Transcript: Developing a Viable Blockchain Implementation Plan for Real Estate

Even though I've been in this business for eight years, it just shocked me how many different parties are really involved in a real estate purchase. All of them are going to be touching the deal at some point. All of them operate on their own schedules and their own set of incentives. So nothing gets done while we're waiting on one person to provide a key document. Proving that you have the funds necessary to engage in the transaction.

Proving that the title landowner is clean and that title can transfer. Attorneys need to be involved. So all of these clauses that would go into a contract are what make blockchain smart contracts so complicated. The advantage to what we're calling a smart contract is once you have built that initial contract in the system, once all of these people have met and talked about potential complex clauses, once all those rules have been built into the system, there's not really work after that. So there's a lot of work upfront.

But once everything is agreed to, signatures can be digital, proof of title and fund transfer is almost instantaneous. Transferring funds could take days or weeks beforehand. It could take minutes on blockchain. And if we can reduce a transaction time, we now also likely have some negotiating power with some of the intermediaries to say, well, maybe you were charging 6% to do this before. Would you do it for four and a half instead?

Because now you're getting paid three, four, five, six, 10 times faster, you can increase your transaction volume and lower some of your administrative burden and tasks. Hello and welcome to the Constructor Podcast, The Best Way to Build It, episode number 69. I'm your host, Brittany Campbell Turner, and this podcast is dedicated to helping property owners have certainty in their decisions about their construction projects. Developing trusting relationships help you to understand how to lower risk, be under budget and on schedule, and most importantly, exceed your end user's desires.

Last episode, we spoke with Dave Conroy, research and development lab engineer at the National Association of Realtors. He frequently educates about how blockchain and distributed ledger technologies, prototyping, software design, management and networking can integrate with real estate. He believes that real estate, finance and supply chain are the most viable markets for blockchain. He also talks about how the NAR is leading the way by eating their own dog food, testing out how to build a better credibility and reputation tracking model in their internal network at the NAR.

So Dave is really passionate and excited about what's to come in the months with technology and real estate. So if you haven't listened to that episode yet, check it out at constructor.com slash EP68. So we've been talking about blockchain and real estate, blockchain and supply chain, asset management. I'm really happy we had the opportunity to talk about so many different topics as it relates to corporate real estate and asset management. But it is bittersweet, today is the last episode in this series about blockchain.

And we'll be wrapping it up with Kevin Schatoffman from Deloitte Consulting. He is a digital technology evangelist at Deloitte Consulting, where he promotes blockchain, cognitive automation and machine learning in real estate. In today's episode, Kevin talks about how real estate transactions, where transferring funds from party to party could take days or weeks, it can take minutes on the blockchain. He also discusses many of the pilot projects that Deloitte is involved with, including leases on smart contracts and data hub document sharing. He covers the four issues in corporate real estate that are making blockchain more relevant today.

And lastly, he talks about why the three real estate buckets are ripe for blockchain and real estate. So with that, let's get into the interview. We are interviewing Kevin Schatoffman, a digital technology evangelist promoting blockchain, robotics, cognitive automation and machine learning in the real estate industry. His role at Deloitte Consulting serves Fortune 500 real estate clients with corporate strategic advisory, technology strategy and operational transformation work. So Kevin, welcome to the Constructor Podcast.

Thanks for having me. First, could you just share with us a little bit about your journey into real estate? So I've been in finance 14 years in change, the last eight of which have been consulting specifically to real estate companies. I was a banker before grad school and there weren't a lot of banking jobs to go around in 2010. The financial crisis was still rearing its ugly head.

So I looked for an alternative career path and a friend of mine worked at a large consulting firm, one of the big four shops and got me in there. And I worked on a number of projects throughout the years, but once I started working on real estate, I fell in love with it. Unlike many other industries in consulting, where a lot of the topics we talk about are very nebulous and hard to put a picture on, real estate you could see, feel and touch. So I fell in love with it immediately, not only because I could look at the value I was providing, but real estate as an industry usually is a slight laggard when it comes to investment in technology.

So there always seems to be a great opportunity to leverage work we've done in other industries and use that as a lesson learned to add value in real estate. Yeah, I love that perspective. And that led you to blockchain along the way. How did that come about? I was just purely lucky in my timing.

