How Banks can benefit from Blockchain Analytics?

 

 

Blockchain is a digital and decentralized public ledger with a system that records transactions across several computers linked to a peer-to-peer network. It was originally developed for cryptocurrency assets like Bitcoin, Dogecoin, Ethereum, etc., In recent years there are several new use cases have emerged in financial services. (See:  Blockchain for Secure Healthcare Records, How Banks & Financial Institutions can use Blockchain Technology, Blockchain use cases) 

As blockchain’s use cases go beyond cryptocurrency, including for government applications, healthcare, identity management, art, and IPR, the database of all blockchain transactions grow even more bigger, richer, and more valuable for banks – if they can use this data via data analytics and use these insights to build better services.  The benefit of blockchain is its inherent transparency. The blockchain’s decentralized, open network allows banks to collect data from blockchain transactions.  

The Rise of Data Analytics

Aside from all the aforementioned areas, blockchain also huge potential in analytics. Modern businesses have been benefiting from data analytics for several years now.  Currently, the big problem with any data analytics is getting quality data from different sources and correlating them. There is the issue of whether there is enough of the right data.   

This is where blockchain technology helps. Data recorded in a blockchain is irrefutable and can be easily cross verified from any node in the network. Having access to this large network that provides high quality data in a vast number of datasets is invaluable. 

A good potential application will be blockchain analytics – to understand customers of cryptocurrency customers & traders. Bank’s asset & wealth management business and customer banking’s marketing organization can use these valuable analytics for future marketing campaigns and for managing cryptocurrency as an asset class in wealth management. This system can be used to forecast price movements for cryptocurrencies. 

Today there are more than 100 digital assets including Bitcoin, Ethereum, ERC-20 tokens, and other crypto coins, representing over $200 billion worth of transactions per month. 

Other use cases include risk analysis on crypto transactions: uncovering activities related to money laundering, terrorist fundraising, fraud, and other financial crimes. Blockchain analytics can de-anonymize funds flow by actively collecting millions of data points every week, and then implementing machine learning to its huge data pool to track flows to legitimate entities and also criminal activities.

 

How Banks & Financial Institutions can use Blockchain Technology

Apart from cryptocurrencies, there are several other important use cases for Blockchain technologies in the banking & financial sectors.

NFT 

Non-fungible tokens (NFTs) are new digital assets.  In a nutshell, NFT is a crypto block – which encapsulates digital art or record. The digital art/record is tokenized – just like recording a payment transaction in a blockchain, it becomes a certified true copy – whose authenticity & Ownership can be verified by any node in the crypto-chain network. This token (also called NFT) can then be traded on the blockchain network just like any cryptocurrency.

Today, the world is experimenting with NFT for digital art or digital records. For example, Twitter CEO Jack Dorsey sold his first-ever tweet as an NFT for more than $2.9 million!

Ownership & Transfer of Financial Instruments: 

One of the biggest use cases of NFT in the financial world is recording ownership of financial records: Bond/stock certificates, insurance policies, etc can be tokenized to record the ownership of financial assets, and then these NFTs can be traded on the crypto network.  

Payments, Remittance & Reconciliation

Unlike cryptocurrencies, banks can create & issue crypto tokens that are tied to a fixed value – which can then be transferred over the network for instantaneous payments and remittances without the need for a central bank’s approval. JPCoin is a good example of this.

Servicing of Instruments

Once the ownership of financial assets is tokenized, Payments as per financial contracts such as Bond coupons or dividends can be made programmatically to the current owner of the Financial instrument accurately.   

Storing KYC information & Anti-Money Laundering Registers

KYC information is nonfungible data that can be tokenized so that these records cannot be altered by hackers, and also be used for rapid ID identification across the network for rapid transactions. As the pace of transactions increases, the current data warehousing systems impose certain limitations and the use of NFT for KCY AND AML Registers can speed up global financial transactions.

Regulatory Reporting

Regulatory Reporting should be a nonfungible report as it has major implications. Countries and participating Banks can use the crypto network to get, store and use all regulatory reporting data. These reports can then be shared securely in the crypto database with multiple regulators and other governing bodies. 

Blockchain for Secure Healthcare Records

Individual users health records - both user generate data: Activity monitors (fitness bands, mobile apps),  home medical devices etc., and co-generated data from hospitals, testing laboratories, insurance companies etc., are becoming important to protect and regulate access of this sensitive data.

Patient health records is a sensitive data and there are regulations that must be followed. Globally, there has been a heightened need to increase privacy and limit access to patient's health records to avoid misuse and abuse.

Here is one use case for Blockchain based record vault - which enables users to secure their own health records & information.

At this point in time, there are no major solutions which offers this, and hence this a mere idea today - which can become a potential product/solution in near future.

There are several benefits of such a system:

1. Secure HIPPA Compliant Data Access.
   
2. User – i.e, Patient owns all his data & can choose to whom to share this data.
   
3. Doctors & Healthcare professionals get authenticated data on all patient records – when needed.
   
4. Simplifies Hospital data record management & has data only when patient has approved & for a agreed duration of time.
   
5. Drug Research organizations get authentic data & speeds up research.
   
6. Patient’s insurance claims are faster due to secure & authentic data. Results in faster disbursal
   
7. Retail & Pharma companies can buy user data directly from the patient/user. Thus helping patients from monetizing their own data. 

Blockchain's smart contract system allows users to regulate who has access and for how long. Users can thus monetize their own health records and also prevent misuse of their health records.

Digitalization of Banks and How Blockchain Helps

The core of challenges faced by banking industry today are: Time taken to complete a transaction, Securing customer and bank’s internal data, Compliance with regulations & Fraud detection & prevention.

All these challenges are essentially data & compute related. Once we understand the core data issues, solving them is relatively easy. Blockchain technology is a great solution to solve many of the current banking challenges.

Bitcoin Hype has ended: What's Next? Answer is Corda!

Bitcoin and Blockchain A number of things have come to pass since 2016.  post (below the line) including Bitcoin forking in order to increase transaction speed. This happened suddenly, after what appears to be a reversal of policy by China whose companies control 80% and all 5 of the largest bitcoin "mining pools."

Chinese companies blocked bitcoin forking for an extended period except Alibaba's ANTpool. Suddenly all five approved the XT and then Classic fork and voila. What happened? We can only speculate, however it appears the Chinese government decided it was better to control Bitcoin than attempt to block it. So yes, Bitcoin is a "distributed" governance model but make no mistake that Bitcoin governance stops in Beijing.

What is Corda?

Corda is a blockchain platform built for business. Corda removes costly friction in business transactions by enabling businesses to transact directly. Using smart contract and blockchain technology, Corda allows existing business networks to reduce transaction and record-keeping costs and to streamline business operations. Corda enables an interoperable, open network that empowers organisations to collaborate and transfer value directly with trust. Corda achieves this with complete privacy in a freely available open source software platform.

Corda can be deployed on Generic x86 Servers

Factors Influencing Blockchain Adaption

Three Practical Use Cases for Blockchain

Corda is not a Blockchain

On November 30th, 2016 the R3 foundation publicly released the code for its Corda  decentralized ledger platform along with a bevy of developer tools, repositories, and community features including both a Slack and a Forum. A little under a month out, and it is safe to say that the Corda platform is well underway under the guidance of the well known Mike Hearn who also wrote the technical whitepaper on Corda.

Notably, in this white paper and in the code, the development team has taken a new approach to decentralized ledgers: Corda is not a blockchain. Many aspects of Corda resembles something in blockchain, Corda is not a block chain. Transaction races are deconflicted using pluggable notaries. A single Corda network may contain multiple notaries that provide their guarantees using a variety of different algorithms. Thus Corda is not tied to any particular consensus algorithm.

This is a fascinating addition to the distributed/decentralized ledger race in that one of the most well known consortia in the blockchain space has moved away from using blocks of transactions linked together. This is an intriguing peer-2-peer architecture since the transactions utilize the UTXO input/output model which is very similar to the transaction system used in more traditional blockchains such as Bitcoin but the storage and verification do not get written into blocks.

