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Blockchain and Real Estate Industry Master Thesis

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Blockchain and Real Estate Industry Master Thesis Blockchain and Real Estate Industry Master thesis International Master of Science in Construction and Real Estate Management Joint Study Programme of Metropolia UAS and HTW Berlin Submitted on 14.03.2019 from Alireza Khalafi S0557526 First supervisor: M.Sc. Sunil Suwal Second supervisor: Dr. Sc. Giw Zanganeh ii Aknowledgment Omistettu suojelusenkeleilleni Piriolle ja Rezalle, ilman teidän pyyteetöntä apuanne en olisi koskaan pystynyt tähän. I wished to thank my beyond supportive supervisors Sunil Suwal and Giw Zanhaneh who trusted me and allowed this to happen. I wish to aknowledge Andreas M. Antonopoulos and Melanie Swan. Houmble thanks to the lovely staff of Metropolia: Taru Korkalainen, Kaisa Meghjee, and Mika Lindholm. As well as respectful and cooperative staff of HTW Berlin: Julia Cadete La O, Nicole Riediger, Frank Stoll, life saving staff of internatioal students affairs at HTW: Carlota Kapp Silva and Gernot Welschhoff. I wished to thank everyone who took part in my survey and special thanks to people who shared it among various networks: Milla J. Åman, Mohsen Dardaei. To my parents who sacrificed whatever they had, for me to become a better person. For my brother who took a chance on me changing my life. I may not be the obvious choice for becoming the person that I am today, but I guess it worked out by the privilege of knowing true gems like Shirin Vaezi and Giv Zanganeh who showed me that love and family is much more than blood. To my brothers in arms: Arnau Montserrat, Ehsan Dardaee, Saeed Hoseini, Mohamad Azam, Moein Abedini, Pooya Berahmandi, and Amir Shaygan: I never forget that you had never let me down. Shoutout to the best combination in this world: Behdad, Farshad, Givi, and Pejman. To all my friends and family who understood me and allowed me to be unapologetically myself, you are my equals, you are my betters, another chapter of my life is closing right now and I could have never been here without you: Leila and Amir Khalafi, Maryam Malekpur, Nazanin Farzin, Nessa Mehrabipour, Sara Ghazanfari, Taija Hopealaakso, Armin Yazdi, Emad Khankeshipoor, Jobin Bolourchi, Siavash Bassam, Kave Tabar , Ghazanfari and Shaygan families. To my friends, Heli and Donald: You are the most open-minded people that I ever had the honor of learning from in person. Special thanks to my brother Afshin Sadeghi. To my beloved Behnaz, who endured my bitterness and kept my candle burning during the time of this thesis: you have captured my heart Jighil. 1 1 Influenced by Rami Mlek’s speech on Feb 24, 2019 iii Proposed conceptual formulation iv v vi vii Abstract The underlying layer of Bitcoin, blockchain technology, is the disruptive technology after the internet. This thesis studies the real estate industry and blockchain technology to highlight the needs for a fusion, along with the current technological and economic developments as the facilitators of adaptation between the industry and technology. Conducting a survey, this study proofs that public perceptions, interest, knowledge, and legal awareness for cryptocurrencies and smart contracts are low for both real estate and other industries. After reviewing the current applications of blockchain technology in the real estate, this thesis offers other use cases of the technology within the industry. viii Table of Contents Aknowledgment ........................................................................................................... ii Abstract ..................................................................................................................... vii Table of Contents ..................................................................................................... viii Table of Figures ......................................................................................................... xii List of Tabulations .................................................................................................... xiii List of abbreviations .................................................................................................. xiv List of Symbols .......................................................................................................... xv List of equations ........................................................................................................ xv 1. Introduction .......................................................................................................... 1 1.1. Subject .......................................................................................................... 1 1.2. Motive ............................................................................................................ 3 1.3. Objective ....................................................................................................... 4 1.4. Structure ........................................................................................................ 4 1.5. Scope ............................................................................................................ 5 1.6. Methodology .................................................................................................. 6 1.7. Importance of the study ................................................................................. 7 1.8. Assumptions .................................................................................................. 9 2. Real estate industry ........................................................................................... 10 2.1. Introduction .................................................................................................. 10 2.2. Technology developments ........................................................................... 11 2.2.1. Building Information Modeling ..................................................................... 11 2.2.1.1. BIM in development and construction phases....................................... 12 2.2.1.2. BIM in the utilization phase ................................................................... 15 2.2.2. Internet of Thing .......................................................................................... 17 2.2.3. Green and smart environments ................................................................... 20 2.3. Globalization and Internationalization .......................................................... 23 2.4. Share economy and Gig economy .............................................................. 24 2.5. Challenges .................................................................................................. 27 ix 2.5.1. Inefficiencies ......................................................................................... 27 2.5.1.1. Development ..................................................................................... 28 2.5.1.2. Title Transaction ................................................................................ 29 2.5.2. Fraud .................................................................................................... 31 2.5.3. Transparency ........................................................................................ 32 2.5.4. Corruption ............................................................................................. 34 2.6. Summary ..................................................................................................... 35 3. Blockchain .......................................................................................................... 37 3.1. Introduction .................................................................................................. 37 3.2. Blockchain basics ........................................................................................ 38 3.2.1. Definition ............................................................................................... 38 3.2.2. Block ..................................................................................................... 42 3.2.3. Distributed Ledgers ............................................................................... 42 3.2.4. Cryptography ........................................................................................ 43 3.2.5. Public key cryptography ........................................................................ 44 3.2.6. Hashing and chaining the blocks .......................................................... 45 3.2.7. Merkle Tree ........................................................................................... 46 3.2.8. Consensus Protocol .............................................................................. 47 3.2.8.1. Mining and Proof-of-Work ............................................................... 47 3.2.8.2. Proof-of-Stake ................................................................................ 49 3.3. Blockchain 1.0 Currency .............................................................................. 50 3.3.1. Currency ............................................................................................... 50 3.3.1.1. Concept of currency ....................................................................... 50 3.3.1.2. Representative currency ................................................................. 50 3.3.1.3. Fiat currency ................................................................................... 51 3.3.1.4. Euro: An international currency ...................................................... 52 3.3.1.5. Drawbacks of fiat currencies .........................................................
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