There are some great advantages to using smart contracts. In theory, they are supposed to make transactions faster and more transparent. The Japanese real estate market was recently experimenting with blockchain to see whether or not they actually do that. The results certainly didn’t disappoint anyone.
Using a newly launched cryptocurrency settlement platform, Japanese real estate agencies can now sell properties in exchange for bitcoins. The transaction is cleaner, securer, and much quicker. And it all began with a simple experiment conducted by a Tokyo-based real estate company Ruden Holdings.
What Are Smart Contracts, Anyway?
In order to understand smart contracts, one must first get familiar with the principles of the blockchain. Without getting too technical, blockchain can be explained as a decentralized network that exists between all permitted parties. In the transaction context, this eliminates the need for middlemen.
Every smart contract is, therefore, a formal agreement between two parties that participate in the blockchain network. Since we’re talking about a decentralized system, this agreement is not regulated by a single third party, but by all the other network participants. Everything is transparent and conflict-free.
This is how smart contracts work in practice:
You fill out an offer to purchase a property and wait for the seller to confirm it. Once the seller does that, you send the virtual currency to their virtual currency account. The contract is then executed publicly since the “if-then” premise that the contract is based upon is witnessed by hundreds of people.
Smart contracts are so effective exactly because they are fully transparent. First and foremost, this automatic ‘if-then’ premise guarantees that the contract will be executed in a conflict-free way. If you pay for goods, you receive them. All the network participants initiate the contract execution and supervise it.
Blockchain transactions are simply much faster, and that makes it “possible to drastically shorten the time required” to buy a property.
The Japanese Real Estate Experiment
You can purchase virtually anything through the smart contracts, even real estate properties. Ordinarily, the process of buying a real estate requires the time to negotiate, work out conditions, prepare necessary documents, and execute the deal. With blockchain and crypto, this is the thing of the past.
At least that’s what the real estate company Ruden Holdings wanted to prove. For the purpose of this experiment, they partnered with Blockchain Global Limited (BGL) to build a cryptocurrency settlement platform for the real estate transactions. The results were published at the beginning of this September.
Apart from a few additions, “the virtual currency real estate settlement platform” works in exactly the same way as any other smart contract. The company made necessary additions to enable conversion from bitcoins to Japanese yen and to allow realtors to make properly notarized purchase agreements.
After sending the virtual currency to the seller, the buyer receives a purchase agreement with all the necessary documents, including a property registration application. If necessary, the request to obtain other forms can automatically be sent to the buyer before the ultimate execution of the notarized sale.
Why Bitcoins and Smart Contracts?
As Ruden Holdings explained, “smart contracts eliminate the need for manual work and conditions”, which usually bring real estate transactions to an unnecessary halt. Blockchain transactions are simply much faster, and that makes it “possible to drastically shorten the time required” to buy a property.
The results of this experiment prove what blockchain users have been telling us all along – that smart contracts are not only an alternative way to boost the efficiency of business operations, but also a secure way to prevent unforeseen circumstances such as incomplete transactions, fraud, and refusal to pay.
With the terms and conditions of smart contracts being fully visible and accessible to all parties, the transactions can be executed smoothly and much faster than with traditional methods. And, unlike traditional methods, automatically triggered smart contracts don’t need you to fill out forms manually.
This, of course, adds to the overall accuracy of the agreement, as there is no risk from omissions and errors. Misinterpretation of terms and conditions is impossible as well since smart contracts are fully explicit. As for misuse of the agreement, the data encryption provides a foolproof layer of protection.
For real estate buyers, this ensures a quick and hassle-free way to purchase a property with bitcoins. There’s no need for banks, notaries, lawyers, and other middlemen. The transaction itself can be executed in only a couple of minutes, while the entire notarized takes days.
Will Realtors Start Accepting Bitcoin?
Real estate agencies have flirted with cryptocurrencies in the past, but it wasn’t until Ruden Holding’s transaction platform that this payment system received a protocol tailored specifically to their needs. The experiment was successful, so we can expect more realtors to start accepting bitcoin in the future.
We’ve already explained how smart contract could benefit real estate buyers by making the entire process faster and hassle-free. But blockchain has a lot to offer to real estate agencies too, especially today when more and more buyers are looking for viable options to invest their cryptocurrencies in.
With smart contracts, real estate agencies could attract a bigger customer pool. They could establish themselves as industry pioneers, which would certainly help them gain a significant competitive edge. Furthermore, as Ruden Holding’s example shows, smart contracts boost efficiency and eliminate risks.
In practice, this promises a quicker and more secure way of conducting business operations on an everyday basis. No manual work, just simple, clean, and almost fully automatized transactions. Smart contracts streamline customer journeys, drive faster conversions, and thus help increase overall ROI.
In addition to building Japan’s first cryptocurrency platform for real estate transactions and proving that smart contracts are indeed a foolproof, conflict-free way of selling and buying properties, Ruden Holdings is planning to establish a Singapore-based overseas subsidiary for the insurance of its token.
Hopefully, other real estate markets will soon start following in Japan’s footsteps, and smart contracts will become a new standard for successful real estate transactions. Until that, the Japanese realtors will certainly continue to improve and perfect its platform, paving the way for others to follow.
Japanese real estate market might start utilizing Bitcoins and smart contracts as the new transaction standard.
