnb