Despite all the hype about blockchain, in which databases exist in the form of encrypted copies distributed across many users, it has not yet emerged as a game-changer in the real estate sector. But even if the revolution is a bit behind schedule, speakers at the 2018 ULI Fall Meeting in Boston said that the technology has the potential to significantly increase the speed and reduce the costs of real estate transactions, as well as make investments safer and more liquid.

And while blockchain is not a technological panacea, advances in the technology are likely to boost its impact and benefits, they said.

“This is still an immature technology,” explained Matthew Higginson, a partner in the financial services practice at McKinsey & Company. “The protocols that we see today are not the ones that we’ll be talking about in two to three years’ time.”

Higginson said that even as experimentation with blockchain continues “fiercely,” the business world is now taking a tougher look at blockchain applications and asking why so few proofs of concept have made it to the commercial phase. That scrutiny ultimately could lead to better, more useful applications.

For those unfamiliar with the technology, it is easy to associate blockchain with the mysterious world of cryptocurrencies.  But Higginson explained that blockchain is not that ominous. Essentially, “this is just a database,” he said. Anyone who participates in a blockchain holds a copy of the database, which can be unlocked using crypto keys.

Users can change and add information to the distributed database, but only once their identity is verified by the other users. “I can’t change anything without a consensus of people across the network agreeing that I am who I am,” Higginson explained.

Blockchain has an advantage over other forms of digital and analog recordkeeping in that it creates an audit history, so that no entries ever are overwritten.  Higginson said that in the real estate industry, blockchains for property records could enable a user to look back through the history of a property’s ownership.

Blockchain could help establish “a single source of truth for property information” that could save time and reduce costs, Higginson said. But switching to blockchain might also have potential downsides, such as the cost and difficulty of digitizing old data.

Also involved in the discussion was Jonathan Weibrecht, director of real estate capital markets for Harbor, a San Francisco–based company that offers a compliance platform for companies issuing shares in private placements.  He said that Harbor’s platform makes such transactions significantly faster, because it automates much of the verification process for determining whether trades conform to the rules for the security.

“We’re taking the settlement time from T plus 60 for a non-publicly-traded company down to four minutes,” Weibrecht said.

Streamlining the compliance process also helps liquidity, Weibrecht said. He noted that blockchain is particularly useful when what is being recorded is high in value, and where a potential mistake also has a high cost. He cited the hypothetical example of a company inadvertently selling shares to an illegal drug kingpin. “If you sell securities to Pablo Escobar, you’re going to jail,” he said.

Weibrecht said that unlike cryptocurrencies, where losing a crypto key password can mean losing one’s investment in the digital units of value, there are safeguards in place to ensure that investors who use Harbor’s platform do not get locked out. “If you buy a share in a REIT through us and you lose your password, we can reissue it to you,” he said. “You still own that share.”

Higginson said that blockchain eventually may gain wider acceptance as the technology is used by big companies that shape markets, such as a major retailer that mandates that its suppliers adopt it.

Higginson said that there is a “degree of inevitability” to blockchain becoming an accepted technology, and he urged companies that think they might adopt it in the future to start attending conferences and learning as much as they can now.