Author: Jacob Dunn

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Blockchain Design Software

Designing for blockchain: How to build trust through good UX

I recently sat down with blockchain product designer, Ariel Hajbos to get his take on some essential elements of good blockchain design and some of the trends in blockchain app UX. Creating an elegant, responsive design is important in all web and mobile projects, but designing for blockchain poses new challenges. Trust-building features and even color choice are vital to an overall comfortable user experience.

Blockchain UX and UI remains a major hurdle for people to actually use the technology. In an earlier interview, blockchain consulting director, Dominik Zyskowski said good design is the key to widespread adoption. “Designers,” he said, “have to create a simple, frictionless experience to attract more users.”

So far, blockchain-based apps act much differently than traditional ones. For us who work with the underlying tech every day, it’s obvious, but if you don’t, blockchain apps may not behave as you expect. They tend to lag — and when you’re seeing charts, numbers, and of course your account balance, this can cause a lot of anxiety. Building trust through good UX is the main goal. Designing for blockchain apps involves regular feedback and trust-building features that create a pleasant user experience. Better UX will encourage more consumers to incorporate the technology into their daily lives.

Ariel Hajbos is a product designer at Espeo Blockchain and has been designing for blockchain projects during his time on the team. He started his career in graphic design and has since become integral in Espeo’s blockchain design projects such as the derivatives trading platform, CloseCross, and the mobile version of the crypto exchange, Trade. io.

In your opinion what is the most important aspect of blockchain design? What’s challenging about designing for blockchain projects?

I would say that the most important thing when designing for blockchain is that the apps often deal with financial assets — users approach these applications will a lot of distance. They’d like to get to know the apps better, know the deliverables, and know the company that built it. That’s a common thing. So it’s super important in my opinion to always design for trust. My role as a designer is to win this trust from users and communicate the ideas behind the application as well as possible so they feel comfortable using it.

The principle of designing for trust is something which is useful in other categories as well. It’s not only with blockchain, but any kind of application you build, you’d like to achieve this.

That’s an interesting point — about building trust through design. How do you do it, actually? What are some features you’ve incorporated that do this?

You don’t have to reinvent the wheel. If there are some patterns that users are familiar with that would be the very best first step. Using a design system and being consistent in your blockchain design creates this feeling that everything is sound and everything in the user interface is in its place. It’s also good to avoid jargon — you can’t assume that all your users will know it so it’s good to present things clearly. If you approach it in the proper way — if you keep in mind some things that are important in UX design in general, you can build trust.

The last thing I would say is creating a feedback loop — some kind of active guidance where users see a responsive design. Even if we build something and release it it’s only the beginning of the road so it’s important to be with the users through the whole app-building building process — and its future development. End users should feel as if they have the opportunity to leave their feedback, and that we’re listening and implementing changes.

In some of the projects that you’ve worked on, what were some common features you’ve changed?

Aesthetics, number of clicks, how the app presents data, and the general flow are some features we’ve received feedback on and changed. It’s always good to discuss those matters with the actual users too. It’s a very common thing because we work in an integrative process.  We build something, we analyze it, gather feedback, and correct it — again and again and again to reach our goal no matter what the goal is. Whether it’s a business assumption or usability.

I also encourage product owners to show the UI and UX to the people that will use their app — a demo group — and gather feedback from them.  it’s also good to clash that feedback from the business perspective and then for the user’s perspective and then get something good from that.

What aesthetic changes have end-users asked for and how does it affect blockchain design?

The applications that I built with Espeo were in general, were pretty consistent. They were focused on a goal It had to be achieved according to some of the steps. There wasn’t much space to think about adding something new. However, when we designed the Trade.io mobile application, and they were happy with the UI and UX, they requested we add additional features such as different color modes in the app. We cranked up the interface to add a dark mode and a color mode.

This wasn’t only an aesthetic decision — some of the users were accustomed to shifting between different color modes. It was easier for them to analyze data and they lacked this feature in the app before we added it. While I’m designing for blockchain apps, it doesn’t seem very important at first glance but if you start to think about it but it’s something really helpful when users have to analyze data quickly and act on it.