About two years ago, we had a three to 400 person blockchain practice at Deloitte and I was not actually at Deloitte yet, but some recruiters were searching around saying, we're looking for some folks specific to real estate who want to own new technology. So blockchain, robotic process automation, cognitive AI, and I thought, well, this is an amazing chance. I'm at the right time in my career, let's take the risk. I didn't see much of a downside, to be honest, either these new technologies were going to be popular and they were gonna be adopted and people with early knowledge were gonna have an advantage or they weren't and I was just gonna have a fun journey and learn something new.

So I jumped at the chance, began researching blockchain two years ago. I'm surprised that only two years of experience makes me a veritable veteran in this space, but that's how new blockchain is to most people in real estate. There are some who are very well-versed, but I would say to 95% of real estate professionals, blockchain is a term they still confuse with Bitcoin. Yeah, indeed. Well, I really enjoy the intersection between technology and the built environment.

What's really interesting to me is that there are potential opportunities for increasing efficiencies and then even improving behavior, just how people interrelate. So that's really my, I guess, intrigue as it relates to blockchain particularly. So that's my perspective, but I really wanted to get from you to baseline with the audience what the different layers are that are incorporated into blockchain architecture and then maybe what we can do is step back into the built environment, real estate side of things. So could you share with us those layers?

When most people that even have limited knowledge of blockchain, when they think about what blockchain is, they're likely only thinking about the tokens, the cryptocurrency that is either being mined or being traded on the open marketplace. So whether you're using Bitcoin or Ether or Ripple or Hyperledger or another under tokens that are out there, that's really just the network and protocol layer. That's typically where side chains are built. That's where you mine for currency, where you see your proof of work or proof of stake. The layer sitting above that network layer is what most people consider to be the marketplace.

We call that the services layer. So where you would buy and sell cryptocurrencies on a marketplace like Coinbase or Bitchain or Loyal or BlockCypher. That's also the layer where smart contract elements would sit, where someone's digital wallet would sit, where they would actually sign their signature for any number of transactions. Then above that would be the application layer. So if I'm a user that's actually interacting with some sort of blockchain platform, it's what my user interface would look like.

It's also where the programming languages sit. Below all of that, a layer which most people don't think too much about, some people call it the infrastructure layer. I like to call it the utility layer. It's where multiple blockchains can come together, multiple currencies can be merged, and a lot of the programming is actually done. That's where data is stored.

That's where mining as a service can become an issue. The companies that you hear about offering this are big, big, big tech names. So Amazon with their web services platform, Google with their private and public cloud platform, Microsoft has built their own platform, but the company that's likely furthest along it is IBM with their Bluemix platform. They have a ton of clients. So those four layers make up a blockchain business architecture.

And then there's, I'll call it a fifth sense, a fifth layer that doesn't actually sit in the architecture, but it's something that anyone who's building a blockchain platform or using one needs to think about, and that's the governance layer. What are the policies that your blockchain platform abides by? What types of reporting are you producing for yourself, for fellow blockchain users, and for government entities? And then what type of training is occurring so that people use the blockchain platform effectively? I'm so glad you mentioned about the governance layer.

And I think all of the others, the other four, they're really helpful to understand what the architecture is. But the governance layer, I know that we talk a lot about, I guess, governance on the podcast from a construction perspective, but it's who, what, when, where, why, who's incorporated, what's the value stream, if you will. And since we've covered contracts in a number of episodes, I actually wanted to kind of tie that to what that means for this governance layer. We talked about smart contracts and that they are neither smart nor contract.

Everyone should really be thinking about governance as it relates to what that could look like in a smart contract. But what would you suggest? What should the average person who's thinking about blockchain, what should they be thinking about as it relates to governance when they're considering building a smart contract? Well, I think it goes probably a layer above the contract itself, and really what's the overall architecture look like. So are you a consortium of entities who have access to the blockchain itself, and it's more of a private access?

Are you a joint venture that has a private entity overseeing the blockchain and then other people can join? Or is it more of a hybrid where you have some sort of regulator or government body agency weighing in on what the structure of the blockchain looks like? And the earlier on you can make those decisions in your development, what key stakeholders and players are actually part of the initial, at Deloitte we call it minimum viable ecosystem. So what different parties need to be playing in the space for a blockchain actually to work?

And I don't just mean the developer or the coder, the OEM, the service provider, I really mean from a business perspective. So in terms of construction or transactions, the owner operator, the developer, the manager, potentially the broker, the appraiser, there are a lot of different parties that are going to playing in the game of development or by sell. So all of their concerns, if they're addressed upfront, you can build a much smarter set of business logic. So when people say smart contract, you said neither smart nor contract.

