I started my career in real estate in 2003 — nearly fifteen years ago — and have been building and selling properties even since. I have sold property to buyers from countries all over the world, and the difficulties of sourcing and closing cross border transactions has been a constant frustration.
Cross border real estate transactions usually involve language and cultural complexities, of course. But the localized and bureaucratic nature of real estate, the difficulties in cross border payments, and the need for myriad third parties involved in all aspects of the transactions can lead to at best long delays. At worst, fraud concerns and just general transaction friction can make buyers hesitant to enter these markets entirely. This leads to less liquid markets, which exacerbates the problems.I founded Propy in 2015 to solve the problems associated with these cross border real estate transactions. I have first hand and long term experience with cross border real estate purchases, and I believe now is the time to use current technology to solve the problem.
In particular, blockchain technology.
Two weeks ago Propy announced its upcoming Token Sale, an important part of the overall solution we are offering.
In 2016 I was visiting Singapore with Andrey Zamovski, our Chief Blockchain Architect, to meet with a number of large Asian real estate companies. These companies have long requested solutions to automate part or all of cross border real estate transactions.
While in Singapore we met with the executives of JLL Asia Pacific, a Fortune 500 company, who were advocating for a blockchain solution to real estate purchases and title transfers, a particular source of transaction friction. Other companies echoed these concerns.
These companies had a basic comprehension of blockchain technology and how it might be used to make real estate transaction easier. During this trip Andrey suggested to make a token sale. However, ICO and token sale concepts were still new a year ago. Today awareness is growing exponentially.
And so a rush of startups have tried to capitalize on this hype by bolting a token, any token, onto a hastily contrived solution and announcing an ICO to the world. These solutions, we argue, make little real world sense and do not present viable products to the market.
Propy is different. Our decades of real world experience in real estate has led us to create a thoughtful, integrated product that we would want to use ourselves. We use the blockchain and other technology to help with nearly all aspect of the real estate transaction: payments, paperwork and title transfer.
At best our competitors are offering only a subset of our services, such as title transfers on blockchain for particular jurisdictions. The purchase automation and a global ledger could not operate without our proposed global standards for title transfer and automated payments, paperwork and identity verification.
In short, Propy will re-think real estate transaction on a global scale. But we also have step based, shorter term solutions to help us get there. Propy is conducting a token sale today because it is a crucial part of our long term solution mapped out a year ago, not because of the current hype around ICOs.
Why is the real estate industry in need of blockchain and tokenization?
Blockchain technology solves the problem of “double spending” for the transfer of legal rights in real property transactions. This forms the foundation of our technology, which allows investors and owners to execute real estate property purchases fully online. Without solving the double spending problem inherent to non-blockchain transactions, this problem cannot be solved.
Among other things, blockchain is a tested technology which allows the transfer of something (for example, a cryptocurrency) from one owner’s wallet to another’s without the involvement of an intermediary. For real estate transactions this kind of effortless transfer of funds and legal rights appears today beyond the realm of reality, as they are tied to government regulations, taxes, payment processing and the document transfers, etc., and all of these processes differ significantly among jurisdictions.
Our strategy is based on the gradual transition to a decentralized model of reduced, minimal or no involvement of third parties between buyers and sellers. To that end, during the last year we developed a product, based on Ethereum smart contracts, which complies with existing California and other U.S. state regulations, and we have validated this product in cooperation with major participants in the real estate market.
By the end of 2017 we expect the first transactions to be made on the Propy Registry. Each title transfer will require Propy Utility Tokens (PRO) for processing and validation. Furthermore, we’re negotiating with several governments to accept the title deed issued by our distributed registry as legal proof of ownership. Thus, growing the ecosystem by involving more governments and real estate companies will increase the usage of PRO tokens. A limited number of tokens — 100 million — will be created.
Why is Propy doing a Token Sale?
For the majority of companies carrying out an ICO, the ICO is a way to raise funds as an alternative to attracting venture capital. VC money often means an emphasis on a strategy focused on early profit achievement and the pursuit of the most promising, low risk strategies and markets. Thus pursuing P2P transactions in such a highly regulated sector as real estate wouldn’t be a good fit.
Our strategy, as a first stage goal, also focuses on the pursuit of a profitable, self sustaining model of automating real estate transactions across borders and jurisdictions within the existing regulatory environment. But this is only our first stage goal. Our longer term, unlimited bounds strategy is the pursuit of real time decentralized P2P transactions, a goal which involves lobbying for legislation changes, which requires the support and participation of the community of token holders worldwide and ecosystem participants in general.
With the help of our world class advisors, including Michael Arrington, David Cowan, Vinny Lingham and Alain Pinel, we are developing a scalable, unique product which makes the best use of blockchain in real estate.
Who will be the buyers of our tokens?
A token is needed in the system to unlock the access to the blockchain-enabled Propy Registry for ownership transfer. Tokens serve multiple functions, including (1) economic incentives for the community to attract new users and partners, and (2) security — as a fee to protect the registry from flood and other types of abuse.
We expect companies and individuals interested in cross border real estate transaction to the be the primary buyers of our tokens. Cross border real estate transaction is a $340 billion annual market, growing at 13% a year. Propy intends to grow that market substantially.
We also have interest in our token sale by industry professionals — venture capitalists, crypto-currency funds and executives at other companies that have completed recent token sales. These advisors and investors have contributed significantly to the creation of Propy’s products and we welcome them into the token sale to help create a liquid market.
Finally we seek, and give serious incentives for the heavy participation of our community in the pursuit of our ultimate goal of a P2P real estate transaction platform. Thirty-five percent of our tokens are earmarked as incentives to potential homebuyers and brokers to join Propy, as well as to governments as incentives to carry out an initial number of ownership transfers on the Propy Registry.
With the help of our ecosystem participants we are fully confident that we will see Propy reach its full potential.