Likewise, Corda does not contain a general gossip protocol which broadcasts all transactions to the network. The validation function of the contract code only needs the validation chain of each individual transaction that it is working with and transactions that occur on the ledger are not broadcast to a public depository or written into blocks. Likewise, the consensus protocol of each deployment of Corda can change allowing the platform to conform to the needs & specifications of each client. These simplifications allow Corda to sidestep the scalability issues dogging blockchains like Bitcoin while allowing for a system that conforms to the needs of an enterprise rather than forcing a multi-gajillion dollar company to fundamentally change the way they need to handle payments.

Corda architecture is a highly client-sensitive private ledger that allows for nodes tailored to the kinds of transactions that their operators need. The ledger allows for mistakes to be fixed and states to be edited and is stored on a H2 database engine interfaced with the SQL relational database language. However, any changes to states must also conform and be validated by the code. This realist approach to an enterprise distributed ledger as it takes into account the need for both familiar integration, headroom for the inevitable human mistake, and a single truth between parties. As mentioned before, the state system also contains a direct reference to an actual legal document that governs this truth.

Bitcoin is not Anonymous

One of the commin misconception about Bitcoin is its supposed anonymity. In reality, it is not so. Though all users of Bitcoin take up a pseudonym which is their public key and this public key does not reveal the name or identity of the user. By using pseudonym, users tend to think that Bitcoin is anonymous - but it is not so. Let me explain below:

The pseudonym is now used for all transactions and all the transactions are recorded in a shared distributed ledger - i.e., everyone can see all transactions. This implies that all transaction data is available for any big data analytics.

By using transaction data with data from person's mobile: Locational data, Social network data, internet access data etc, it is possible to triangulate the pseudonym to the identity of a real person. With rapid advances in realtime bigdata analytics, it is now possible to link a bitcoin address to a real-world identity.

If one interacts with a bitcoin business: Online wallet service, Exchange, or a merchant - who usually want your real-world identity for tansactions with them. For example details like credit card information or shipping address; Coffee shop or resturants that accept bitcoins - then the buyer must be physically present in the store. The store clerk/attender know about the buyer - thus the pseudonym now gets associated with the real-world identity. The same information can be gleamed from digital trail in form of data from cell phone, CCTV grabs etc,. Information like geographic location, time of the day, social network postings (Twitter, Facebook etc) can all be collected remotely, analyzed and soon a pseudonym can be associated with a real-world identity.

Blockchain & CorDapps Use Cases

R3 Corda Application Architecture

Corda is a distributed ledger platform designed to record, manage and automate legal agreements between business partners. Designed by (and for) the world's largest financial institutions, it offers a unique response to the privacy and scalability challenges facing decentralised applications

Corda's development is led by R3, a Fintech company that heads a consortium of over 70 of the world's largest financial institutions in the establishment of an open, enterprise-grade, shared platform to record financial events and execute smart contract logic.

Corda is now supported by a growing open-source community of professional developers, architects and hobbyists.

What makes Corda different?

1. Engineered for business
Corda is the only distributed ledger platform designed by the world's largest financial institutions to manage legal agreements on an automatable and enforceable basis

2. Restricted data sharing
Corda only shares data with those with a need to view or validate it; there is no global broadcasting of data across the network

3. Easy integration
Corda is designed to make integration and interoperability easy: query the ledger with SQL, join to external databases, perform bulk imports, and code contracts in a range of modern, standard languages

4. Pluggable consensus
Corda is the only distributed ledger platform to support multiple consensus providers employing different algorithms on the same network, enabling compliance with local regulations

Closing Thoughts 

Corda provides the opportunity to transform the economics of financial firms by implementing a new shared platform for the recording of financial events and processing of business logic: one where a single global logical ledger is authoritative for all agreements between firms recorded on it. This architecture will define a new shared platform for the industry, upon which incumbents, new entrants and third parties can compete to deliver innovative new products and services.

Corda - A Next Generation Blockchain Technology

Corda is a distributed ledger platform designed to record, manage and automate legal agreements between business partners. Designed by (and for) the world's largest financial institutions, it offers a unique response to the privacy and scalability challenges facing decentralised applications

Corda's development is led by R3, a Fintech company that heads a consortium of over 70 of the world's largest financial institutions in the establishment of an open, enterprise-grade, shared platform to record financial events and execute smart contract logic.

Corda is now supported by a growing open-source community of professional developers, architects and hobbyists.