I agree, a smart contract is really just a set of business logic rules that are built into blockchain. My overall advice would be after the minimum viable ecosystem participants have been determined, it is which business concerns make the transaction get done in the most efficient, cost-effective and secure manner. And identify those upfront so that, especially since a smart contract can essentially automate itself, makes sense to have identified all that logic, like you said, the business logic. What parameters need to be met before title can be transferred, before assets can be moved, before agreement can be reached that a transaction is done.

So let's talk about this value ladder on a potential blockchain. You gave us this example just briefly right here, but could you just walk us through what that would look like as it relates to all the intermediaries being participatory in a transaction, a corporate real estate transaction? Sure, so we're actually working, and I know this is not directly related to the construction industry, but we're doing a building a residential real estate single-family blockchain right now. And even though I've been in this business for eight years, it just shocked me how many different parties are really involved in a real estate purchase.

Yes, you have the buyer and the seller, but you also have the realtor broker, you have the lender. In some cases, they might be even different than the underwriter. You have the appraiser, you have the title company, you have the insurer, you have the county recorder, the inspector, am I trying to think of them all? There could be an auditor, a surveyor, others. The average real estate transaction has nine different parties in it.

So all of them are going to be touching the deal at some point. So proving that you have the funds necessary to engage in the transaction, that you don't have repayment risk, proving that the title landowner is clean and that title can transfer. And so to get a transaction done, you have to agree not only on the purchase or sale price, you have to agree on all the other clauses that sit in the transaction. Is there earnest money? Is there an inspection?

Are there any poison pill parameters that would kill the deal if discovered during inspection? How long does the seller have to leave the house after the transaction is done? Are there any discoveries after move-in that can cause fees or penalties? So all of these clauses that would go into a contract are what make blockchain smart contracts so complicated. So if it's only two parties and it's one parameter, obviously that's very easy to automate.

But as you make it more and more complex, that is when attorneys need to be involved and all the participants I mentioned earlier. The advantage to what we're calling a smart contract is once you have built that initial contract in the system, once all of these people have met and talked about potential complex clauses, once all those rules have been built into the system, there's not really work after that. So there's a lot of work upfront. But once everything is agreed to, signatures can be digital, proof of title and fund transfer is almost instantaneous.

So whereas transferring funds could take days or weeks beforehand, it could take minutes on a blockchain. Past video that I watched you do for the Cornet talk in New York, I heard you discuss about the potentiality for reducing that what, 60-day transaction in residential to six days. But I'm curious specifically around the commercial side of things. Yes, so the goal is to go from 60 days down to six. The reason we say that is all nine parties trying to communicate with one another, operate on their own schedules and their own set of incentives.

So nothing gets done while we're waiting on one person to provide a key document versus if all of the data gets introduced into the blockchain at the beginning, we're not trying to track it down from various parties. It's just there. And what we're doing is building the rules that say, track this piece of data first, then this piece of data second, then this piece of data third, so on and so forth through the end of the transaction. So the work upfront is probably heavier, but getting from step through step through step in a transaction becomes extremely quick.

And that's often the headache of most real estate providers is the underwriters done their job, but they're waiting on everybody else. We're waiting on the appraiser, then the appraiser is done it, we're waiting on the title company, et cetera, et cetera. And if we can reduce a transaction time from 60 days down to six, we now also likely have some negotiating power with some of the intermediaries to say, well, maybe you were charging 6% to do this before, would you do it for four and a half instead?

Because now you're getting paid three, four, five, six, 10 times faster, you can increase your transaction volume and lower some of your administrative burden and tasks. So, I've been talking about blockchain pretty hardcore for about the past seven months, seven or eight months. And I've been getting a little pushback from the AEC community because of the energy consumption. What's known about right now, it's high. So I wanted to find out what you guys are doing to investigate how to make things more efficient.

What solutions are you guys looking at? Yeah, we think it's a very valid concern. And at least as it pertains to this next, probably the remainder of 2018, I don't think you're going to see a lot of improvement on the amount of energy production it takes to get this work done. But there's two paths we think continue to show progress. And first is on the energy production side.

So solar cells, wind farms, hydro farms, biomass, all types of sustainable energy solutions continue to get more and more efficient and cost effective. So the hope is that over time, these sustainable energy solutions will become a larger percentage of energy production, therefore leading to a little bit of less harm on the environment as this happens. The second thing is of course, Moore's law, the type of computing power and its efficiency continues to improve year over year. So the hope is that on the production side, we see improvement and then on the usage side, we also see improvement.

