Do you need a dictionary to understand property transactions?

Creeping slowly into the property world are some new terms.  We are seeing references to some various new topics and how the property market is going to change as a result.

As a jargon-buster for the new 21st century kids on the block (no pun intended!) perhaps you should note the following and how they may change property transactions:

Blockchain

This is a digital ledger (stored over many computers worldwide) in which transactions made in Bitcoin and other crypto-currencies are recorded chronologically and publicly.  The Blockchain (based on earlier “distributed ledger technology” work) was a concept invented by Satoshi Nakamoto in 2008.  It is an evolving technology.  Expensive items have already been sold in Bitcoin using Blockchain technology.   Housing and buildings are no exception.  The transactions happen openly (as all members of the Blockchain can see and authorise changes) and are safe (as the ledger is shared on many computers so a hacker would need to hack all computers to interfere) and quick.

Blockchain divides opinion amongst those who are informed about it.  Some say it will be a revolution in managing payments and transactions and others question its long-term security and others feel it may be manipulated by criminals to cover their tracks e.g. money launderers.

Cyber Currencies

There are about one hundred crypto-currencies (or cyber-currencies as they are otherwise called) of which Bitcoin is one.  These are on-line currencies. Many are used on the Darknet for criminal transactions.  They are not subject to the same anti-money laundering rules which apply to professionals and the banking industry.  It enables dirty money to circulate outside the normal banking system.

Darknet (or Darkweb)

This is a network on-line to which you can only gain access by using specific software, specific configurations or authorisations, mostly using non-standard portals.  It is the domain of criminals.

Bitcoin

This is the best known of the crypto-currencies.   Britcoin is a crypto-currency and worldwide payment system. Like paper money and gold and older currencies, Bitcoin allows the parties to exchange value peer to peer but without intermediaries such as banks to manage it.  It is the first decentralised digital currency.  The value fluctuates as any currency but perhaps more so than others.  For example on 2nd March 2018, one Bitcoin was worth $10,936.

In December 2017 it was about $20,000 and at other times it has fallen to about $6,000.  It is a digital asset used in exchange for goods or services.  Bitcoin is a global currency – you can send it to anyone anywhere in the world without any cross border issues to contend with.

Musicoin

This is a crypto-currency specifically geared to the consumption and payment of music-based Smart Contracts programmed into its Blockchain.

Brickcoin

This is another crypto currency launched by a European company backed by real estate.  Each Brickcoin is backed by real estate holding a Real Estate Investment Trust (“REIT”).  This crypto currency is therefore secured by real tangible property assets in real estate unlike, say, Bitcoin which is not backed by any valuable secure asset.

Smart Contract

This is a computer protocol intended to digitally facilitate, verify and enforce the negotiatonal performance of a contract.  It means some contractual clauses may be partially or fully self-executing or self-enforcing or both.  The aim is to reduce transaction costs associated with complying contract provisions.  An example is in the music industry: every time a piece of music is played (mainly relevant to DJ mixes where there is a DJ and several tracks and hence artists in the mix) the Smart Contracts, attached to the piece of music, pay the artists almost instantly using Blockchain technology using Musicoin crypto-currency.

It is easy to see how other types of contracts (e.g. property selling and buying contracts) could ultimately follow after some further research and development.

E-Conveyancing

This is “old hat” compared with the other terms used here.  It is back again in the property legal press.  It was originally the “buzz word” about 15 or 20 years ago in U.K. real estate law but this time the trend in the property press is looking at Australia.  Here,  the on-line transfer of funds electronically is simultaneous with the completion of the sale/purchase of the property and the registration of title at the Land Registry.  It is easy to see how both “Smart Contracts” or similar could be integrated into such a system.

Chatbot

H.M. Land Registry in the U.K. have built a prototype Chatbot on-line property advisor as part of their own vision known as the “Digital Street” project looking into land registration of the future.  They have also produced an instant mortgage concept enabling lenders to make an instant decision and using Blockchain” to transfer funds.  Despite the excitement in some quarters, we are not there yet.

Conclusion

We all need to get familiar with these terms and similar as and when they arise.  A Treasury Select Committee is having an enquiry into the regulation and potential impact of distributed ledger technologies such as Blockchain which underpins Bitcoin and other virtual currencies.

Watch this space!