What makes Corda different?

1. Engineered for business
Corda is the only distributed ledger platform designed by the world's largest financial institutions to manage legal agreements on an automatable and enforceable basis

2. Restricted data sharing
Corda only shares data with those with a need to view or validate it; there is no global broadcasting of data across the network

3. Easy integration
Corda is designed to make integration and interoperability easy: query the ledger with SQL, join to external databases, perform bulk imports, and code contracts in a range of modern, standard languages

4. Pluggable consensus
Corda is the only distributed ledger platform to support multiple consensus providers employing different algorithms on the same network, enabling compliance with local regulations

Closing Thoughts 

Corda provides the opportunity to transform the economics of financial firms by implementing a new shared platform for the recording of financial events and processing of business logic: one where a single global logical ledger is authoritative for all agreements between firms recorded on it. This architecture will define a new shared platform for the industry, upon which incumbents, new entrants and third parties can compete to deliver innovative new products and services. 

Why Fintech should embrace DevOps

Making your IT operation DevOps friendly can improve Bank's ability to respond to rapid changes in FinTech deployments.

For many years now, the biggest challenges banks face have been "soft" and cultural as much as technical. CIOs and IT directors need to align with business values, nurture security awareness, and cultivate a forward-facing workforce with considerably more urgency than they apply when they look at, say, a migration to IPv6, certifying SOC2 compliance, or calculating the ROI of a shift from spinning disks to flash memory.

The latest wrinkle for IT is how to befriend DevOps talent, or more precisely, how to leverage DevOps capabilities and resources. This introduction describes DevOps, distinguishes DevOps and IT cultures, and concludes with a handful of specific ideas IT should consider in response to DevOps fashions.

What is DevOps?

Make no mistake: A significant fraction of DevOps practice is fashion, in the sense that belief in the benefits of those practices is far more widespread than objective documentation of the same benefits. That doesn't mean that all of DevOps is bunk. It just means that DevOps deserves the same critical scrutiny from IT as functions like data management, legal, or marketing. All of them ultimately have a responsibility to communicate how they promote the organization's mission.

The "DevOps" neologism aspires to capture collaboration between software development (Dev) and IT operations (Ops) skills and experiences. One sign of DevOps' mind-share is that it has inspired even more contrived targets, such as DevSecOps and Lean DevOps.

DevOps is often explained as a contrast to outdated silos of responsibility. In the latter model, programmers code up functionality, then toss their source code "over the wall" to a distinct engineering or operations crew responsible for delivering that functionality at a production level and scale. Ignorance of operations realities often results in developers choosing architectures or coding styles that scale poorly and fail clumsily, and are hard to monitor.

Similarly, operations staff who work without deep programming insight have only blunt tools to attack such real-world requirements as a sudden need to multiply capacity by a factor of 10 or harden an application against hostile actors.

DevOps practitioners should have sufficiently broad and deep perspective to step around such pitfalls. The current hot market for DevOps hires reflects the expectation that DevOps practitioners should be solidly grounded in both development and operations.

Another strong theme in DevOps culture is that practitioners automate and generally treat as software as much of operations as possible. A traditional operations staff might install and test operating system patches during downtime hours, while dedicated DevOps workers are more likely to have hosts under automatic control so they can launch new resources and migrate workloads during business hours. Similarly, a new version of an OS should be just another configuration element to update.

When things work well, DevOps takes credit for reliable, highly scalable results delivered to customers, with rapid turnaround of feature requests.

Hybrid vigor

Those certainly sound like desirable qualities. Can traditional IT hire a few DevOps practitioners and acquire the goodness for itself?

Yes and no, as with any important question. Yes, there's plenty DevOps can bring to traditional IT. There are also numerous hurdles to overcome to avoid wasting IT resources and annoying DevOps adepts.

Part of DevOps reality in 2017 is intimacy with cloud service providers, from Amazon Web Services (AWS), Google's G Suite, and so on. Most DevOps professionals take for granted the rich ecosystems of management and orchestration that have grown around these services. A traditional IT on-premises environment—where a new host or storage unit might take weeks to approve and physically requisition rather than seconds to select and deploy—can upset DevOps hires profoundly.