So you're getting double improvement as these algorithmic calculations for a blockchain continue to happen. The second thing I would say is that there is a movement from more of a proof of work model to a proof of stake model. And I don't know the difference in the amount of energy production it takes to perform proof of stake calculations, but I know it's a lot less than proof of work calculations. I want to interject here and give the difference between proof of work and proof of stake.

So in proof of work, it is as if there are many miners or people racing to find an answer to do a math problem to see who will figure out the actual block of information first versus proof of stake where each person is being assigned to a problem to solve each block of information separately and individually. So you can clearly see that proof of work consensus is less energy efficient. So let's get back to the interview. I'm sure you're investigating the commercial real estate side of things.

So with that being said, of course, there's a lot more complexity to that side of things. I wanted to understand from your perspective in corporate real estate, where do you see the potential applications and how are they different from residential? I would say overall, you really have four industry issues and then four separate industry drivers for commercial. What are the two things that you see in terms of how you see the block chain more relevant today? One, obviously the process is slow.

We talked about the number of potential players involved in our transactions. Secondly, you have a lack of transparency because not everybody can always completely see the information that's involved in the purchase process. Thirdly, transactions are crowded. All the verifications that have to take place make this a tougher process. And finally, fourth, it's just inefficient.

So you have to have a lot of different options for your transactions, your land availability, extensive due diligence requirements. And of course, you have multiple sign-offs in which increase the expense and time to close. So all of those factors on their own are the driver of some sort of technology solution being in need, not necessarily block chain. What makes block chain key is what I'm calling four industry drivers. So interest rates have been low for a long, long time.

Interest rate, volatility, global market volatility is driving the need to access the best rate globally, not just domestically. Secondly, a lot of new accounting standards are coming through the pike. Some that will come in effect in 2019, some in 2020. Most are around leasing and new FASB standards. If all of the data for key transactions was available in a specific place publicly, you could follow the audit requirements or accounting standards coming in place much lower cost.

Thirdly, the fraud risk that comes with new technology only exacerbates the problem more. So we've seen a lot of Bitcoin and other marketplaces get hacked. You've seen a lot more convincing looking emails and voicemails put in people's mailboxes that seem real but can be fraudulent. So how do you remove the trust factor? And then finally, the fourth thing is, I'm calling it internet of things.

So just how every device we operate today is connected to one another. That means a lot of data about usage and habits is going to be shared. So how do we protect that when we need to protect it? And then secondly, how do we leverage it to make smarter decisions? Those factors are driving blockchain in three different real estate buckets, I'll call it.

So the first bucket is property management, leasing and technology. How do you manage properties, tenants, and force agreements as a commercial real estate tenant? How do you work with your manager as a director of real estate for a non-RE corporation? So if I run real estate for Target, how do I find new land to buy and sell? And how do I work with the shopping center owner?

The second bucket I call registry and data. So document verification, anti-fraud provisions, running analytics so that I can quickly and efficiently make investment decisions based on what my portfolio looks like. And then the last bucket would be buying and selling. So both the due diligence aspect of determining what I should buy and sell and then the transaction itself. Those three buckets, I think, are right for blockchain.

That was a whole lot there. I love the perspective. So I guess kind of going back into the industry aspect, I spoke with the National Association of Realtors and they talked about their investigation into having unique property identifiers for their residential properties. It sounds like there's something similar there that's taking place. If it can be applied to the blockchain from a corporate commercial real estate perspective, that would also do a huge benefit to improving accuracy of information, like you said, the due diligence.

And then in addition to that, reducing fraud, because now you can trust the data because it's been tracked on a database in the blockchain. Is that correct? Currently, at least in today's market, the majority of real estate documentation, deeds, rental agreements, titles, mortgage documents, that are required and used for transactions are in paper form. And more often than not, they're also coming from various third parties, which opens these transactions to the risk of confidential forgery. So part of it is building a platform that combines all the information in a single place.

And that's actually already being done. We've seen not in the US yet, but the Swedish National Land Survey has created this proof of concept to investigate how blockchain technology can reduce manual errors in the process of transferring documents. So they've digitized all of their contracts, they're completing payment registration through blockchain. The startup that's helping them do this is called Chrome Away. They have successfully run a couple of transactions in Sweden.

