Knotel Embraces the Blockchain
This is another blog post about the blockchain, the thing that everybody is talking about but nobody seems to really understand. The blockchain holds a lot of potential to revolutionize industries, reducing wasteful transaction costs:
• Take shipping. It’s paper-based. To track diapers from China, you need a lot of Pampers checkpoints, which adds 20% to transport costs. On global trade of $4 trillion, that’s a very wet diaper.
- − Blockchain could digitize this, reducing waste
• Take international aid. Nonprofits send billions of dollars/food to people in need. Transaction costs take 3.5%. Then graft and mismanagement keep another 30% from ever arriving.
- − Blockchain could help it go directly to the target.
• Take music. Pre-Napster, you’d buy albums from stores. If you shared it, you didn’t have it. Post-Napster, you could download a song while playing Minesweeper and share it with anyone. It killed Tower Records and forever changed how (little) we pay artists.
- − Blockchain could enable us to buy directly like never before.
The applications are endless.
Real estate is just another industry ripe for disruption, which brings us to today’s news: Knotel today announced the first step in democratizing the notoriously opaque business via the acquisition of San Francisco-based 42Floors, a commercial real estate search engine that will provide technology and data insight into more than 10 billion square feet of office space, accelerating our own plans to develop a blockchain platform. The goal: to reduce transaction costs and increase transparency in the real estate market.
The product will be called Baya.
The blockchain first captivated public imagination with news of the soaring cryptocurrency Bitcoin, which peaked at around $19,000 toward the end of last year, inspiring a New York Times trend piece about rich bros in hideous sweaters and even a runway show at New York Fashion Week. Bitcoin has since lost more than half of its value, and is currently hovering below $8,000.
Blockchain is not Bitcoin. The volatile Bitcoin craze has obscured the true promise and potential of the blockchain to reduce transaction costs and strengthen contracts between two parties. Think of the blockchain as the Internet itself, while Bitcoin is more like Paypal or Netscape, an early application of a much bigger, much more stable technology. While Bitcoin may or may not take off as a mainstream alternative to currency, the blockchain is here to stay.
How does it work? Think about Wikipedia and Google Docs, both of which are built on decentralized systems, allowing multiple people to modify them at once. Blockchain at its core is a digital ledger, a database in the sky. There are no file cabinets or hard drives, and the records themselves are owned by no one, reducing the chances of theft and corruption.
The advantage of the blockchain is that, unlike Wikipedia which may contain some false information, records must be verifiable in order to be added to the system. Tokens are used as an incentive system to validate information, creating trust amongst disparate parties who, in many cases, have never met each other. This element holds the breakout potential for the blockchain to revolutionize industries.
We at Knotel are looking forward to leading blockchain innovation in real estate.
(For a good primer on the technology that will transform industries ranging from shipping to aviation to real estate, check out this book.)