How can central, traditional IT best welcome DevOps talent? These following four ideas—right target, tech clarity, broad perspective, and API opportunity—will take you a long way toward making the right DevOps impression.

Right target

First, keep the goal clearly in mind: While the title of this piece targets "friendly" relations, that's a metaphor. The real goal is to promote the organization's business mission; "friendliness" or "comfort" are means to that end. A traditional IT department probably should never aspire to the "leading edge" technology turnover that some DevOps relish. At the same time, a traditional IT department can speak frankly about the specific help it needs from DevOps and the opportunities to apply DevOps principles outside the usual DevOps domains. The right candidates prize that sort of honesty and challenge.

Technical clarity

Clarity about the organization's infrastructure plans is also important. Is the department adopting private cloud on-premises? DevOps can help define its configuration. Has the company decided on a hybrid cloud architected to allow loads to migrate from on-site to off-site and back? Hybrid remains a specialized, narrowly understood technology likely to excite many DevOps professionals. Is the company committed to legacy architectures in its own data center?

A smart company can remain with legacy at that level and simultaneously work to virtualize and streamline management of those legacy resources. Good DevOps professionals can recognize that, although on-premises legacy architecture won't help them keep up with the latest AWS releases, integration and modernization projects offer abundant opportunity to apply DevOps principles and tools. Part of recruitment should be to sort out the DevOps candidates you encounter: Does a particular individual hunger to be at the bleeding edge of technology? Is the candidate's reward more in using existing tools to fulfill the organization's needs? While both prospects can equally claim "DevOps" status, the latter is likely to be a better fit for integration in centralized IT.

It's more than just a GitHub account

The DevOps focus is on automation and lifecycle management. While this applies immediately to provisioning, that focus can help traditional IT in other areas, including capacity planning, availability, and business continuity. Certainly the past decade has seen a great improvement in tooling around performance, but much of that tooling is still poorly understood by traditional IT. DevOps will assume Logstash, Kibana, Redis, Elasticsearch, Nagios, Puppet and/or Chef, a messaging bus, and other such tools are available. Even the most traditional IT departments probably need to open up to these basic building blocks. IT probably also needs to support Git or a comparably modern source code management system, along with an integrated issue tracker and source review manager. The department doesn't have to hand everything over to GitHub—but it better offer something almost as good or DevOps careerists will think they're just wasting their time.

Embrace APIs

Join the API gold rush. APIs represent another (at least?) double-edged sword, of course. Plenty of past IT attempts to provide programmability have resulted in ill-conceived uses that made more work for IT, however much the intent was to encourage departments to construct their own robust applications. APIs play a different role in 2017, one DevOps will insist be supported well. Cooperate with DevOps and they will show how APIs can be published and consumed more inexpensively than in the past.

Blended strengths = enormous opportunity

A traditional IT department in a non-technology company does no one any favors by pretending it is DevOps paradise. If it's clear about its goals and plans, though, and ready to move on from break-fix and physical craftwork approaches, it can present its IT plans as great opportunities for the automation and management DevOps does best.

There's no need to view cloud providers and convergence technologies as enemies to traditional IT. Rather, they are simply new challenges that deserve thoughtful response in support of traditional IT's longtime strengths in business continuity management, security routines, identity management, cost accounting, and so on. The opportunity to blend the strengths of DevOps and traditional IT is enormous, at least for those IT decision-makers clear about their plans and resources to support them.

Blockchain for Real Estate Transactions

Indian real estate transactions are fraught with risks. At every stage, there are risks of fraud or risks of legal entanglements over the ownership title. As a result, the common man often does not have a choice of risk free properties to buy.

As a result, bulk of real estate transactions are handled in cash[1] - thus bypassing the organized banking sector. According to RBI report [2], housing sector accounts for only 16.6% of all the credit portfolios of the banks in India.

This contrasts sharply with the real estate loans represent a vast majority of outstanding credit portfolio in the USA [3], where 45.2% of the outstanding credit portfolio is in real estate sector.

This implies that there is a lot of opportunities in Indian real estate sector for banks to lend - provided banks can find ways to bring in transparency and developers can gain trust of borrowers. In this context, blockchain technolgies will be of big help.

