Let’s say a new technology is developed that can allow many parties to enter into a real estate transaction. The parties meet and work out the details regarding timing, special circumstances and financing. How will these countries know they can trust each other? They will need to check their agreement with third parties – banks, legal teams, state registration, etc. This puts them back to square one in terms of using technology to save costs.
In the next stage, third parties are now invited to join the real estate deal and provide input as the deal is created in real-time. This significantly reduces the role of the intermediary. If the deal is so transparent, the middleman can even be eliminated in some cases. Lawyers are there to prevent misunderstandings and lawsuits. If the conditions are disclosed in advance, these risks are greatly reduced. If financing arrangements are secured in advance, it will be known in advance that the transaction will be paid for and the parties will meet their payments. This brings us to the final stage of the example. If the deal terms and conditions are met, how will the deal be paid for? The unit of measure will be currency issued by a central bank, which means dealing with the banks again. If this were to happen, the banks would not allow these transactions to be completed without some sort of due diligence on their part, and that would mean costs and delays. Has technology been useful in creating efficiencies so far? Not likely.
What is the solution? Create a digital currency that is not only as transparent as the transaction itself, but is actually part of the terms of the transaction. If this currency is interchangeable with currencies issued by central banks, the only remaining requirement is to convert the digital currency into a well-known currency such as the Canadian dollar or the US dollar, which can be done at any time.
The technology referred to in the example is blockchain technology. Trade is the backbone of the economy. A major reason money exists is for trade purposes. Trade makes up a large percentage of activity, production and taxes for different regions. Any savings in this area that could be applied worldwide would be very significant. As an example, look at the idea of free trade. Before free trade, countries imported and exported with other countries, but they had a tax system that taxed imports to limit the effect foreign goods had on the domestic country. After free trade, these taxes were removed and many more goods were produced. Even a small change in trade rules had a big effect on world trade. The word commerce can be broken down into more specific areas such as shipping, real estate, import/export and infrastructure, and it is more obvious how lucrative blockchain is if it can save even a small percentage of costs in these areas.