Are you interested in Real Estate blockchain? Maybe you have heard of smart contracts, Real Estate Crypto and Real Estate Tokenization. Today we’re going to explain the basics from what is a blockchain, how does a blockchain work, and why the blockchain is so secure. Once we go over the fundamentals, we’re going to discuss blockchain technology in real estate: the problems it solves, and why this is the future of real estate. In our previous pieces, we have underlined the fact that blockchain technology is very secure, reliable and safe. But how exactly? It’s time for our beginners guide to the blockchain, in two parts.
What is a blockchain? Blockchain, or blockchain technology is essentially an electronic structure composed of a chain of blocks that contains information or data that is distributed in a decentralized database where information is made public and anyone can have access to it. In contrast to having a simple company or a database containing all the information, the information is scattered across an entire network.
So what can be found within a block? Each block inside a blockchain contains three things. Number one is the data: the data contains information about a specific transaction, such as the sender, amount, and the receiver. The second is a hash code: an identifier code of each transaction which functions like a fingerprint that makes the transaction unique from all other transactions. Lastly, each block contains the hash of the previous block it’s linked to. Everytime a new transaction is recorded or every time there’s a change of information within the block, a new hash code will be generated automatically. This mechanism then creates a continuous chain of blocks that are all linked together starting from the original block.
What makes Blockchain super secure in the digital world?
There are three layers of security implemented on the blockchain. The first security layer is the hash code. To demonstrate, as soon as new information is added or altered within the individual block, the block will automatically generate a new hash code. If a hacker wants to change the data that is already recorded within a specific block, that tampered block will automatically generate a new hash code. And if that hash code does not match the hashcode of the block after that, it would render the whole transaction invalid. Each block contains a hash code and the hash code of the next block, meaning they must all match up.
It is not possible for a potential hacker to hack a whole group of blocks, due to the next level of security: the proof of work. Let us explain: a hacker cannot defy the hash code security system by altering a whole group of blocks connected to the tampered block, in order to move back this hash code security. This is not possible because of the proof of work. This means that
The duration of the proof of work is unique to a specific blockchain and it can take up to ten minutes or longer for each new block to be validated and generated. So if a hacker wants to tamper with data on a single block, they would need to alter the data on all the affected blocks within a set time frame of a number of minutes for each tampered block to be made valid. This makes altering information very difficult.
The third security layer: the peer-to-peer network. Since blockchain technology is a decentralized database, it means that everyone can see and access all the data within the blockchain. This is made possible using a decentralized network or what is called a peer-to-peer network. When a block is created, the block is distributed to everyone within the peer-to-peer network and is then verified by the nodes within the network in order to check if everything matches. Each member within the network then creates a consensus verifying the validity of the block. This system is added in place to ensure that all blocks within the blockchain remain valid, correct and unaltered. As a result, if a hacker attempts to distribute a tampered block in a peer-to-peer network, it will be verified and then rejected by other nodes in the network if it is not validated successfully.
Thus, blockchain technology can secure the following records from hackers: transactions, business transactions, management activities. These can all be securely stored on the blockchain.
Can the Blockchain solve common problems of traditional estate? Read our part two for more.