So it had nothing to do with how the app actually works, just how it looks?

Yes, it was only about how it looks. However, you have to remember if this is a blockchain app so we were struggling with presenting a lot of data, a lot of numbers, and a lot of charts. It’s always in the context of something positive and negative when you gain or lose assets.

For some people, different color approaches for gains and losses were less stressful. Magenta/cyan (pictured above) instead of green/red was an easier approach. It felt less stressful — more like a game. It’s a kind of user approach for such a topic. It’s not only about using a clean and simple minimalistic UI it’s not always the super idea that will satisfy all users.

What values among blockchain app users influence design do you think? I mean blockchain people skew skeptical — they don’t trust anything. How does this influence UX?

Yeah, so there are a few layers to that — first of all users have to trust the machine. It’s important that the user believes that the device is responsive And that he’s getting all the information that he needs to get. It’s also connected to blockchain technology itself.

Since it’s a decentralized technology, we have to think about why users will trust the blockchain and why blockchain technology is so important to them. These are new opportunities and it’s something very exciting. So this trust in the machine and in the algorithm is a challenge for us. Designers have to help users to trust the mechanisms blockchain technology.

Aside from blockchain itself, users have to trust the people building the applications as well. For instance, in the CloseCross app that we helped design, users predict the value of assets in the future and you have to be sure that it’s accurate and that you’ll receive your assets back. To combine those two things the trust for the application itself and the trust in the UI and the UX of the application a designer’s role is to demonstrate this trust.

Reducing cognitive load, guiding with consistency, and displaying messages properly goes a long way. All those things are connected to blockchain design and UI/UX design generally. It’s a designers role to demonstrate these things. With blockchain apps, you have to signal to the user and say ‘hey, you’re fine, your assets are fine, everything is happening as it should.’ Grasping this proper flow is something that I strive for.

How do you get into the minds of everyday users — those who may not know, or really care about how something works, just that it works.

It’s always a matter of communication. You always have to listen to users and also the people you’re working with. Designing for blockchain is a collaborative process. You have to be an open, empathetic person. I have to think about different approaches to look at a problem from a different perspective. It depends on the project —  lots of our projects aren’t structured in a super strict flow.

There’s not always time for a lot of proper research. My role is to always try to understand the product as well as possible — try to pick through it in layers and from different angles of blockchain design. But my job doesn’t end there I also help guide in the implementation phase because I’m one of the few people, along with the product owner who knows the interface entirely.

I have to be a communicative person — I have to speak up with the product owner and present as many methods as possible based on the resources you already have. If there’s a space, I speak up and discuss with the users. If there’s time, I also map out a user story, write a backlog, and discuss it with developers. It’s a matter of constant discussion and analysis.

Which project that you’ve worked on are you the proudest of?

For sure Trade.io and CloseCross. For Trade.io there was already a web platform we didn’t build. Instead, we had to transform and migrate those functionalities and features to a mobile app. That was kind of challenging, however, the client was very helpful during the research part and they delivered a lot of already started wireframes and ideas for the UI. We didn’t build it from scratch but we built on top of something that already existed it was a super nice input at the very beginning that helped us to start from a good level.

With CloseCross, it was a project we helped design this platform in very close corporation with Vahibav Khadikar, the CEO. We had really long and intense sessions analyzing the UI in various versions — we did several versions. We had to think about the features, prototype it rapidly, verify the idea, and then build something on top of that.

CloseCross is a really large application with a lot of design features. As I said earlier, collaboration is something super important — it helps you to come up with really nice ideas and extend your possibilities because there’s no way one person could build something totally from scratch.

What are the main trends in blockchain design?

Trends in blockchain design are constantly changing — but the principles are the same. Design thinking, proper user research, quick evaluation of ideas like low fidelity wireframes. Those are essential tools that deliver really nice outcomes. Designing for blockchain involves trust-building features. The main trend is designing for the global nature of the blockchain — with proper localization and device agnostic.