The area of Sweden is called the Landtmateriet, which is more Stockholm. It's very, very exciting. There are other geographies that are trying this, but Sweden is furthest along. Yeah, I heard about Sweden trying to get all their land title information documented, but I didn't know how far along they were with the transaction side. So that's really cool that they've done a couple.

All right, so you mentioned Internet of Things, and since you're with Deloitte, I wanted to see what your perspective was on the edge. I had the opportunity to review the architecture firm, PLP Architecture, with Kevin Flanagan and Ron Backer. And they talked about a lot of the really innovative design elements, features like your light fixtures being powered by low voltage cabling, and the fact that you can operate the zone simply by using your mobile phone. That's just one of the many different applications that have been incorporated into the edge.

But stepping away really from, I guess, the very specific design features, I wanted to ask you about how sustainability, in a broader sense, can potentially integrate with Internet of Things and then tie into some opportunities with blockchain and corporate real estate. I haven't had a chance to visit the edge physically yet. I've read a ton about it. And when Deloitte did this project back in 2016, their focus was on effectively gathering data and then using whatever technology platforms get built in the future to leverage that data the best.

So the edge building itself has something like, I'm trying to remember the number, it's 25,000 plus sensors in it, capturing everything from temperature to usage to weight on a piece of furniture, tracking movement through certain corridors and which rooms are getting used the most and how much time is each employee spending sitting at their desk or standing. Part of this is the work-life balance, attract and retain next generation of workers. Millennials want flexibility, mobility, community, all that. Today's employers would like to do is remove the mundane boring tasks from an employee's life and try to keep them challenged and excited.

So the purpose of the edge building is to track all of these different data points on what is driving employees to be happier and enjoy their work while they're in the building versus what causes them to disengage, whether that's from their work or from their coworkers or from their employer or otherwise. And I think it's really powerful because so many devices are now connected, someone's laptop, their work cell phone, the microwave that's sitting in the break room, all of these devices are sending bits of data saying, well, this is when people like to take breaks the most, so maybe we shouldn't be scheduling important meetings right at this time.

Or because the building is in Amsterdam, well, here's the time of year when the weather's best and we've spent more time outside, so maybe we encourage the outdoor parts of the space used for some meetings. Other buildings are trying to mimic this as well, but I really think that this is the first time that Deloitte kind of acted as architect advisor and really got buy-in from potential tenants of the space as the building was being built. They also worked with the Amsterdam office to say, well, how could we help drive health and wellness in our building?

To me, it's a popular term that the employers use. When they first introduced health and wellness, I think that was, it was more selfish. They wanted to reduce healthcare costs, but now I think they're realizing that health and wellness is just another aspect of something that keeps an employee engaged and excited in their work. So today's younger employees, they want to be more active, they want to be more collaborative, and they want to engage in new types of technology that they either grew up with or haven't been exposed to yet.

They want the challenge. They don't want the same thing every single day. And I, man, I love this topic so much because what you've described is, from a landlord's perspective, and Deloitte is the major tenant in the Edge. Correct. So from a tenant's perspective, from what I understand, people just apply to work in the building.

Deloitte is an amazing company, as we all know, right? But they apply primarily to work in the building based upon some of the feedback that you've gotten in applications, from what I understand in the interview with PLP. So driving the idea for fulfillment to be incorporated into the built environment and tying that back to how do we use this data now to make better decisions about not just design but about behavior recommendations based upon just activity, right? I'm seeing some ideas, but I'd be curious as to how that ties to blockchain potentially.

From the ground up, I think blockchain was at least in theory thought about. All of the lease agreements that are used at the Edge sit on a blockchain. It is not a completely public blockchain. It's a permission chain. So certain parties have access to what I'm gonna call personally identifiable data.

Lease terms, square footage, cost spent, all of that sits on a blockchain. Not only that, there is a loyalty program for most of the employees, at least within Deloitte. There's an app on the phone that acts as a blockchain and the tokens are not monetized. The tokens basically carry non-currency value. So as the employees engage with the building and perform various tasks that are encouraged by either the building or by Deloitte, points are generated similar to what you'd be doing.

Like when you mine for coins, they're completing certain tasks and they earn loyalty points and those points can be spent on certain gear or the right to wear jeans every Friday. They can be used when they traveled for certain meals. So that's just a way to continue to encourage employee engagement in the building. There's a portion of the Edge building that's built kind of like a coworking space, like you would see with a WeWork. And blockchain enables the sharing of data for folks who would like to work together in various startups.

