Our new Disruption by Blockchain series aims to highlight companies that are leveraging the incredible potential of blockchain technology to disrupt and revolutionize their industry. Through one on one interviews, we'll speak directly with industry leaders to cut beyond the hype and get directly to the heart of practical use cases and examples of how it will change the world, one industry at a time.
The following is an interview we recently had with Alex Voloshyn, CTO of Propy.
1. What’s the history of Propy? How and where did you begin?
AV: Natalia started her first company at the age of 19, She became a very successful real-estate developer in Sofia, Bulgaria and was involved in many cross-border transactions. Its during this time that she realized how much the process was broken, and that there was a dire need for a platform that did cross-border payments with smart contracts on the blockchain.
She then moved to Palo Alto to start Propy, which became the first company ever to do cross-border transactions via blockchain.
2. Who are the founders and key team members?
Natalia Karayaneva, Founder, CEO
Alex Voloshyn, CTO
Denitza Tyufekchieva, Business Development Manager
3. What problem does Propy solve?
AV: Today, the global real estate market is worth $217 trillion and makes up more than half the value of all mainstream assets worldwide . One great differentiator between real estate and other major asset classes is liquidity. Compared to exchange-traded securities such as equities and government bonds, real estate markets are not as organized or efficient as other markets, with incredibly slow transaction times and less efficient price discovery mechanisms. As a result, substantial capital is trapped in less liquid investments, often concentrated in certain geographic areas devoid of domestic investment opportunities. While many investors with excess liquidity would welcome the opportunity to invest in foreign real estate assets, there are currently substantial impediments to such investment activity. China is an excellent example of this problem. Currently, Chinese citizens are among the largest groups of foreign investors in the U.S. real estate market. Chinese investors own over $28 billion in U.S. residential property. However, the total value of the U.S. residential real estate market is over $29 trillion. Foreign investment in the U.S. residential sector could be potentially equal to hundreds of billions of dollars if foreign investors were properly educated on how to invest and provided with the facility to, among other things, close real estate transactions online. In the current market, Chinese who intend to invest in foreign real estate mainly rely on family and friends to obtain referrals to local brokers, who in turn work with international brokers in selling a property. This process is time-consuming, involves too many intermediaries, and often, the property the buyers are seeking for is sold to another investor before the process is complete. The core of the problem is the lack of international standards or comprehensively available platforms for the electronic transfer and recording of real estate. Each country (and in some cases, as in the United States, even individual counties) maintains its own registry and establishes national (or local) rules for property deed registration and transfers. Moreover, legacy property rights registry systems were developed to handle local real estate transfers but are ill-equipped to handle international ownership transfers. As a result, there is an inferior experience for people on both sides of the marketplace. Additionally, the informality of procedures prevalent in certain jurisdictions makes them particularly susceptible to fraud or tampering. There is currently no single tool available that allows a property investor to research, pay for, and reliably secure and record ownership of international property online.
4. How does your solution work?
AV: Propy aims to solve the problems facing international real estate transactions by creating a novel unified property store and asset transfer platform for the global real estate industry. Initially, the Propy Registry will mirror official land registry records in which transfers of real estate are recorded. Ultimately, however, Propy’s vision is that jurisdictions will adopt the Propy Registry as their official ledger of record such that the transfer of a property on the Propy Registry constitutes the legal transfer of the property and the legal registration of that transfer. By leveraging Propy Registry and Propy’s smart contracts platform, unnecessary delays and impediments inherent to legacy property rights registrations systems could be eliminated. The Propy platform seeks to enhance the security of transactions while reducing inefficiencies through its innovative use of mobile, cloud and blockchain technologies linking buyers, sellers, investors and registries around the world.
5. Why is your industry ripe for disruption?
AV: Blockchain technology holds great promise for a range of industries and use cases, including real estate. A blockchain is a type of shared database, the contents of which are verified and agreed upon by a network of independent actors. In order for a new piece of data (such as the new owner of a transferred property) to be added to the blockchain, the independent verifiers must come to a consensus as to its validity. Because each new set of transactions (a “block”) is cryptographically linked to the previous block, it is extraordinarily difficult to change data stored in a blockchain and any such change would be readily detectable. Thus blockchains are widely considered to be immutable and thus can serve as a record of proof of ownership. When transacting in a blockchain platform, each user makes use of a public address (needed for other actors in the network to send a transaction to that user), and a cryptographically paired “private key.” Private keys are used to sign transactions digitally, a form of authentication to ensure that a given user has genuinely generated a transaction. Blockchain is a relatively new technology. The first implementation of blockchain, Bitcoin, launched in 2009. The Ethereum blockchain was released in 2015. In addition to the distributed ledger capability of the Bitcoin blockchain, the Ethereum blockchain allows so-called “smart contracts,” which are programs stored in the Ethereum blockchain that can act autonomously to execute sophisticated transactions. Blockchain is currently considered one of the most secure technologies for digital asset transfer due to its distributed nature and use of sophisticated cryptography. Smart contacts, therefore, offer a potential solution for the management of real estate transactions via the introduction of a universal, distributed ledger that does not require trust in a single third party.
6. What’s the future of blockchain in real estate?
Prediction #1: TOWARDS A DECENTRALIZED P2P SYSTEM
Traditionally, international standards are established via conventions, laws, and regulations enacted by governments. As a result of the lack of standards with international scope, the current electronic land title registry solutions function as multiple incompatible sets of siloed data which must be manually parsed and translated to work with external platforms. The Propy Registry can solve that problem. In order to do so, and for the Propy Registry to ultimately deliver on its full promise, it will need to transition from a ledger that mirrors official land registry ledgers to being the official ledger of record. For a government to adopt this technology, it would need to recognize the legality of the electronic deeds and the ledger. Propy is actively engaging with local and state governments to accelerate the acceptance of the Propy Registry as a legally valid ledger of record for real estate transfers. Additionally, Propy is working with the governments of several emerging countries where, due to systems’ inefficiencies, corruption and the lack of regulatory complexity, a transition to a new system is expected to be more straightforward; the specific countries to be disclosed in due course as partnerships are confirmed.
Prediction #2: REGULATION CHANGE
The first one would be the current context, where governments recognize their legacy databases as the exclusive legal evidence of ownership. In this environment, Propy intends to initially conduct business and thus, the current development of Propy is geared towards mirroring government records in the blockchain with the goal of providing a platform for foreign real estate investors to conveniently and remotely carry out property transactions. The Propy Registry acts as a source of fast delivered evidence of property transfer for brokers and serves as a mirror of the ownership transfers currently taking place at the title registries of the targeted markets (U.S., UK, UAE). Brokers who focus on foreign real estate investments have expressed the need to have available technology that could allow the online processing of real estate purchases with the additional layers of security that the Propy Registry intends to provide.
Prediction #3: PROPY REGISTRY – GLOBAL TITLE REGISTRY
Each property has a unique title that serves as evidence of ownership. The ownership of properties is usually tracked by the recordation of such titles in organized property registries which are managed by regional governmental organizations. As previously discussed, Propy aims to develop the Propy Registry with the ultimate goal of becoming a global registry for title deed ownership information, which would be made available to worldwide entities, similar to a DNS system for website domains.