How to Assess and Evaluate Blockchain Solutions

November 29, 2018

Interest in blockchain technology has skyrocketed in the real estate and title markets in recent years. Claims that it can improve the real estate transaction and recording of land records have been followed up with companies experimenting with proof of concepts and trials. However, questions persist about the true benefits and opportunities, and how broad adoption will be.
To understand how a blockchain solution could improve a company’s operations, Tony Franco, CEO of SafeChain, said employees of title and settlement companies must understand how to assess and measure projects.
What is Blockchain?
Franco described blockchain as “a database that multiple people can manage together with no central trusted authority.” According to Franco, blockchain improves the security of data by storing it on multiple servers rather than just one, making it harder for people to manipulate it. He also stressed that a title professional does not need to know everything about blockchain to assess products using it. “I can look at an automatic transmission (in a car) and I can see the benefits without absolutely understanding how that works at all.” Franco said. “You do not necessarily need to know exactly how something works … to realize and enjoy the benefits of that technology.”
Blockchain Landscape
Franco compared the current state of blockchain to dial-up internet in the 1990s. “At one point on the internet it took us 10 minutes to download an image and not long after that we were streaming movies instantly,” Franco said.  “So, the (blockchain) market will develop and as improvements happen, they will happen quickly.”
This development is happening more rapidly in real estate and mortgage markets than the title industry because of the complexity of the industry. “I think many people lack the understanding and nuance that goes into the work of the title industry,” Franco said. With more projects destined to enter the market, he explained now is the time to learn how to assess new products.
Assessing Projects
Product Adoption
When you hear about a new blockchain project in the industry, the best way to assess it is to find out its adoption rate. For example, according to Franco, 45 percent of the title market uses SoftPro software, so it is obvious that the market has decided their product is valid and accepted in the industry. A blockchain project that has not been adopted by anyone in the market does not benefit from that same validity. According to Franco, if 10 percent of the market has paid for a product, then it has begun mainstream adoption and warrants serious attention. “This is a high bar that no one in the market has right now,” Franco said.
To assess a newer product before its adoption rate has risen, you can also ask for references from some of their other clients or ask for a demo or prototype of their product. “If you don’t have three references, you can say that the project is incredibly early,” Franco said. He suggests reviewing the market every four to six months for new developments.
Risks
While it can be exciting to discover a business with a promising new product, there are some risks involved with young and old companies. “Startups have a 90 percent fail rate,” Franco said. “They take boat load of venture capital and end up becoming nothing.” On the other hand, large companies can often be inflexible and ill prepared to adopt new business models that blockchain could create.
No matter the size of the company, Franco believes that it’s important that their product is legal and compliant with lenders, underwriters and government oversight. “We tend to only look at projects seriously if they are legal and compliant or have a good chance of becoming so. Finally, to assess whether you can realistically utilize a product, you must make sure that it can handle your business’s transaction volume and be able to scale with you as you grow. One of the glaring problems with many blockchain products is their inability to handle large amounts transactions quickly, so it is important to keep in mind the technological limits of a product.
Project Side-by-Side
To show how he makes sense of blockchain projects, Franco compared products from two companies in the market using a scorecard. The first company, Propy, claims it is looking to automate the entire real estate transaction end-to-end and has released a whitepaper titled “Global Property Store With Decentralized Title Registry.” The other project, Building Block REIT (BB REIT), was recently announced by Fidelity which also released a paper describing the product’s vision of utilizing blockchain to manage mixed properties.
Product Adoption
Franco said that neither blockchain technology has mainstream adoption within the title industry, so both products scored a 0/3 in that category. BB REIT received full scores for references due to the backing by Fidelity, while Propy had no customers that could confirm its claims. However, since Propy announced their product in June 2017, they have had more time to develop a demo and prototype while BB REIT is extremely new and has neither.
Risk
The main differentiation in risk between the projects stem from their compliance to existing laws and processes. “The idea that varying degrees of people globally are going to hop onto a blockchain, agree on how it works, and disjoint their processes … is an aggressive claim,” Franco said. “We would say that Propy has kind of gotten ahead of themselves.”
BB REIT on the other hand is attempting to improve an already existing business function by innovating with blockchain. According to Franco, their project has a clear path to legality with technology ready to handle the volume of transactions while Propy cannot say the same for international real estate transactions.
Claims
While title pros love talking about claims, Franco suggested to consider claims or promises businesses make about their products and assessing whether the assertions are valid. If a company doesn’t have a demo or prototype, there may be a whitepaper describing the project. You can also follow the company more closely by reviewing what promises they made during public events, how many engineers they have on their staff or if they have delivered on any other products in the past.
You can also research many companies claims on social media. “I am on Reddit, LinkedIn and Twitter all the time because there are experts on there that are commenting,” Franco said. However, Franco concluded by stating “the best way to know what’s going on is to test products. Talking to 10 title agents and asking, “Is this useful?” is 100 times more valuable than any whitepaper you’re (going to) read.”
“Saying ‘I’m going to change the global system of real estate’ versus ‘I’m going to incrementally improve’ is a fundamentally different claim,” Franco said. While BB REIT is a new product with no marketing in the industry yet, Franco believes the claims are plausible. Propy may have more extensive marketing, but they have not proven they can back up their vast claims, according to Franco.
Click here to download the blockchain scorecard.
Patrick Russo is a Government Affairs intern for ALTA. He graduated from the University of Maryland, College Park with degrees in Marketing, and Government and Politics. He can be reached at govtaffairsintern1@alta.org.   


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