So what if I'm trying to build a new real estate platform? If I'm working with an appraiser, with a developer, with a group from government, the blockchain almost replaces the idea of a data room. So I don't need special access credentials to get into the data room now, all the data sits in the blockchain. So I don't need to wait for someone to provide me with an answer. I can find that answer myself and help make really important employee investment decisions.

So just to confirm, this is not in implementation now or is it at this point? No, no, it's active, it's live. All of that is happening at the Edge building today. It took, I wanna say about 18 months to build a platform. It's not a public chain available for use by anyone.

And you have to be a tenant or employee in the building to access the chain. My guess is as they learn more, gather more data, get more comfortable with is blockchain working, my guess is they will expand its reach. I had suspected that it would only make sense to utilize the blockchain, but I had not gotten any confirmation that actually been in utilization. I can tell you the more complex contract clauses, I haven't talked to the people at the Edge to determine if those clauses have been introduced and included in the blockchain.

My guess is they have not, because for better or for worse, this is still an iterative process where if we're figuring out what breaks the chain, and maybe I shouldn't say breaks the chain because really blockchain is immutable. Once you put a transaction on there, you cannot take it back. If you need to make a change, it's really an additional piece of data or transaction introduced at the end of the chain. As these more contract complexities get introduced, I think people are learning some valuable lessons on what has to be done upfront because everything gets slowed down.

Yeah, indeed. Okay, well, I'm thinking of going two directions. I'm thinking about from the tenant's perspective, but I'm also, I guess, veering to the landlord, right? So from the landlord to the tenant's perspective, say for instance, there are other tenants say in the Edge, right? And maybe there's some space that opens up for whatever reason.

I would say two things there. With the data from leasing agreements and user activity being available as much as the landlord would like to provide it, it helps in two ways. It helps the landlord get the right tenant into the building if there's gonna be some turnover because more people have access to the layout of the space, what parts of the space are being used most often and effectively. There might even be a feedback loop of potential improvements that could be made to attract a more expensive rate or a nicer tenant.

And for the tenant, it allows them a clear view of how they can effectively use the space and enjoy the space and what improvements they would want negotiated into the contract on the front end so that there's less back and forth. And there's also a little more transparency on paying the right price per square foot for the right lease term. So let's transition a little bit about pilots and use cases that Deloitte is investigating. I know you mentioned a couple already, but could you share with us some specific examples?

Yeah, so obviously the building of the edge, that was a big one as far as testing the idea of smart contracts, working with the Swedish Land National Survey to understand how we can crowdsource the correct land data and get transfer done. So this is some work the bank ABN Amro did with IBM to develop a system in which buyers, sellers, brokers, regulators can share and record real estate transactions. So most of this is not done on historical basis, most of it's done on a go-forward basis.

As more transactions get recorded onto a blockchain, the blockchain itself becomes more holistic and more reliable. So the company used this to help potential customers decide where they might want to be buying and selling. On the residential side, you have NAR considering how they can improve their MLS system. So today there's hundreds of different MLS platforms that have to be subscribed to to get accurate local real estate data. And they're thinking about how that might be improved over time and there's a lot of options being discussed.

From the transaction side, also ABN Amro, they've created a bank account that actually uses blockchain for identity verification. And I don't know if that bank account is actually like live for use with the average person. I'll have to look in back to you, but basically they launched this type of account where all the know your customer data can be stored automatically on a blockchain. And so you don't need escrow anymore. The bank account removes the need for an escrow account.

I'm intrigued to see where that's gonna lead because if you eliminate the need for an escrow agent, that could really be a game changer when it comes to real estate transactions. On the startup side, you have a number of companies. One of them I mentioned earlier, Chrome Away, which is a Swedish consortium. They're basically building databases to help land users get transactions done in a quicker fashion so that they can trust a title. Then you have a company called Be Landlord, which is using blockchain technology to divide up a real estate transaction into shares, democratize the purchase of real estate so that you don't need to just be an accredited or individual investor to be able to invest in certain real estate deals.

The third company, Proppy, is a global peer-to-peer real estate exchange. So the idea almost kind of like a Napster, but for real estate marketplace. And what Proppy's created is this decentralized title registry aimed at facilitating a more international bucket of real estate purchases. So the idea that I'm in Berlin and I could invest in a property in Dallas. And the time it would take to transfer funds, I wouldn't need to do an international wire that could take weeks.