Hernando de Soto, a renowned economist wrote that: No nation can have a strong market economy without adequate participation in an information framework that records ownership of property and other economic information.[4]

Property rights can be in form of any high value items such as:

• Real Estate: Apartment, agricultural land, house
• Art & Collectable Items of Value: Paintings, Antiques, cars, watches etc.
• Proof of investments: Stocks, bonds, certificates of deposit etc.
• Intellectual Properties: Copyrights, Patents, Algorithms, APIs etc

These records represents the owner's rights and majority wealth of an individual. It is therefore crucial to maintain completeness & correctness of these records to prevent unauthorized or fraudulent changes to these properties.

Historically, people had to trust the government agencies to provide a standard centralized ledger that represents the ownership. However in developing countries, and in times of uncertainties, we have seen that government routinely tramples upon individual property rights and in many occasions even usurp private property.

Even in developed countries or developing economies where there is stable government and a strong rule of law, trading in property is a hassle. Documents can be forged or fudged to create fraudulent transactions - which results in lost value and long time spent in court disputes.

Blockchain technology presents an alternative way to protect and secure the rights to these properties. Blockchain is a consensus based peer-to-peer network with a proof-of-work algorithms which makes changing these historic records probhitively expensive and correctness of the documents is guaranteed by block chain technology protocol rules.

Block chain technology ensures that the rightful owner can always be identified using public key cryptography. Blockchain technology allows creation of "colored coins" - i.e,. Non-fungiable bitcoin (see https://en.bitcoin.it/wiki/Smart_Property)

Smart property technology as described by Mike Hearn:

Smart property is property whose ownership is controlled via the Bitcoin block chain, using
contracts. Examples could include physical property such as cars, phones or houses. Smart
property also includes non­physical property like shares in a company or access rights to a
remote computer. Making property smart allows it to be traded with radically less trust. This
reduces fraud, mediation fees and allows trades to take place that otherwise would never
have happened. For example, it allows strangers to loan you money over the Internet taking
your smart property as collateral, which should make lending more competitive and thus credit
cheaper.

The main benefit of blockchain technology is a distributed database, which cannot be hacked or misused by administrators. Even in case of natural or man-made disasters land records data cannot be destroyed. Blockchain will also serve as a virtual notary service - which authenticates all transactions. This authentication service can be used by banks & insurance companies to provide loans and insurance services.

Therefore block chain is very useful for keeping property ownership records. There are multiple benefits of block chain based property rights management system, that goes beyond the proof-of-ownership and fraud prevention.

1. Provide Transparency
2. Eliminate fraud.
3. Smart Contracts
4. Increase the speed of Transactions
5. Leverage & unlock Value of Assets

1. Provide Transparency  

If I were to buy a property today in Bangalore. I need to get a copy of all the property documents from the rightful owner. Often, the owner of the property would have documents in a safe locker. The owner has to retrieve the original documents, make a photo copy and hand over the photo copy to the buyer. Then as a potential buyer, I need to verify the authenticity of the document with several government agencies, identify legal risks against the property by getting a legal opinion from lawyers, and then negotiate the final price and then pay via a bank, and then register the sale agreement/deed with government agency. All this will take several weeks for the transaction to complete and the buyer has to spend quite an amount of money.

In India, a significant amount of money - almost 1-2% is spent to verify and validate the ownership titles of the property before the transaction can occur.

With Blockchain based system, all this hassles are eliminated. All property related documents are hosted on block chain. Even the entire history of all transactions on that property can be hosted on the block chain. All relevant tax paid information, relevant clearances etc. are all on block chain. The owner of the property can provide read access to this data to potential buyers. The buyer in turn can trust this data, which results in total transparency of ownership rights.

2. Eliminate fraud

In India, real estate & property disputes form a majority of civil court cases. The prevalence of fraud and complexity of property rights has been a major obstacle for a vast majority of Indian citizens to buy/invest in real estate. No wonder less than 10% of the population owns property in India.

In India, a significant amount of money - almost 1-2% is spent to verify and validate the ownership titles of the property before the transaction can occur.

Since the original property records are on block chain, and these historical records cannot be edited/modified, it eliminates fraud and reduces the cost of transaction.

