Last September, the Propy blockchain startup raised $15 mio through an ICO to create a global blockchain-enabled marketplace for real estate. The technology will speed up transactions to just a few hours, and even a few minutes in the near future, while also reducing the cost of intermediary services. Over a year, 13 real estate transactions were made on the platform in different countries; overall, 50,000 properties are put up for sale here in the USA, London, Prague, Thailand and other countries. The project team is also working on applying blockchain for state registers of residential and commercial property in Ukraine and in the U.S. state of Vermont, Propy CEO Natalia Karayaneva told Invest Foresight.
– A little over a year since you launched the ICO, how many deals have been made? How much property has been sold, in square meters?
– Over the year, we have built a transaction platform for automating property purchases and started using it for first transactions in Vermont, California, Arizona, now in the European Union, in Spain (a warehouse in Seville was sold for Ethereums – ed.). Overall, we have formalized 13 blockchain transactions, although I cannot cite the total area of the property involved. The first transactions took place in Ukraine and in Vermont, U.S., with approval by the local state authorities; the subsequent ones were carried out without any involvement of the state, proving that our platform is in complete agreement with the existing laws. The first transactions in each jurisdiction were rather difficult in terms of finding buyers, sellers, real estate agents, notaries, etc.
– How long does a blockchain transaction take?
– The first ones took from several days to a month: it takes the notary and the agent time to prepare for using the blockchain-enabled platform. The deals also had to be adapted to local rules and laws of the real estate market. In Arizona, with the second transaction, the preparations took a week, that is, faster than the first, and the third, I think, will take a day or two. The platform is ready for scaling. Even now, a transaction can be completed in a few hours, provided that the seller, the agent, and the buyer are in the same time zone and are ready to act.
– Is selling property for cryptocurrency allowed in Arizona?
– Cryptocurrency is allowed in all U.S. states, but we make deals using both cryptocurrency and local currency. The bitcoin is recognized as an official commodity by the United States and many countries; Germany and Japan recognize it as a financial instrument – that is, money. Only such countries as China banned bitcoin as a payment tool. Dubai does not recommend using it so far. We do not have problems with using the bitcoin as a payment tool in each country we operate in.
– Where is it easier to sell real property with the use of your platform?
– In the United States. When a land plot was on sale in California, the buyer and the seller were in different parts of the world, and the deal was concluded remotely. This can be done using a blockchain only. In the United States, a property deed is signed by a title company, which specializes in checking real estate title and issuing corresponding certificates, rather than by a notary. In Russia, the government is responsible for ensuring the right of possession, while the United States does not have such an institution. The right of possession is recorded by a municipality, yet the municipality does not guarantee the right itself. That is why they have the insurance of the right of possession. This business is worth $20 bln and owned by title companies. There are four major companies in the United States, including Chicago Title, which took part in completing the deal in California. The company logged into our platform, uploaded the documents, and at the conclusion of the deal the address was received via the blockchain and was then included into the real estate certificate. Then the certificate was documented in the municipality, and, correspondingly, in our blockchain register. The title company forwards the documents to the municipal registry, but, unlike Russian notaries, the company does not store the data but simply certifies that the document has been signed. In the future, we will begin sending documents to the registry ourselves. Title companies check the history of the ownership title and issue a real property insurance certificate. Should any claim to the right of property arise, the insurance covers such cases. The title certificate is stored in two databases: in our registry in the blockchain, and in the state registry. The blockchain stores only hashes of the deal data, which protects it from counterfeiting and theft of the right of property, while we store the data centrally as PDF files. We are working with several state registers to have them hand over the blockchain state registry.
– In what jurisdiction is this work closer to completion?
– Ukraine and Vermont. Ukraine has two registries, one for land and the other one for residential and commercial properties. We are working on the second one. We will be doing this for another couple of years. We are ambitious and the work is in progress. Many government agencies are cooperating with us. Vermont was the first of the US states to legally define blockchain. Arizona was next, then Nevada and California. In California, blockchain records constitute proof of title in court.
– How do token holders use tokens of your platform?
– Owners can advertise their property at Propy.com. Buyers use tokens for transactions via our platform for the smart contract to become effective. Tokens are also used for entering a title document into the registry.
– If transactions are made in fiats, how are they compatible with smart contracts?
– Currently, we accept four cryptocurrencies, Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and Binance (BNB). When we use national currencies, we also use money wiring technology. We don’t have to send customers to their bank but rather provide them with a platform for filling out bank details. Then the customer will get a call from a title company to confirm his identity and bank account. The money is transferred from the customer’s account to the account of an escrow agent and then to the seller’s account. Smart contract allows parties to receive confirmation of the successful deal.
– You use Ethereum. But there are currently new faster and cheaper blockchains. Do you have any plans to change the platform’s blockchain?
– Smart contracts will remain on Ethereum as its speed and rate are adequate for Propy. However, it is very expensive to store transaction documents on Ethereum. There is a possibility to start using other blockchains for deal registries of different countries. We have tested NEM, EOS and Hyperledger. We are also considering Exonum Bitfury.
– Cross border real estate trading is estimated at $340 bln. What annual turnover is Propy expecting in 2018?
– The results of our work are only beginning to show themselves; in 2018 we expect a significant increase of transactions through Propy. We are not ready to discuss the annual turnover yet.
– Who are your competitors, and what are your plans?
– Our main competition is companies that create blockchains for data storage: Bitfury, Ubitquity, Chromaway and others. But we don’t see a player with an experience in automation and closing of the deal cycle that Propy has. There have been about a hundred ICO projects in real estate trading. As for our plans, we aspire to become an Amazon in real estate. At the moment everything can be sold using e-commerce except for real estate. We want to fill this niche.
– How did you find yourself in the Silicon Valley?
– I was born in Russia in 1980. When I was 19, my husband and I moved to Bulgaria. When there was a boom at the real estate market we established MP Group Bulgaria to purchase land plots, build housing compounds and sell them to foreigners: British, Latvian and Russian investors. Three years ago I moved to the Silicon Valley to improve the search for foreign investment using blockchain. I started with conferences, and then agents and other real estate market participants persuaded me to stay. One of our potential investors suggested an ICO. We received a lot of support in creating Propy, from Vinny Lingham, Blockchain Capital, Chicago Title and others.
By Natalia Kuznetsova