I could provide funds that takes minutes. Then the last startup I would mention would be Bitquity. This was back, I must've been mid 2016. They executed their first property transfer. So their solution, they built a platform, it recorded, tracked, and transferred a deed by creating a ledger entry on Bitcoin.

And I think they're now trying to get to the point where they can use different cryptocurrencies to build that platform. This is when I'll do my one plug. It's not for Deloitte. It's actually for a conference that's coming up in mid May. The conference is called Consensus.

That's an annual conference in New York that gets a ton of blockchain focused startups, thought leaders, government agencies. It is not specific to real estate. It's across industry, but most of the startups I mentioned will have a presence at Consensus. Thanks for sharing that. And I'll make sure to put that in the show notes.

Lots of opportunity, as I suspected. And is Deloitte involved at some level with all of the pilots that you mentioned, or those are just ones you're keeping an eye on? Those Deloitte is involved in, there's obviously many more I can't discuss. Our practices, we've got 900 folks in the blockchain group across all industries globally. But there are a ton of pilot projects that are going on beyond Deloitte's property.

There's a ton of other firms that play in the space. There are a couple articles about IBM recently about how something like 60 different Fortune 500 clients are trying out blockchain pilot projects. None of those are in the real estate world, but it's only a matter of time before those large real estate companies start playing in the box. I'm sure they are working with other firms. Those pilots just aren't public.

But I would tell you blockchain market activity in general is just massive right now. Marketplaces like Coinbase and Ripple have raised hundreds of millions of dollars. You've got a number of consortiums like Hyperledger, R3, Ripple, Enterprise, Ethereum Alliance that are running hundreds of different pilots. And a lot of these platforms are open source, so the data is applicable to anybody who wants to learn more about it. Let me ask you this from sort of the landlord tenant perspective.

If I'm in that role and I want to go back to my company and I want to think about how can I start even thinking about implementing a blockchain solution? Because from a conscientious standpoint, similar to Deloitte and I'm sure the other tenants at The Edge, they're wanting to reduce the mundane tasks and allow for their employees to really increase their creativity, productivity and fulfillment. What are the things that you would recommend for that person who's just starting to think about this? Sure, well, I would say two things on that.

One, blockchain as a solution can be for external transactions you're engaging in, but also internal transactions and data tracking. So inner company transactions, the movement of money globally within a firm is something you should be looking at. But there's five key data points that you should evaluate to determine if blockchain is even the right solution. Is the data that you're using shared data? Is there a need for a structured repository between parties?

Secondly, are there multiple writers of the data? So is there more than one entity generating the transactions that would modify the database? Three, is there some level of mistrust between entities that are writing to the database? And when I say that, I mean, is there a possibility that one user might not accept that form of truth reported by another user for a number of reasons? Fourth would be the opportunity for disintermediation.

When it's difficult or costly to use some sort of central gatekeeper to verify transactions, it would be nice to be able to remove that cost. And the last factor would be the transaction dependency. Is there some sort of interaction or dependency between transactions generated by different entities? So those five things, whether internally or externally at your company, if you see those as recurring factors with a particular function of your business, blockchain is a likely solution. You mentioned a point earlier about employees wanting to remove mundane tasks from their life.

I don't necessarily think that blockchain alone really is the panacea for that. There are other types of process automation that do not depend on blockchain. There are a number of vendors that provide that automation, Blue Prism, Automation Anywhere, UiPath, and a number of others that can help take certain lines of code and make that code communicate with a host of different applications. It's like, without getting too technical, if you wrote a macro like you would in Excel, but instead of it just communicating only with Excel, I could automate the receipt of an email, the reading of that email, the search for keywords, the picking up of a keyword that says, oh, I need to go scrape some data for the internet, scraping public data off the internet, taking that data, putting it into my centralized database and then running a report.

I could do all of that without blockchain, but with a different type of automation technology. While blockchain is not a complete panacea for everything, I think it will help with the transfer and storage of important pieces of data. You just then use other pieces of technology to potentially evaluate and analyze that data. Yeah, and I think that interconnectivity with other potential technologies is a key area to continue to investigate. I know that the Construction Blockchain Consortium that I'm now part of, they are definitely looking at technology integrations with blockchain as a major focus.