In case of real estate properties, there will be a common trusted registry service to authenticate the owners and record all transactions. With blockchain, the use of coloured coins to repersent the property. The ownership title of the property can be modified only with a combination of private keys of the owner and registration authority. This ensures that neither the property owner nor the registry - can modify the records individually, without the consent of the other party. This scheme provide safe & secure way to record all transactions. And ensures all transfers are properly recorded.

3. Increase the Speed of transactions

Block chain technology ensures total transparency in property ownership titles and it also eliminates fraud. This will encourage buyers to trust the seller, and close the transaction faster. A faster sale results in better economic gains to both buyer and seller. The seller gets a faster access to capital, and the buyer gets an assured property which he can use.

Furthermore, payments for real estate property transactions could be handled on a Blockchain using digital currencies. Thus eliminating the expensive bank transaction fees, and the seller gets faster access to cash.

4. Smart Contracts

A property can generate income and will have certain expenses. In case of real estate property, there are certain annual expenses such as property taxes, property insurance and there may be other maintenance charges.

With block chain technology, the owner of this property can build in rules into the block chain system which triggers payment of taxes or other maintenance charges based on predefined rules. In case of taxes, the rules will be defined by government agency and one can write in the automation tools to calculate and pay the required taxes - via the technology of "Smart Contracts".

Insurance companies can also evaluate the value of the property and provide better pricing and  owners can pay insurance companies via smart contracts.

A property can also generate income. In case of real estate, this could be often seen as rents. Smart contracts can be developed to collect rents from tenants. Smart contracts allows for automatic collection of rents as per predefined rules.

Take an example of retail shops in a mall. The mall owner/mangers can use smart contracts to collect rents for all tenants -based on smart rules such as rent as % of sales revenue or rent as % of electricity/utility consumed etc.

Today, these rule based rent calculations are tedious and cumbersome. This implies the landlord has to spend money to have accountants go over all the calculations, generate an invoice and then go behind tenants to collect. Tenants can at-times dispute this calculations (human error) and delay payments.

With smart contracts, all the rule based rent collection can be automate.

Smart contracts will also allow the rents to be paid out to multiple owners - if the property is jointly owned by many investors. Smart Contracts will encourage investments in commercial real estate ventures.

5. Leverage & unlock Value of Assets

Block Chain technology provides total transparency and when merged with smart contracts, the entire transaction history on that property can be made available to banks or other financial agencies over the block chain. This will allow banks/lenders to evaluate the quality of the assets and quickly determine the quantum of loan that can be provided to the owner.

Property owners can quickly leverage their real estate assets quickly and use that freed up capital in other ventures.

Banks/lenders in-turn can bundle up the assets and create Mortgagee Backed Securities (MBS) and trade MBS to investment banks in the secondary markets. Credit rating agencies can quickly valuate the quality of the underlying assets that makes up the MBS, the risk rating of the MBS can be dynamically calculated on demand.

Unlocking the value of real estate assets can really accelerate a countries economy!

Closing Thoughts

Blockchain technology is ideal for real estate property transactions. However this will not happen overnight. The Blockchain technology offers great prospects for the future. Streamlining a slow cumbersome process in real estate transactions will unlock value for everyone.

However such an innovative technology will not get a wide spread acceptance quickly. It will take time and few innovative & forward thinking real estate firms will lead the way and create enormous wealth for themselves.

Retail Banks, Investment Banks, & Hedge funds will benefit greatly by having real estate on Blockchain. These bankers have the clout and money to clear off the hurdles and create adequate regulation or rules needed for real estate.

Blockchain technology is still in its infancy, but the potential benefits of this technology is too great to ignore.

References

1. www.iimb.ernet.in/sites/default/files/u201/Housing%20Market%20in%20India.pdf
2. Https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/T_11118A5AFCC55634D2F8AA62E5CB885E233.PDF
3.    Http://www.forbes.com/sites/greatspeculations/2015/06/17/q1-2015-u-s-banking-review-outstanding-commercial-loan-portfolio/#61b531074e61
4. "The Destruction of Economic Facts", by Hernando de Soto. April 28, 2010. Bloomberg BusinessWeek. Accessed online May 2, 2011