25 | 9-18-2018
Hosted by: Dang Du, Jeff Peterson
What is Your Tech Background?
Alex has 15 years of software development projects ranging from computer computer games to cybersecurity at companies of various sizes. At Apple, he worked on security solutions. Tapping into his entrepreneur side, he left Apple to do a startup that provided a streamlined framework for early iOS developers to build apps.
From objective C (with Apple) to Solidity (Ethereum blockchain), Alex likes to stay on the bleeding edge of tech. Just before joining Propy, he was working on public key infrastructure, which prepped him for blockchain development.
What is Public Key Technology and Why is it Important?
Alex traces cryptography back to Julius Caesar who used the Caesar cipher, which encrypted information by systematically shifting letters around. At the time, when there was low literacy rate, that encryption method was sufficient to protect information, but the encryption algorithm could be broken. In the modern age, there are two types of encryptions: symmetric and asymmetric key encryption. In symmetric key encryption, the sender and receive share the same key to encrypt and decrypt the information.
For asymmetric key encryption, the sender and receiver each have their own pair of public-private keys. One key to encrypt and another key to decrypt. Anyone can send you a message by using your public key to encrypt , but only you can decrypt the message with your private key (only known to you). This asymmetric encryption is integral to how blockchain transactions are signed. Your private key is used to sign, and the public key is used to verify.
What is Propy?
Alex says that Propy solves multiple problems for buying and selling real estate in a global context. He sums it up in three parts:
- the listing platform that allows sellers to list their properties and buyers to search for properties
- the buyer selects their property and move to the transaction platform where documents are signed and payments are done.
- Once the conveyance is completed, then they go to the decentralized blockchain registry where the instrument of conveyance can be reported for verification.
In addition to having the above steps in one platform, Propy provides security measures to avoid fraud. Everything coming in and out of the platform are encrypted. Propy also stays away from using emails that contain sensitive or identification information. Alex cites an eye popping figure: $1 billion lost in the U.S. real estate market due to fraud, largely attributed to wire fraud. For example, someone will try to forge emails with payment instructions.
What Other Points of Forgery Can Happen in Real Estate?
The problem is different in each country. There’s the risk of title forgery which can be addressed by a decentralized registry. All the documents recorded have a corresponding hash which can be verified. Because it’s recorded on the public Ethereum blockchain, a user can be sure that the info contained in the metadata is correct.
In a legal dispute, you can use all docs associated with the transaction platform to prove your case. All the actions done on the transaction platform are immutably recorded on the blockchain as evidence that you’re the owner with the original documents (it’s a mathematical proven process).
Once the registry software is adopted by more and more registries and more data is recorded to the blockchain, the data has immutability. In other countries, there may corrupted actors manipulating the registry therefore it’s necessary to adopt a public, decentralized blockchain.
In the U.S., the problem has more to do with how to create infrastructure for decentralized data storage. One example involved digitizing copies of the physical deed documents. When the building burned down, it destroyed copies of the records, including physical and digitized docs with no way to restore.
An alternative may be to build a distributed database, but the hundreds of registries out there may not have dedicated resources to build. Hence an open-source, publicly available blockchain can be a good solution. You can always access those original documents.
How many transactions have you done?
Propy has done three full transactions with every step executed on the platform. There were a couple of transactions where some of the steps were done on the platform. The remaining dozens of recordings were done on the decentralized registry involved recorded deeds. This acts like a decentralized storage.
Tell us About Your Real Estate Deal in California
It was Propy’s first U.S. deal where every step was done on the blockchain — from recorded documents and payments transaction were done with smart contracts. The deal was done with Bitcoin.
All key players were present: buyer, seller, brokers, and escrow company. Propy developed the deal where you can modify the process in a way where it can be done in any country in any deal flow you want. Like an Amazon for real estate, the buyer didn’t even need to be in the country. They could do it in front of their computer. For the seller, that did involved physically going to the escrow company, but that’s something Propy is looking to automate (e.g. business best practice).
With smart contracts, you have a decentralized environment where no one party can influence the results. You can think of ways we could automate. The transaction deal in Ukraine, smart contracts play the role of escrow by holding the funds until the deal was complete. Upon completion, funds were disbursed to the seller. This part has a huge benefit since no one controls the funds. You can automate it while avoiding the risk of fraud.
Any Lessons Learned From Your Token Sale? How Did You Attract High Profile Advisors?
Networking and meeting people is one piece. Propy’s CEO convinced people how it would work and wanted to find advisors who can give them valuable feedback. These people’s reputations are on the line, so they would have to believe that the team can execute on the idea. They know that real estate is fiercely competitive and ripe for disruption.
What About Post Token Sale — is That a Different Strategy?
Propy had working software before the token sale and had the team to build the software. Alex attributes it to idea + implementation. They had the proof-of-concept for the listing platform and an alpha platform for the transaction platform by the token sale.
After the token sale, they had already had a first deal on the alpha platform. Their community has been very supporting, giving feedback on the app, website, and transaction platform, which is a different model than traditional VC fundraising.
Lessons From Working with Public Officials?
Vermont state is very progressive on blockchain. They want to connect with other government entities, share data amongst themselves. It can attract more high paying , tech jobs in the state and boost economic competitiveness.
Propy has been working with Vermont on pilots for a decentralized real estate registry. The city clerk in South Burlington offer feedback on what works what doesn’t work. Propy iterates on the software to ease the learning the curve since new software requires training personnel.
Propy is looking to start pilots in a couple other cities. The more people adopt the registry, it’ll be easier for others to join. Even across states, you can customize the registry and process flows. If registries are interconnected, you can query the data, it’ll be a lot more streamlined.
Summing up What You Learned From Early Deals?
You map out the process, the steps. Every case you must modify, so there are many different conditionals. But you can’t possibly customize for every different deal. To automate the user experience, perhaps break it down to simple steps, like a user wizard that’ll streamline customer interaction. Once automation is in a good spot, Propy would be able to do more deals. Deal flows would be able to accommodate stronger user adoption, adding not just 5 deals at a time, but perhaps 100 deals at a time.
Propy is a global real estate store, allowing buyers, sellers, and all other parties to come together through smart…propy.com
Media Intern: Yidu Wang