So that could include what you just mentioned and others like obviously AI, obviously machine learning. And then a plethora of others. So definitely great point. Yeah, thanks for laying out those key areas to look for opportunities to use blockchain. So if there are corporations that are looking to build a solution, roll out a pilot, I wanted to share what a typical pilot timeline is that Deloitte actually takes to test and develop blockchain pilots.

Sure, it's hard to give kind of a one size fits all answer to a technology that's so new and exciting like blockchain, but for real estate in general, we've done a handful of pilots and I'll tell you how those have gone. There's typically four stages to them. The first we like to call IDA and that's really learning about the businesses involved in a particular blockchain, what the players do for a living, how they operate, what business challenges they face and how blockchain might be able to solve that.

So typically it's taking a week or two to get all the players together to discuss the scope of a potential solution. Then there's about two weeks of discovery and design. So figuring out what kind of supporting architecture would need to exist to build what we call a minimum viable ecosystem or MVE. You might hear that acronym thrown around a lot. So that is a solution.

All of the participants would be playing inside of a blockchain, what roles they have, what permissions they have, what data they need to provide and what sort of incentive structure would apply to make sure all users continue to participate in the ecosystem. Then there's our implement phase, which is to build the pilot itself, show the use case actually works in an active environment. And then after that implementation is tested and done, a couple of weeks after that to work with the partners to learn what went well, what could be improved, what needs to be changed.

And then finally, how would you actually scale that up from pilot to a larger audience and use case? So typically that all in together is about 10 weeks. Typically it's two weeks of discovery and design, six weeks to actually build and test the pilot and then another two weeks after that to enhance the pilot and draft maybe like a business case to scale up. That's a really quick turnaround. I mean, would you say that a new organization that's embarking on really testing a pilot, do you think that would be realistic still?

Well, I think that there's some pre-work that happens typically before a project begins. So Deloitte is usually in conversations with whoever the lead entity is that's pushing this project. And so a lot of scope discussion happens before anything is signed and agreed to. The other point I would make is that oftentimes we encourage clients think big, really, really big. I mean, imagine what endless possibilities blockchain could do for your company and your partners.

But then when it actually comes time to get tactical, start small, very, very small. You'll work on a very limited use case first, try it out, iterate often. The scale seems very big at the beginning, but in reality you're testing a very small use case because a lot of people at this point are still skeptical about the technology. So you want to figure out a way to get one thing done to convince more players to come into the ecosystem to then leverage more usage in a larger use case and then continue, continue.

So the circles get a little more concentric. Think big and then start small. I think it's perfect. With that, Kevin, this has really been a fun interview. Let the audience know how they can learn more about you and any way that you would like them to reach out.

Yeah, absolutely. Deloitte has a number of white papers and studies that are open to the public. There's not one single website link that will get you to them. But if you just want to reach out to me on LinkedIn, send me a message, what particular use case you might be looking for, and I can send you that. Another resource completely not related to Deloitte, I don't want this to only be about us, there's a great nonprofit called the International Block Team Real Estate Association.

A gentleman named Ragnar runs it. It's nonprofit member-focused advocacy. It's very educational and it's also a trade organization. They are a great resource for a lot of thought leadership around blockchain and the for-profit company, Veloqs.re, that's a spinoff of Ibrea that Ragnar runs, actually completed a conveyance transaction in Cook County outside of Chicago. So they have run an actual use case of transaction and title ownership in the states.

He's got some great views on what was easy about that process and what was very hard about it. If you want some perspective, that's not related to our firm. Since Kevin mentioned it here, you can find the interview that I did with Ragnar Liffresar at constructor.com slash EP67. All right, Kevin, with that, thanks so much. This has really been a great interview with you.

Appreciate your time. Thanks for listening to this interview with Kevin. Find out more about Kevin and what he's up to at Deloitte Consulting at constructor.com slash EP69. If you've learned something valuable in this episode, share it with your friends and colleagues. You can also let me know if you enjoyed our discussion by connecting with me on Twitter at Brittany underscore CT or find me on LinkedIn, or you can just email me too at Brittany at constructor.com.

That's B-R-I-T-T-A-N-I-E at constructRR.com. Next week, we'll be speaking with Ulfahamdi, founder and executive director of the Advanced Work Packaging Institute and CEO at Concord Project Technologies. She will be talking with us about how advanced work packaging can drive the definition and planning within the construction sequence at the beginning of the project and its benefits. She argues that a more defined project execution plan is the key to managing complexity and to have more efficient cost-effective construction on major capital projects. I look forward to sharing this interview with you guys next week.

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