You’d like to deliver your outcome and deliver the design you working on to as many people as possible so it’s super important also for trust to think about different languages and different devices. You have to design systems that work well across environments. 

Conclusion

Even though one blockchain technology’s greatest strengths is ensuring trust, Many users remain skeptical. Blockchain design is the most important challenge for widespread adoption. Cumbersome user experience will only hamper further adoption of blockchain among the wider public. Effective UX design is essential to create useful, valuable blockchain apps. designing for blockchain apps involves building trust through regular feedback and frictionless navigation.

Getting blockchain design right to make end users comfortable — and maybe not even notice the underlying tech, needs innovative solutions. Hajbos and designers like him are driving greater adoption of blockchain applications.

Categories
Blockchain Financial Services Technology

Blockchain testing MakerDao's stablecoin platform

As the cryptocurrency bear market continues, investors are looking for much-needed predictability. Stablecoins have risen in popularity as the market tumbles. Several have emerged, but few are as transparent as MakerDao . Maker had Espeo Blockchain testers check to make sure everything worked properly before they launched. Since the technology is so new, blockchain testing is vitally important for any project if you want to keep the trust of this fickle market.

Cryptocurrency is having a bit of an identity crisis lately. Some extoll utopian notions of freeing consumers from banks, while others see a way to make money. It was this unregulated asset speculation that spurred investors to flock to cryptocurrency late last year. Unsurprisingly, speculation in such a constrained asset class caused wild volatility in the market.

Market volatility, of course, is not good if you’d like to actually use cryptocurrency as a currency. One solution to this is the stablecoin. Stablecoins are crypto tokens with fiat currency or other more stable assets backing them. Similar to pegging a weak currency to a stronger one, stablecoins ideally lend confidence to those who hedge with them.

The Stablecoin

Centralization and dubious fiat backing are some current criticisms of stablecoins on the market. Users have to trust a central authority that the company issuing the tokens actually has the funds . But just like pegged fiat currency, stablecoins introduce much-needed confidence into the token economy.

Espeo Blockchain helped MakerDao with blockchain testing before launch. Unlike other stablecoins, Maker issues their Dai tokens using smart contracts in exchange for Ethereum. Head of business development, Gregory DiPrisco wrote in a company blog post from earlier this year that Maker operates in a similar way as a bank, just without the middlemen. The platform aims to introduce stability into the cryptocurrency market with its Dai token. Ether collateral backs each token. MakerDao reduces volatility and allows users to maintain their purchasing power with crypto assets.

” Pretend you are at the bank asking for a home equity loan. You put up your house as collateral and they give you cash as a loan in return… just replace your house with ether, the bank with a smart contract, and the loan with Dai.”

Of course, just as the bank might take your house if you can’t repay the loan, Maker automatically resells ethereum collateral if it drops below the value of the Dai loan. This mechanism maintains the integrity of the system and keeps the price stable. As prices drop, though you might think that the system would unravel. Mike Porcaro, head of communications at Maker remains positive, however. In an email interview, he said:

“Maker is unlocking the power of the blockchain for everyone by creating an inclusive platform for economic empowerment — allowing equal access to the global financial marketplace… The currency lives completely on the blockchain; its stability is unmediated by any locality, and its solvency does not rely on any trusted counterparties.”

Collateral debt position

MakerDao’s CDP portal holds a surplus of collateral in publicly auditable Ethereum smart contracts. Users can use Dai tokens in the same way as any other crypto. Users can send Dai to others, pay for goods and services, or save them long-term. Creating a Collateral Debt Position (CDP) allows users to protect their ETH assets with Dai stablecoins. Porcaro went on to say:

“People or organizations create Dai by locking-up ETH in a CDP. As long as people can open CDPs there will be Dai in circulation. [Maker is] seeing increased volumes of Dai in circulation. In fact, about 1.5% of total ETH is locked up in Dai smart contracts.”

The hope is that the system will encourage more people to use cryptocurrency as a medium of exchange. Stability is essential to achieve this.

Blockchain testing

Espeo Blockchain helped MakerDao with blockchain testing before it went live. Checking how usable the platform is, and the security of the smart contract code is critical in a blockchain project. This process ensures that the system functioned properly before people started putting their money in. Head of product, Soren Nielsen agreed to hire Espeo when his team needed assistance with testing the MakerDao platform. Nielsen explained in an email interview:

“We needed immediate assistance with testing a product, [so] we decided to “test the waters” with Espeo… A challenge we currently have in general when engaging new suppliers is that there is a steep learning curve unless you’re already a user of our system… I felt that we had a professional client-supplier relationship. It certainly was good to have a dedicated project manager following this from Espeo.”

Finding bugs to fix

Project manager Natasza Stanicka and testers Bartosz Kuczyński and Patryk Jaruga got to work trying out every aspect of the platform looking for bugs to fix. They had to methodically sift through every feature and behave just as a regular user would. Kuczyński recalled:

“First, we clicked through every clickable item and went through every user story and tried to find edge cases. I guess the challenge with that was the fact that it is a blockchain application and that has certain consequences in itself. We needed to make sure that it actually cooperates with the blockchain correctly and the results were accurate.”

Jaruga remembers finding a bug which interrupted Ethereum transactions between hardware wallets. He said that every device behaved a bit differently in transactions and that they tested the Maker platform with a range of hot and cold wallets. The Maker team fixed the bugs as soon as they knew about them, said Bartosz Kuczyński. He added:

“Maker’s development team was really interested in bug reports, and they dealt with them immediately. In that respect, I believe this was really very ‘well-oiled.’ The bugs were corrected immediately so we would be able to move on to the next thing. The overall attitude of the company was certainly very positive.”

Testing such a complex application ensured a successful launch. Since MakerDao relies on consumer trust, getting the calculations right is vitally important. Blockchain testing involves a lot of things. Tokenomics, UI/UX, and hardware compatibility are some of the aspects our testers analyzed. In order to maintain the integrity of the token system and preserve the public’s trust, making sure the app works as promised was essential.

Conclusion

Dai stablecoins and the MakerDao infrastructure goes a long way to stabilize the cryptocurrency ecosystem. For more people to adopt crypto and start using it as a medium of exchange, easing price volatility and uncertainty have to happen. Dai’s stability helps users hedge their Ethereum assets and protect their investments from wild swings in the market. Blockchain testing ensured the platform worked properly before launch. More than anything else, confidence in blockchain technology will encourage wider adoption. Knowing that you won’t lose everything overnight will spur more people to start using cryptocurrency.

Categories
Blockchain Financial Services Technology

Blockchain art: Opening new avenues for artists and collectors alike

Blockchain art is a bit of a paradox. The highly technical and the highly creative generally don’t mix well. However, several recent projects are bringing the two worlds together in fascinating ways. Blockchain technology is not only a tool for artists (and collectors) to protect the value of their work. It’s also increasingly becoming a medium of expression. Digital artists especially can now control the authenticity and scarcity of their work with the help of distributed ledger technology. Ownership titles, provenance, and even art asset tokenization are a few of the compelling use cases emerging.

But more than simply controlling the flow of distribution, blockchain art also opens new avenues for artists to engage a broad community of connoisseurs and enthusiasts. Even the notoriously conservative art and collectibles market is slowly starting to adopt the technology to establish provenance and facilitate art sales. Several cutting-edge startups are working on blockchain applications in the art world. Blockchain art may fundamentally shift how artists create and how collectors collect.

Blockchain art market

Elena Zavelev, CEO of the New Art Academy believes digital artists will benefit the most from DLT. She wrote in Forbes, “For the first time ever, limited editions of digital art are possible thanks to blockchain technology. Digital artists can create limited editions of their works, providing a new way to grow their market. Previously, the bane of digital art has been the fact that it’s easy to copy and pirate.”

Projects such as CryptoKitties and CryptoPunks were among the first examples of editioned blockchain-based art. Art projects as much as technical feats, the unique figures demonstrate blockchain technology’s usefulness in this sector in a way for everyday people (like me) to easily grasp.

Each CryptoKitty and CryptoPunk is unique and cryptographically secure. While these original works are cute, there are deeper implications for artists and other content creators. Once a collector buys a CryptoKitty, no one can forge the originals thanks to the ERC-721 token. Think of them like baseball cards without the central authority. While blockchain technology guarantees uniqueness, it also limits distribution making these digital assets more valuable for collectors.

Radical Shift

Price speculation in CryptoKitties threatened to collapse the Ethereum network late last year as collectors flocked to buy and trade the exclusive cartoon cats. Some even sold for hundreds of thousands of dollars as interest peaked. Many criticized the craze as frivolous but failed to see the bigger picture. More than a way to speculate, this decentralized ownership model for an original digital artwork is a radical shift in the art world.

Immutability is useful for both artists and collectors. Unchangeable authorship information, for example, allows living artists to prove that their work is original. Once an artist sells a work, a record of its sale also goes onto the blockchain linking any future buyers to a clear history. Buyers benefit from investing in an immutable digital asset.

Blockchain as medium

Artists are also taking blockchain a step further and incorporating it into their work. Brooklyn-based platform Snark.art calls itself a blockchain art laboratory. The startup aims to change the relationship between collectors and artists. According to chief marketing officer Fanny Lakoubay, who spoke to me over Telegram, ”Snark.art is producing conceptual art experiments on the blockchain with established artists who want to reach the crypto community and get traditional art collectors to discover complex and conceptual digital art projects.”

Their first collaborative experiment in blockchain for art is Eve Sussman’s 89 seconds atomized. The video installation is a reimagining of Sussman’s 2004 video installation 89 Seconds at Alcazar. In the original work, Sussman recreated the moments prior to and just after Velasquez’s masterwork Las Meninas in film. In 89 Seconds Atomized, however, the artist split the video installation into 2,304 atoms at 20 x 20 pixels each. Collectors can buy individual atoms — similar to asset tokenization — and decide whether to display their atom to reconstruct the work, or not.

Lakoubay explained that owning a piece is slightly different than fractional ownership. “[Collectors] own an atom entirely,” she said “and can decide what to do with it without having to have consensus from all other owners. It is a choice for you to take part in the buyer community to reconstruct the original work by lending your piece.”

Community experiment

89 Seconds Atomized is not only an art installation but also an experiment in digital ownership and community. Users can view their own atoms on the platform, or either borrow or purchase atoms from other users to view it. Snark.art also encourages the community to organize their own screenings. Granting access to individual atoms is a defining aspect of the concept. “89 seconds could not exist without the blockchain, it is part of the medium of the work,” Lakoubay said.

What’s so groundbreaking about the installation is that it’s a conceptual artwork first, and an investment vehicle second. The community of atom owners is as much a part of the work as the film itself. Though both have implications for the art world. Art has a unique advantage in teaching a broader public about how blockchain technology works through accessible lessons. Ownership, permission, and peer-to-peer transactions are just some of the benefits blockchain technology lends to the art world. Of course, it’s also another way to speculate on price. As art enters its own asset class, investors look to blockchain art as an asset that accrues value.

Not only digital art

Digital art is not the only medium decentralization is starting to change. Some startups and more established players are looking at ways blockchain can enhance the trade in physical art and other more tangible collectibles. Just as digital art benefits from an immutable record of ownership, the more conventional art market is also adopting blockchain innovations. Similar to digital blockchain art, authenticity and a clear provenance increases an artwork’s value and reduces friction in the traditional art market.

For art collectors, provenance is an essential consideration. Investing in a fake, or stolen artwork is an expensive mistake few would like to make. However, the global trade in art and collectibles is a shadowy, unregulated market. One where you have to trust many different actors. Art fraud looms whenever a work comes up for auction. Auction houses hire teams of experts to verify the authenticity and clear provenance of any work before it sells it. Unsurprisingly, this costs both time and money. Blockchain technology could help manage all the parties involved. 

Art Fraud

A 2013 case involved a woman named Glafira Rosales who claimed to be selling previously unknown 20th-century paintings from masters such as Mark Rothko and Willem De Kooning. Instead of being genuine paintings, a Chinese painter was mimicking the artists’ styles and “aging” the works with tea, or dirt. She sold a total of $80 million dollars worth of fake art before the fraud was uncovered.

While blockchain may not help directly in preventing theft, it can help establish ownership as well as a history of transactions. One of Espeo Blockchain’s developers Krzysztof Wędrowicz believes blockchain technology could help auction houses and buyers spot fakes. “Let’s say each artwork could be digitized into a cryptographic print,” he said. “This proves that even if someone would forge a piece of art — to create something which is really really similar, in terms of what your eye can see — you can’t see the difference. With a blockchain, you can prove that a work is not authentic.” 

Currently, a work has to have an extensive review each time it comes up for auction. For an effective title registry to work, however, an expert or centralized institution will have to establish provenance, to begin with. Wędrowicz admits that “You need some authority to start with — so yes it’s some kind of risk.” However, several startups are developing novel ways to track provenance and authenticity using blockchain technology.

Decentralized title registry

One project addressing the provenance of art and collectibles is Artory. According to the company’s website, it’s a decentralized title registry for art and collectibles – a $2 trillion-dollar market. Currently, this asset class lacks a central registry. Artory stores vital transaction data and the history of ownership, and is easily accessible to all parties involved. Wide adoption, they claim, will help reduce costs and give investors more confidence.

Adoption across the art market, of course, will depend on how stakeholders will perceive the change. Artory remains confident that large stakeholders will see the benefits. Previous efforts to keep a central registry have failed largely because collectors don’t trust central entities with their information and intermediaries would like to keep their jobs. However, due to the decentralized nature of Artory, more stakeholders are willing to accept it, they claim.

Last month, Christie’s concluded the sale of the Barney A. Ebsworth Collection of 20th-century art. The record-breaking auction brought in more than $320 million. The auction was not only hugely profitable, but the sales were also recorded on Artory’s decentralized, public blockchain.

Provenance tracking on a blockchain could add more transparency to the art market and facilitate valuations, provenance studies, insurance claims, and even asset-backed lending.

Art Asset Tokenization

Similar to 89 Seconds Atomized, investors can also own individual pieces of physical artwork. Art asset tokenization enables many investors to own parts of an asset. Real estate asset tokenization is another industry where companies are using blockchain technology to tokenize.

Developers claim that blockchain art asset tokenization will add more liquidity to the market encouraging more people to invest in smaller units. Fractional ownership gives investors the chance to own small parts of famous works of art.

Blockchain advisor Francois Devillez has written extensively on asset tokenization and believes it’s the future of blockchain. 


“[Asset tokenization] works as follows,” Devillez told me. “Let’s say you have a house, you bring the house into a company and you tokenize the share. So you don’t tokenize the asset itself directly. With art, you associate a token with ownership. When you sell the art, you sell the token with it.” Unlike digital art, tokenizing tangible art is more about representing ownership.

Fractional Ownership

Art startup Maecenas is already tokenizing art assets. Maecenas is an unabashedly investment-focused platform looking at art assets as a way to make money. Art sold on the platform is stored in safe facilities far away from the eyes of the public. Nevertheless, for investors who view art as an asset class, this is perfectly natural. 

In a conversation over Telegram, Macaenas press spokesman Mayank Jain said, “we are pioneers in asset tokenization and we firmly believe in its financial potential to reinvent some industries such as the fine art market. But [asset tokenization] shouldn’t be an end in itself. The disruption lies in the value proposition behind the technological process.”

Greater Liquidity

Maecenas claims that splitting million-dollar paintings into smaller pieces will open the market to greater participation. Liquidity is the main argument for this kind of innovation. As in real estate asset tokenization, being able to quickly buy and sell smaller financial units of large assets will allow smaller investors to react to enter the market.

Maecenas’ platform runs on a public, decentralized blockchain to keep all transactions transparent and to protect the company from insider trading, according to the company’s whitepaper. When an owner wants to sell a piece of art, he or she first has to put it up for sale on the platform. Investors bid with the company’s ART token using smart contracts. Once the auction finishes, the smart contract calculates the final share price and the number of shares each investor receives. The seller then receives either ART tokens, or an equivalent crypto or fiat currency.

“Maecenas’ proposal is not just a theory,” said Jain. “Our platform is a tested and proven fractional ownership model. In September, we successfully tokenized and auctioned a 31.5% stake in Andy Warhol’s 14 Small Electric Chairs (1980), collectively raising $1.7m, and recently we revealed Project Phoenix — our upcoming sale of a tokenized Picasso.”

“Project Phoenix will be the first ‘perpetual’ digitized and tokenized work of fine art,” Jain added. A single ERC 721 token and a fixed number of ERC20 tokens will represent ownership of the physical asset. Similar to owning stock in a company, holding tokens gives investors voting power for key decisions in the painting.

Unfortunately, tokenizing the paintings makes them difficult to view in person. Each goes into a safe storage facility in a “freeport” such as Singapore’s Le Freeport. Keeping art stored in these facilities allows investors to avoid high taxes involved in selling luxury items.

Conclusion

Blockchain technology is revolutionizing the art world in a number of fascinating ways. From cutting-edge blockchain art, asset tokenization, and decentralized title registries, blockchain tech is driving innovation in the space. Blockchain not only controls the distribution of digital assets, but also records vital provenance information, and opens the market to investors. Many of these projects are still in their infancy but have also demonstrated successful use cases for the technology.

Images in order of appearance:
CryptoKitty
Las Meninas Diego Velazquez 1656-1657
Chop Suey Edward Hopper 1929
Big Electric Chair Andy Warhol 1967

Categories
Blockchain Financial Services

4 blockchain real estate startups shaking up property investment

Real estate companies have traditionally benefited from keeping secrets. Try to invest in a property and you’ll likely have to wade through a bureaucratic nightmare and dodge widespread fraud. On the other hand financial advisors mostly agree that buying property is a good investment. So why would blockchain real estate startups show their cards?

Interestingly, several blockchain real estate startups have emerged over the last few years. Each intends to disrupt the way real estate industry work.  Secrecy is not profitable anymore, especially when middlemen become redundant. A blockchain network, after all, can reduce risk aversion through a trustless environment. In turn, this facilitates property transactions without the need for trusted third parties. Of course the expertize of real estate agent is still a great value. However a greater market demand for transparency in the global economy has spurred innovation in real estate tokenization.

Tokenizing assets makes many processes associated with property transactions happen faster and at a considerably lower cost. This, in turn, enables greater liquidity in the market and makes life of real estate investors way easier. Earlier this month, a $30 million New York property became the first asset to be tokenized using blockchain technology.

This article will shed some light on real estate tokenization and ways real estate startups are increasing returns for property investors.

How blockchains work

In order to unpack some aspects of property tokenization, it is essential to understand the basics of blockchain technology. At its core, blockchain is an ever-expanding decentralized public ledger. Individual blocks contain data, secured with cryptography that are impossible to change. Moreover, each block will have access to a cryptographic hash of the block prior to it. This includes a timestamp and transactional data. Having a publicly-accessible unchangeable ledger adds transparency to real estate industry.

Through smart contracts, blockchain real estate startups remove trust from the equation as well. In a market in which trust is of the great value, smart contracts are the perfect solution. Buyers and sellers can streamline the process of a property transaction.

Tokenization of real estate industry

Blockchains prevent any data manipulation once the information is on the distributed ledger. As a result, the technology records data permanently, efficiently, and transparently so that all parties involved can see the history of i.e. real estate transactions.

Moreover, blockchains prove very difficult to attack due to their decentralized, distributed nature. All these features encouraged the development of peer-to-peer transactions with cryptocurrency. Though since the advent of cryptocurrency, investors including future property owners have sought a way of tokenizing other assets. Real estate tokenization is one such example.

Blockchain startups tokenize an asset ensuring that sellers actually own the property and that the buyer has the funds to cover it through cryptographic smart contracts. A blockchain can seamlessly verify all this data instantly, reducing the time and the total cost of the transaction.

Tokenizing a property into cryptocurrency is the way of property management that allows increasing the security and viability of the purchase, and opens up a global market. To many, blockchain technology has a clear application in the notoriously opaque real estate market. Several blockchain real estate startups have filled this niche by driving innovative solutions.

New opportunities, new risks

In an interview with Tom Bill of Knight Frank, real estate expert, Abimanyu Dayal, said blockchain has the ability to revolutionize the property market due to its ability to increase liquidity rates.

“This could revolutionize the real estate market because it provides 100% liquidity 24/7,” says Mr. Dayal. “If you want to invest in London residential property today you are looking at £700,000-plus and are locked in for seven to nine years. Now you can enter and exit whenever you want and that is how people want to invest.”

However, the regulation of real estate tokenization is still something that is yet to fully settle. Mr. Dayal, however, believes that this will not affect property values, as the currency will always be based on domestic currency and not the token itself. If a dollar appreciates against a crypto, the liquidity of the cryptocurrency allows for an immediate adjustment that offers no arbitrage.

Conversely, Oxford professor and real estate expert Andres Baum believes such a liquid market is neither achievable nor desirable. His research document Proptech 3.0 is the leading word on technology and property.

“If real estate traded more like a stock or a bond, prices might rise due to increased liquidity, but equally they might fall because of greater volatility and risks. The global banking system has survived over the last decade because it has not been forced to mark property assets to market.”

This follows a similar theory which states that the banking system relies on marked property asset value. Investors who seek a different avenue than stocks and bonds may suffer from a lower yield due to a lack of diversification.

Blockchain real estate startups

Despite the risk associated with the property-blockchain collaboration, there have been a few startups run by open-minded real estate professionals who have attempted this marriage – with varying degrees of success. No doubt these companies are some of the pioneers in the industry and their experiences could aid anyone seeking to venture into real estate tokenization and new investment opportunities.

Propy

With an initial ICO that attracted over $15 million in investments, Propy is definitely a must-watch company in the blockchain property space. Founded in 2015, the company allows investors to purchase property through blockchain in a variety of locations, the most prominent being in the USA, Dubai, Europe, and Hong Kong. The company claims to aid cross-border property transactions.

As time develops, the amount of Propy users is expected to grow substantially, so early investors may see a reward for adopting the trend early.

Harbor

Launched in 2017, Harbor topped Propy’s initial capital raising endeavors. The blockchain real estate startup attracted over $38 million from its ICO. The token sale has funded Harbor to the point where they now hold a large share of the market in North America.
Meanwhile, the Harbor token is further backed by Ethereum ERC20, which allows for the resale of the currency as a security. Liquidity aspects are an obvious attraction with the Harbor model.

ShelterZoom

ShelterZoom is an easy-to-use platform that offers potential investors a way to infiltrate the blockchain property market from the comfort of a mobile platform. This includes other functionalities like widgets and a dashboard.
Additionally, the property aspects are straightforward and easily accessed. The company seeks to increase the number of sales over the Ethereum network. Transactions are founded by smart contracts, attracting users from over 22 countries.

StreetWire

Espeo Blockchain is proud to be involved in StreetWire’s mission to innovate the market. We’ve aided in blockchain consulting, writing a technical whitepaper, and designing the company’s landing page. In the future, we plan to support their backend operations. StreetWire is building a decentralized clearing house for real estate data and transactions. It will streamline processes around closing, lending and valuing property while returning value and control to data producers.

The project leverages blockchain technology to support the global adoption in an evolution of the technology in real estate.

Blockchain’s utility

While many industries are thinking of ways to apply a distributed ledger ( and whether it’s worth it), blockchain real estate startups have begun to use the technology. Cutting out expensive middlemen, streamlining financing, and removing trust from transactions are just some of the blockchain’s advantages in this traditionally conservative sector. Cross-border property investment may also increase as the decentralized technology reduces risk and verifies financing. Blockchain technology is poised to disrupt a market in dire need of an update.